Don't Hire This Man

Why Jeffrey Sachs is a terrible choice to be the next head of the World Bank.

Want to save the world? You might actually have a chance, if you happen to be named the next president of the World Bank. There is a reasonable likelihood that the number of people living on less than $1.25 a day will be reduced to near zero within the next 10 years. But how fast we get there, and how many lives are saved in the process, depends in large part on whether the historic rates of economic growth in the developing world continue. So, while they're probably not betting on the outcome in Las Vegas, it's of enormous importance who will lead the World Bank. Not only is it the largest aid organization in the world in terms of financial clout, it is also a global policy leader. Where the World Bank goes, the rest of the aid industry follows. This is why the very public candidacy of Columbia economics professor Jeffrey Sachs is so worrying.

Sachs is a remarkable man by any measure. A rare economist who enjoys mainstream celebrity status, he played a pivotal albeit controversial role in Eastern Europe's transition to open markets, advised then U.N. Secretary-General Kofi Annan on the Millennium Development Goals, founded the Millennium Villages Project, and has been a tireless champion of the world's poor. As economist Nouriel Roubini has noted, "Sachs has long promoted the goals of a stable, peaceful, cooperative, and prosperous world." There is no question that Sachs has been one of the most outspoken advocates for poverty reduction, if not an actual instrument of poverty reduction.

When Robert Zoellick, who has overseen considerable reforms and expansion at the World Bank, announced he was stepping down, Sachs's popularity made it inevitable he would be touted as a replacement. (Although the fact that he chose to openly campaign for the position via Twitter, Facebook, and in op-ed pages surprised many.) Regardless, that campaign has made him a crowd favorite, not just among American college students sporting Kony 2012 bracelets, but also with many developing countries. His candidacy has been endorsed by the governments of East Timor, Haiti, Namibia, Bhutan, and others.

In spite of this support, Sachs remains the wrong man for the job for several important reasons. First of all, the World Bank president needs to be a diplomat, capable of persuading the most truculent leaders to move on the most painful issues. In this regard, Sachs has had some previous success, most notably during his work in Eastern Europe and Latin America when he prescribed his "shock therapy" during the 1990s. But since then, he has evolved into someone who may move in diplomatic circles, but is rarely described as actually being diplomatic himself. He has become an activist, a campaigner, more comfortable holding a bullhorn outside an embassy than a cup of tea within.

Consider, too, that the job requires extraordinary management skills. The president of the World Bank oversees 13,000 employees working in over 100 offices and manages $178 billion in capital. Sachs never managed an organization of any real size and is particularly unprepared in this regard.

Most importantly, the next president of the World Bank must acknowledge that the age of the development planner has passed. Fifty years ago, when the World Bank and other major development institutions were being established, aid accounted for 70 percent of capital inflows to the developing world. Today, it is less than 13 percent. In these economies, the size and importance of foreign direct investment has long outpaced international aid. It is trade, not aid, that will ultimately defeat poverty. Sachs himself conceded this point, perhaps inelegantly, when he remarked "My concern is not that there are too many sweatshops but that there are too few.''

But Sachs continues to champion the old model of grand plans and greater spending. Nothing illustrates this failed approach better than his own Millennium Villages project. In 80 villages in 10 African countries, local committees led by international experts make a series of coordinated interventions, ranging from health care to fertilizers, based on the theory that if enough money is applied to a "big push" it will boost these populations out of the poverty trap. But observers remain highly skeptical of their impact. Rigorous external evaluation has not been applied, and the little data that is made available, such as incidence of malaria or mobile phone usage, differs little from regional statistics.

Sachs describes the Millennium Villages as a bottom-up, grass roots, decentralized scheme to fight poverty. But they are still a scheme, yet another in a long history of attempts to launch a new plan, apply a new strategy, find a new silver bullet to generate jobs and build prosperity in Africa. After each fails in turn, the planners ritually lament that the only thing that was missing was more money. For his part, Sachs intends to increase the number of Millennium Villages from 80 to 1,000, and more broadly wants to increase annual aid spending to $195 billion. In other words, he wants more schemes and bigger plans.

