Even a Broken Clock…

is right twice a day. So I guess a tinhorn dictator can be right once in a while, too:

President Hugo Chavez announced Monday he would formally pull Venezuela out of the World Bank and the International Monetary Fund, a largely symbolic move because the nation has already paid off its debts to the lending institutions…
Chavez made the announcement a day after telling a meeting of allied leaders that Latin America overall would be better off without the U.S.-backed World Bank or IMF. He has often blamed their lending policies for perpetuating poverty.

This is actually one move by Chavez that the US would do well to follow. The IMF and World Bank have lent money for infrastructure projects that do little to help the people of the debtor countries, but those people are still burdened with the debt. The irony is that the centralization of power and economic dislocation created by the need to pay off huge World Bank/IMF loans is the sort of thing that puts despots like Chavez in power in the first place. Private lending institutions are perfectly willing to lend money in (and to) developing countries for big projects that will actually pay for themselves and quite often will even risk money on projects that don’t. That a project requires government intervention in the form of IMF or World Bank loans to go forward is a pretty good indication that the project is a terrible idea in the first place.

To the extent that the US taxpayer should be subsidizing development in the Third World through subsidized lending, we’d do much better to focus that money on bottom up efforts like the Grameen Bank and other microlending programs which harness the entrepreneurial spirit of the people themselves. It makes sense financially and politically. Financially, risk is thoroughly diversified through thousands or millions of much smaller loans instead of centralized in a few megaprojects. Politically, instead of creating an obligation for a developing countries taxpayers and creating more grudges against America, microloans are self-funding and enhance the income of individuals who receive them. Useless infrastructure loans create poverty and encourage anti-American dictators; microloans create the sort of economically productive middle class whose interests naturally align with ours.

Chavez,IMF,World Bank

Chavez: Venezuela to pull out of IMF, World Bank

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