What 'Developing' Countries Can Teach the U.S.

As Barack Obama huffs and puffs about his tax plan, which is unlikely to pass in the Democratic-majority Senate much less the Republican-controlled House, Robert Zoellick, president of the World Bank, has provided a much broader view of where the United States stands amid great changes in the world and some useful guidance on what direction public policy ought to take.

Zoellick spoke at George Washington University on Sept. 14, midway between Obama’s Sept. 8 speech to a joint session of Congress calling for a second stimulus package and his Sept. 19 speech in the Rose Garden laying out the tax increases that he evidently believes will, somehow, lead to the creation of jobs.

Zoellick devoted some of his speech to World Bank business – his “Beyond Aid” proposals to stimulate Third World development through private-sector involvement and his call for programs to address the needs of women.

But he also provided a much broader perspective than most officials do, starting with a comparison of where things stood when the foundations of the World Bank were laid at the Bretton Woods Conference in 1944 and where we are today.

Back then, developed countries accounted for 80 percent of the world’s gross domestic product and the United States for nearly 50 percent. Much of the world was in ruins, starvation was rampant, disease afflicted millions of children.

Today, we’ve been seeing enormous growth in what we have been accustomed to call “developing” countries. They have been growing nearly four times faster than “developed” countries, and they account for nearly half of total global investment and global economic growth today.

In effect, we are going through a period when China and India – with one-third of the world’s population – are moving rapidly from (to use the old terminology) Third World to First World status. That’s true as well of millions in developing countries in Latin America, Asia and even Africa.

Nothing like this enormous transformation has ever happened before, and nothing like it will ever happen again.

Interestingly, these countries have developed in part by copying Western institutions but also by creating their own public policies. Examples cited by Zoellick include Brazil’s and Mexico’s cash transfers (bolsa familial) to mothers who vaccinate children and send them to school, Turkey’s macroeconomic policies, Singapore’s open economy and intolerance of corruption, India’s information technology services and Colombia’s mass transit systems.

These policies have spurred growth in places where few experts predicted it would be possible, from steamy Singapore to Brazil’s sugary northeast. They are a reminder that policies that encourage self-advancing behavior and leave the way open for human creativity to flourish can accomplish more than simple transfers from the affluent to the impoverished.

That this unprecedented rapid development has caused some problems for the United States and other advanced countries should be no surprise. Any sweeping change renders some old practices obsolete and requires some institutional adjustment.

Zoellick, who served in the Reagan and both Bush administrations, says he is skeptical of predictions of American, European or Japanese decline, but admits we have work to do. The U.S. needs “credible and definitely possible action – not just short-term fixes – on debt and deficits to restore confidence.”

Nations need, he said, to “focus on structural and tax reforms to spur private-sector growth, boost productivity and create jobs.”

And advanced countries need to practice what they preach on fiscal discipline, free trade and sustainable debt.

All of which sounds like a pretty stringent critique of what Barack Obama has been up to lately.

One of the underappreciated truths about Obama is that he isn’t all that interested in public policy – much less so than Bill Clinton, considerably less so than George W. Bush.

He was content to leave the details of the stimulus package to congressional appropriators and the details of Obamacare to the deal-cutters squeezing out the last few votes in Nancy Pelosi’s office. The result is laws that don’t work nearly as well as advertised.

His latest proposals, for $447 billion of stimulus spending and goodness knows how much in tax increases, are not designed to become law but to provide a backdrop for campaign ads.

The Obama formula of higher taxes and no significant change in entitlements is a formula for transforming America into something like continental Europe – even as it becomes clearer than ever that the European model is collapsing.

The times call for serious governance, as Zoellick says. But Obama seems uninterested in serious policy issues and interested only in cheap-shot campaigning.

The Patriot Post® · What 'Developing' Countries Can Teach the U.S.