The ugly American bank

Let's not focus on mismanagement. Instead, let's talk about ideology.

Before the Iraq war, Pentagon hawks shut the State Department out of planning. This excluded anyone with development experience. As a result, the administration went into Iraq determined to demonstrate the virtues of radical free-market economics, with nobody warning about the likely problems.

Journalists who spoke to Paul Bremer when he was running Iraq remarked on his passion when he spoke about privatizing state enterprises. They didn't note a comparable passion for a rapid democratization.

In fact, economic ideology may explain why U.S. officials didn't move quickly after the fall of Baghdad to hold elections - even though assuring Iraqis that we didn't intend to install a puppet regime might have headed off the insurgency. Jay Garner, the first Iraq administrator, wanted elections as quickly as possible, but the White House wanted to put a "template" in place by privatizing oil and other industries before handing over control.

The oil fields never did get privatized. Nonetheless, the attempt to turn Iraq into a laissez-faire showpiece was, in its own way, as much an in-your-face rejection of world opinion as the decision to go to war. Dogmatic views about the universal superiority of free markets have been losing ground around the world.

Latin Americans are the most disillusioned. Through much of the 1990s, they bought into the "Washington consensus" - which we should note came from Clinton administration officials as well as from Wall Street economists and conservative think tanks - which said that privatization, deregulation and free trade would lead to economic takeoff. Instead, growth remained sluggish, inequality increased, and the region was struck by a series of economic crises.

The result has been the rise of governments that, to varying degrees, reject policies they perceive as made in America. Venezuela's leader is the most obstreperous. But the most dramatic example of the backlash is Argentina, once the darling of Wall Street and the think tanks. Today, after a devastating recession, the country is run by a populist who often blames foreigners for the country's economic problems, and has forced Argentina's foreign creditors to accept a settlement that gives them only 32 cents on the dollar.

And the backlash has reached America's closest neighbor. Mexico's current president, Vicente Fox, a former Coca-Cola executive, is a firm believer in free markets. But his administration is widely considered a failure. Meanwhile, Mexico City's leftist mayor, Andrés Manuel López Obrador, has become immensely popular. And his populist rhetoric has raised fears that if he becomes president he will roll back the free-market and free-trade policies of the past two decades.

Fox is trying to use a minor violation of the law to keep Lopez off the presidential ballot. If he succeeds, many Mexicans will believe that democracy was sacrificed on the altar of foreign capital.

Not long ago, the growing alienation of Latin America from the United States would have been considered a major foreign policy setback. So much has gone wrong lately that we've defined disaster down, but it's still not a good thing.

Where does Wolfowitz fit into all this? The advice that the World Bank gives is as important as the money it lends - but only if governments take that advice. And given the ideological rigidity the Pentagon showed in Iraq, they probably won't. If Wolfowitz says that some free-market policy will help economic growth, he'll be greeted with as much skepticism as if he declared that some country has weapons of mass destruction.

Moisés Naím, editor of Foreign Policy, says that the Wolfowitz nomination turns the World Bank into the American Bank. Make that ugly American bank: Rightly or not, developing countries will see Wolfowitz's selection as a sign that we're still trying to impose policies they believe have failed.

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How more cynical can you get than to put the architect of the Iraq war in charge of the world's premier development agency? ask newspaper editorials and relief agencies across western Europe. Will he not bend the bank to his will and use it to push his agenda of spreading democracy by force?

Clare Short, the former international development secretary, went so far as to claim that Mr Bush was showing "two fingers to the world".

Following the nomination of the outspoken hawk John Bolton as the next American ambassador to the United Nations, the outlines of a new Bush doctrine are becoming clear: whereas in the first term he used military power to topple Saddam Hussein, in the second term he will use "soft power" to advance American - and western - goals. The targets of this soft campaign are the "multilateral institutions" - the global bodies whose legitimacy in the eyes of the world stands as the sole opposition to the American superpower.

But will that be to the disadvantage of those institutions? In Washington it is not just Mr Wolfowitz's close allies who think the heated reaction to his appointment a little premature.

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