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GREEN-'HOUSING' GAZANSJames S. Henry and Andrew Hellman

The US government, the Palestinians, and indeed most Israelis are delighted that the Sharon Government has finally stood up to some settler extremists, and is still on track to pull out of the Gaza Strip by mid-August.

However, we should all pay closer attention to the precise way that the Israelis are leaving.  There appear to be several missed opportunities to leave a much healthier economic base for Gaza's 1.4 million Palestinians when the Israelis leave-- a necessary, if not sufficient, condition for eventual peace. 

In particular, Israel is  now on a path to dismantle or destroy over 1500 homes and 1000 acres of greenhouses, which already provide thousands of jobs for Palestinians, and might provide thousands more....

DEBT RELIEF MYTHOLOGY One Week in Iraq's Worth, No Less! James S. Henry and Andrew D. Hellman

You know that it is high time to read the fine print and sharpen the pencil when Treasury Secretary John Snow, Angelina Jolie, Al Franken, Bono,  Bob Geldof, the World Bank's Paul Wolfowitz,  and the UK's Gordon Brown all line up on the same side of the field to cheer some change or other in First World policies with respect to the developing world. 

This was indeed a "feel good" week for First World development buffs,  as a group of G-8 Finance Ministers, warming up for next month's giant G-8 confab in Gleneagles,  Scotland, announced that they had finally agreed on "$40 billion of debt relief" for 18 poor, heavily-indebted countries in Latin America and Africa.

In his typically understated fashion,  the UK's Gordon Brown, Chancellor of the Exchequer and heir-apparent to Tony Blair, called the measure an "historic breakthrough," the "most comprehensive statement that finance ministers have ever made on issues of debt, development, health, and poverty" -- even if he did say so himself!

Perhaps so. Of course any amount of debt relief, no matter how picayune, is to be welcomed, especially by the 282 million impoverished inhabitants of these 18 benighted countries, whose median per capita income is on the order of $1153 per year ($PPP). Indeed,  at least  75 percent of  these poor folk somehow manage to survive on less than $2 per day, with an average daily income of  just $.98 cents. Fully half  of these countries now start out with life-expectancies at birth of less than 50 years.     

At the risk of appearing to be slightly cynical, however,  we may wish to pause for a few seconds before  popping the champagne bottles, tapping the kegs,  and inviting our starving Third World brethren over  for a few brewskis, a jol,  and a brai to celebrate the "end of poverty" in our time.

As discussed below, in the words of one famous aging rocker, when it comes to debt relief, "We still haven't found what we're looking for."

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"Why Can't the World Bank Be More Like a Bank?" Background to WSJ Op Ed Piece, June 1, 2005 James S. Henry and Laurence J. Kotlikoff

With Dr. Paul Wolfowitz's ascension to the World Bank's Presidency this month, we've continued the proud tradition of having the Bank run by white male Americans whose primary careers and reputations have had virtually nothing to do with economic development, certainly not in poor countries.

Previous World Bank presidents have included a long line of successful Wall Street investment bankers (James Wolfensohn (Salomon), George D. Woods (First Boston)), commercial bankers (A.W. Clausen (B of A), Lewis T. Preston (Morgan), Eugene R. Black (Chase), car company executives/ Defense Secretaries (Robert S. McNamara), newspaper publishers (Eugene Meyer (Wash Post)), Wall Street lawyer-bankers (John J. McCloy (Chase)), and long-time US Congressmen (Barber B. Conable).

Such backgrounds may have honed their management skills -- although commercial banks, newpapers, car companies, and the US Congress have never been noted for managerial excellence. But all of these gentlemen certainly needed a great deal of on-the-job learning with respect to all other aspects of the World Bank job. As a group, they were also rather more sensitive to the concerns of Wall Street than of Poor Street.

In Dr. Wolfowitz's case, there has at least been,  thanks be, no Wall Street in-breeding.  He also has a strong background in international relations, not only as Deputy Secretary of Defense and Dean of the John Hopkins School of International Relations,  but also as Assistant Secretary of State and Ambassador to Indonesia back in the 1980s.

He may have been a bit palsie-walsie with former dicators like Indonesia's Suharto and the Lee family dynasty that still runs Singapore. But that is hardly unique among World Bank Presidents. And we also know that, in the best neo-Straussian tradition, he is also capable of being a radical Wilsonian democrat when it suits him -- at  least in the case of Iraq and several other carefully-selected Middle Eastern countries.  

Finally, regardless of what we may think of Wolfowitz' naivete' about Iraq, the fellow is clearly a quick study, and is evidently not shy about rethinking conventional strategies and shaking up entrenched bureaucracies. These attributes, rather than specific experience, may be precisely what the World Bank needs most at this point.

They may also be precisely what the G-8 needs, as it meets next week in Canada to consider some  rather fuzzy-headed  proposals to sharply expand the First World's commitment to development aid.

Of course "ending poverty" is a noble, apple-pie objective that is as good as any other at getting former Deputy Defense Secretaries, Treasury Secretaries, economists, and rock stars alike to wander through African backstreets and huddle down around the camp fire, singing "Cum By Ya."   

But the point is that unless we deal with the structural reasons that poverty exists in the first place, some of which -- like First World agricultural subsidies,  lousy lending, and "pirate banking's" role in Third World tax evasion  -- are not very pretty, and will not be solved just by increasing aid budgets -- we won't "end" poverty.  We will simply pour more money down the same "development industry" rat holes that now consume more than half of every "phantom aid" dollar. 

Indeed, in the long run, we may even risk expanding poverty, because handing out doles to a perpetual underclass is a recipe, not for ending poverty, but for eventually ending aid.

In the spirit of welcoming Dr. Wolfowitz to his new position, BU's  Professor Larry Kotlikoff and I have suspended disbelief, and have produced the following semi-Swiftian proposal for "Making the World Bank a Real Bank."  Download WSJArticle.pdf

Of course our proposal needs refinement. It is intended in part just to stimulate debate.  However, it is not as if the existing international systems for financing development and distributing aid to the world's poor, much less marshalling their life savings and helping to transmit their remittances back home are perfect. If they were, there would be no need for this discussion in the first place.

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