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The appointment of Justin Yifu Lin as World Bank Chief Economist and Senior Vice-President for Development Economics is big news. This is the first time this position is held by a citizen from the developing world, but such a move was to be expected, since after all Lin is Chinese and his country will have a bigger economy than that of the United States in twenty years time. Yet the real surprise is that Lin is known for his criticism of the Washington Consensus, and particularly of shock therapies and mass-scale privatizations, two policies actively promoted by the Bretton Woods institutions in the last two decades.

The first thing that a journalist-to-be learns is that a dog biting a man makes no news but it is news when, against the natural order of things, a man bites a dog. According to this definition, the appointment of Justin Yifu Lin as World Bank Chief Economist and Senior Vice-President for Development Economics is big news. This is the first time this position is held by a citizen from the developing world, but such a move was to be expected, since after all Lin is Chinese and his country will have a bigger economy than that of the United States in twenty years time. Yet the real surprise is that Lin is known for his criticism of the Washington Consensus, and particularly of shock therapies and mass-scale privatizations, two policies actively promoted by the Bretton Woods institutions (i.e. the World Bank and the International Monetary Fund) in the last two decades.

With over a hundred articles published in academic journals – most of them on the rural economy and development – Lin is an outstanding researcher and his name has been included on the short list of candidates for the Nobel Prize in Economics. The award was conferred to Joseph Stiglitz in 2001, after he resigned the World Bank position to be held by Lin in May. Stiglitz has made cutting remarks against the World Bank and IMF after resigning his post. Lin has done so before taking office.

“The Washington Consensus, which is based on the basic principles of neo-classical economics, has been recommended by the IMF and World Bank in the developing countries”, asserted Lin during a conference at the TIGER institute in Prague. “Most countries in Eastern Europe and the former Soviet Union followed this approach, based on stabilization, price liberalization and privatization, three reforms considered to be necessary and that should be simultaneous. The result was a sharp and prolonged decline in GDP with high inflation rates and deterioration of social indicators”.

Instead of these shock therapies – advocated for at the time by Jeffrey Sachs and Milton Friedman – Lin proposes the “Chinese approach” which is “neither guided by a well-founded theory nor follows a predetermined blueprint” but “is gradual, evolutional, partial, incremental, often experimental and without large-scale privatization”.

This model started to be implemented in China in 1978, the same year that Lin graduated in business administration while serving as captain in the army of…Taiwan, the rebel Chinese province then ruled by the Kuomintang’s dictatorial and ferociously anti-Communist regime of Chiang Kai-shek. In 1979, at the height of the Cold War, captain Lin made news when he swam from Taiwan to mainland China, leaving behind his academic and military career, and also his wife, then pregnant with his second child. The scandal was such that it was not until 2000 that Taiwan officially changed his “missing” status to that of “deserter”, which still applies to him and makes him subject to arrest if, as he has expressed it would be his intention, he steps on the island to visit his father’s grave.

The government in Beijing (Peking) welcomed with honors the prodigal son, who continued his studies and earned a master’s degree in Marxist political economy in 1982. Lin was one of the first Chinese scholarship students in the United States and received a PhD in Economics from the University of Chicago (yes! the same as Milton Friedman’s and that of the “Chicago boys”). This trip allowed him to meet again with his wife, who also earned a PhD in the United States during that period. Back in China, he combined his academic research with government advising and teaching, and in 1994 he founded the China Center for Economic Research, which he chaired until he was appointed in February to his new post by World Bank president, Robert Zoellick.

Zoellick is a Republican who had key positions at the investment group Goldman Sachs and was member together with Condoleezza Rice and Paul Wolfowitz of the ultra-conservative team of advisors to George W. Bush during his presidential campaign. They called themselves ‘the Vulcans’ after the Roman god of fire…and first weapons manufacturer. What is Zoellick after when he appoints someone coming from his geographical and ideological antipodes as head of the World Bank economic policy-making? A profound reform of the ‘Washington Consensus’ or, instead an extended hand to China, which last year surpassed the World Bank as the main foreign aid donor to Africa?

There is no way to know what was in Zoellick’s mind. But we do know what Lin thinks: “In Chicago I learnt that the market undoubtedly has the best solutions in an ideal world”, he told the German newspaper Die Zeit, a few days after his nomination. “But in fact there are all types of distorsions, particulalry in developing countries. As a Marxist I think that we have to take these factors into account, together with the quality of institutions and historical heritages, before introducing the market economy or the Washington Consensus, which only work in an ideal world”.

Will the World Bank now promote a “Chinese model” of development? “In China the reform process started in agriculture. Peasants were given lands. China is a very densely populated country, with small plots of land and short distances between producers and their markets. When Mikhail Gorvachev tried to make similar reforms in Russia, he failed, because distances and farms are huge in Russia. There is no such thing as models. I believe in diagnosing each case. Each country has its own obstacles to development and its own potentialities. When I arrived in China from Taiwan in 1979, a great conceptual change was underway. I think that the World Bank is now entering into a similar process and there is an increasingly large number of people in Washington who believe in a diagnostic-based approach rather than in pre-established convictions”.

Should there not be perhaps conditionalities referred, for instance, to human rights? “Countries become more liberal as they get richer”, asserts Lin. “The more development progresses, the more individual liberties will progress. When I travelled to Chicago in 1982, it took me six months to get my passport, and I had to fill in innumerable forms. Now anybody can get it in six days in China. I am sure that we will have a democracy in China, but it will be a democracy with Chinese flavour, such as the German democracy is different from the British or American one”.

(*) Third World Institute (ITeM) Executive Director and Coordinator of the Secretariat of Social Watch.

This article was published on March 6, 2008 in Agenda Global, a weekly supplement issued every Thursday with the newspaper La Diaria (Montevideo, Uruguay).

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