The World Bank: “Freeing us from poverty through gold”

It’s so sad one can only laugh.  The World Bank was established in 1944 with the stated goal of reducing world poverty.  Today it has this morsel of Madison Avenue branding prominently displayed on its web site: “The World Bank: Working for a World Free of Poverty”.  Like most corporate slogans, it’s a stark lie.  The World Bank and its sister IMF have throughout the 1990’s to today worked to impose austere Washington Consensus policies on the third world with the sole beneficiary being high finance.  I won’t go into the sad history of this failed institution – but one can’t go wrong by starting with the works of former World Bank Senior Vice President Joseph Stiglitz.

Which brings us to today and World Bank President Robert Zoellick’s call in the Financial Times for a return to the gold standard.  That many affiliated with Wall Street and high finance would like to see this is not at all surprising but Zoellick’s call from such an influential position must be seen as an important indicator of the prevalence of this opinion within elite circles.  Wall Street and the New York banking community have throughout our history sought to tie money to gold.  Those who have the money always wish to make it dear.  The  19^th and 20^th centuries, though, provide ample evidence that a gold based monetary system is horrible for everyone else as it necessarily enforces high unemployment, deflationary policies, and great instability.  For an institution that is “working for a world free of poverty” to call for a return to the gold standard is as conflicting and humorously outrageous as Orwell’s famous institutional branding – “war is peace”, “freedom is slavery”, and “ignorance is strength”.  Perhaps the World Bank’s slogan should be changed to “The World Bank: Freeing us from Poverty through Gold”.

Zoellick is an excellent example of how high finance has captured all our key institutions.  Who is Zoellick?  Are you ready?  He’s a former Vice Chairman of Goldman Sachs and throughout his career he’s been deeply connected to interests favoring free trade and finance.  With such a background, it’s no surprise Zoellick would represent what Keynes derisively called the “treasury view”, an institution for which Zoellick’s also worked.

Zoellick was appointed by George W. Bush but don’t think this means his views are limited to the extreme of the republican party.  It’s fully bipartisan as the same basic views were held by officials of the Clinton administration who initially developed the Washington Consensus and they are prominent today within the Obama administration, as indicated by the high position of former World Bank Chief Economist Lawrence Summers.  I think it’s safe to say that Zoellick represents the center-right of a bipartisan monetary consensus.

We are firmly in the grips of a neo-19^th century world.  It’s clearly visible in Europe as every government is focusing on deficits and austerity with the exact same diligence that a gold standard would require.  And we’re about to see the same in the United States as politicians from both parties are calling for cuts in social security and medicare in order to reign in the deficit.  We are already in a de facto gold standard with the only difference being that financial markets are being reified rather than gold.  The depressionary effects are evident everywhere.

It’s truly amazing we’re forgetting all that was learned through two world wars and a depression.  Keynes is nowhere to be seen.  The power of money and capital is all encompassing.