Development planners like Sachs are willing to spend billions on one scheme after another, wiling to try anything, with the exception of handing the fight over to the only people who actually have a successful record creating jobs and wealth: local entrepreneurs. According to the Bank's own data, small and medium sized businesses are responsible for creating 86 percent of all new jobs globally, and that number is even higher in low-income countries. Sachs embodies the difficulty the development profession has accepting the fact that the remarkable progress on the Millennium Development Goals is being achieved by economic growth, rather than through the aid industry.

In his campaign, Sachs has claimed that "malaria in sub-Saharan Africa is down by 30-40 percent with the strategies that I helped to champion and implement around Africa." He fails to give credit to the historic increase in African GDP during that same period. This growth is not limited to Africa: The International Monetary Fund predicts that from 2012 to 2016, emerging and developing economies will grow at 6.7 percent as compared with advanced economies at 4.9 percent. This growth has led to better education, greater personal wealth, and higher tax revenues. These, in turn, have led to better disease awareness, improved housing, and stronger health-care systems. The markets, not Jeffrey Sachs, are beating poverty.

The next president of the World Bank must also be astute and humble enough to accept the limits of what can be achieved through development interventions. He or she must recognize that market-based growth is succeeding where decades of aid failed. And with that knowledge, the next president must focus on supporting that growth by championing local entrepreneurs, opening markets, unleashing finance, and building strong and fair financial systems. Sachs is not inclined to limit himself to do any of these things, because he will not concede that that rising markets, like a rising tide, floats all boats -- including his Millennium Villages.

There are better options, declared and undeclared, even given the limitation that the job is really only open to U.S. candidates. Rajiv Shah, formerly of the Gates Foundation and now head of USAID, has surprised many with the success of his ambitious reform agenda and would be a welcome new face at the World Bank. Indra Nooyi, CEO of PepsiCo, is a leader in using global supply chains to generate wealth at the bottom of the pyramid. And New York mayor Michael Bloomberg is another possibility. Don't laugh: He has in-depth experience running large organizations, an intimate understanding of global finances, a record of public service, and the instincts of an innovator and reformer. All of these people understand that the race to end poverty will be won by markets, not by yet another aid scheme.

The question of who takes over the World Bank is important. The world is changing. The World Bank must change with it. Putting Sachs in charge will ensure that it doesn't.



End the Drug War

All the evidence suggests that the efforts to crush Mexico's violent drug cartels have failed. Why won't the White House listen?

What more evidence does the U.S. government need to understand that the current approach to fighting the Mexican drug cartels is failing?

The U.S. general who commands military forces in North America testified before a Senate committee last week that, while the "decapitation strategy" has succeeded in killing some of Mexico's major drug figures, it "has not had an appreciable effect" in thwarting the drug trade. Regional leaders see it even more dimly, as evidenced by their frustrated reactions to Vice President Joseph Biden's visit to Mexico and Central America this month. That trip suggested the White House just doesn't grasp that the approach launched by George W. Bush's administration in 2007, and continued essentially unchanged by President Barack Obama, has been irrelevant at best and disastrous at worst.

Mexico is far from being a "failed state," but its skyrocketing violence threatens our interests as well as its own. Our economies, our people, and our problems are interdependent. We use the drugs, but Mexicans get shot up. It's not right.

The evidence of policy failure is undisputed: 47,000 Mexicans dead since President Felipe Calderón took office in December 2006; the continuing flow of hundreds of tons of cocaine and thousands of tons of marijuana into the United States despite post-9/11 border controls and anti-immigration fences; and more than $20 billion in drug cash and many thousands of U.S. guns streaming south into Mexico each year.

The Bush administration's "Mérida Initiative," a scaled-down version of the efforts to combat drug smuggling in Colombia, has cost U.S. taxpayers $1.6 billion. Politicians and bureaucrats feel good about Mérida, because it has facilitated unprecedented cooperation between the United States and Mexico and the demise or capture of a dozen drug kingpins. They've been pushing the same approach -- albeit in a more piecemeal fashion and less generously -- on Central America.

