WHY CAN'T THE WORLD BANK BE MORE LIKE A BANK?
June 3, 2005
There's a new challenge facing the World Bank: delivering massive amounts of development aid in a way that can't be expropriated or exploited by corrupt Third World bureaucrats or the avaricious development industry, say James S. Henry, editor of Submergingmarkets.com and Laurence J. Kotlikoff, chairman of the department of economics at Boston University.
By using new technology, there is now a direct way to assist people in the Third World via World Bank accounts. Under this proposed policy, the Bank would establish, manage and oversee individual accounts for citizens or institutions in Third World countries, as well as directly contribute to those accounts. New technology -- electronic fingerprint recognition -- can be used to ensure that only one account is opened for any given Third Worlder.
The accounts would serve three functions: checking, saving and investing.
- All account balances would be invested in a market-weighted global index fund of stocks, bonds and real-estate securities.
- The accounts would be the private property of their owners, allowing them to make deposits or withdrawals at ATMs at home or abroad.
- Since portfolio holdings would be marked-to-market, account owners would be able to write checks against their account balances.
- Balances in the account could also be used to secure micro-lending, which is working in countries like Bangladesh, Mexico and Colombia.
- Finally, the accounts would be free.
By establishing World Bank accounts, the World Bank would end, rather than contribute to, Third World financial servitude. This would limit excessive borrowing and spending by Third World countries and force domestic financial institutions to meet the international market test, that is, to compete. The new policy would also force developing countries to adopt the legal and accounting norms needed to attract foreign investment, say Henry and Kotlikoff.
Source: James S. Henry and Laurence J. Kotlikoff, "Why Can't the World Bank Be More Like a Bank?" Wall Street Journal, June 1, 2005.
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