But it has barely made a dent in the drug trade it aims to stop. For every drug capo taken down, several lieutenants have surged forward to keep the business going -- but in a manner much harder for U.S. and Mexican intelligence to detect. That was one of the unheeded lessons from Colombia: taking down the ostentatious, sports car-driving bosses yields a political boost, but the atomization of the drug trade makes it much more challenging to combat.

Both sides deserve blame in choosing this approach. They both pushed for a Colombia-style military approach, and they both failed to advance serious solutions to mounting human rights abuses.  As a result, doubts among Mexicans about the government's ability to provide even basic security are deeper. The scary prospect of paramilitary groups taking affairs into their own hands has also emerged: The group that dumped 35 bodies on a main street in the southeastern city of Veracruz last September called itself the "Mata-Zetas" -- the killers of a ferocious gang called the Zetas -- and issued self-righteous warnings reminiscent of the paramilitary terrorists in Colombia.

Both the U.S. and Mexican governments have shown glimmers of recognition that the Mérida Initiative, with its heavy military emphasis, has failed. In early 2011, then-U.S. Ambassador Carlos Pascual tried to nudge both countries' bureaucracies and resources toward social, economic, and justice programs that would address the underlying causes of Mexican violence -- less sexy than helicopters, but more strategically important. His "Beyond Mérida" approach was removed from the State Department website after he stepped down as ambassador.

Although the Mexican government's public position remains the same, officials have also grasped that it's time for a change. At a meeting with governors, judges, and mayors 18 months ago, a frustrated Calderón challenged them to help him, saying, "What I ask, simply, is for clear ideas and precise proposals on how to improve this strategy."

Mexico has also quietly begun shifting strategies, from an emphasis on interdicting drugs and dismantling networks to a focus on citizens' safety. "Our obligation is to our people, not to interdicting drugs for the U.S. market," a senior official told me. It's a reprioritization similar to predecessor Mexican administrations.

Both Obama and Secretary of State Hillary Clinton have declared "our shared responsibility for the drug violence." But co-responsibility, as they called it, has to mean more than Mérida and intelligence cooperation. We have to get serious about reducing consumption. Forty years after Richard Nixon declared the "War on Drugs," U.S. government drug experts report that 8.9 percent of Americans aged 12 or older -- an astounding 22.6 million people -- are current users of illegal drugs.

Biden repeated the theme of "shared responsibility" in Central America this month -- in addition to wagging his finger at the region's presidents for launching discussions among themselves on decriminalization options, which they call "market alternatives," as they search for ways to take the edge off the narco-violence.

Regional leaders hit the vice president hard for his failure to offer new solutions. "We demand the United States assume responsibility, said Costa Rican President Laura Chinchilla. "Central America is sacrificing the lives, making its enormous sacrifice, and continues to demand that the international community take greater corresponsibility in this struggle."

It's time for Washington to abandon the fiction that the cartels don't operate in the United States. The U.S. government's narcotics-flow maps show the drug trade as fat arrows coursing their way from Colombia through Central America and Mexico -- but they all stop at the U.S. border. The National Drug Intelligence Center has published a list of 235 American cities reporting a Mexican cartel "presence," and that just skims the surface. Ignoring the cartels' vast networks won't make them go away. Co-responsibility also means addressing "southbound" flows -- the U.S. arms and cash that are the raison d'etre of the cartels -- to Mexico, Central America and beyond.

Or if we're unwilling the match the courage that the Mexicans have shown -- and if we just want the Central Americans to follow the same failed strategy -- we must launch a serious dialogue here on legalizing, or at least decriminalizing, the drugs. It's not a perfect solution, but it's better than no solution at all.

It's not in the U.S. national interest to be supplying cash and weapons to both sides of the drug war in Mexico. The United States needs a strategy to win the war or to settle it -- not just arm it and watch from the sidelines, as Mexicans die. Mexico will elect a new government this summer. Regardless which party wins, everyone will lose if we don't get a smart policy in place now.

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