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What Future for the World Bank?

Date
Time (GMT +01) 12:00 13:30

Speakers:

Charles Abugre, Head of Policy & Advocacy, Christian Aid

Prof Ben Fine, Professor of Economics, SOAS

Tim Cullen, Consultant & Former World Bank Chief Spokesman

Chair:

Jeff Powell, Co-ordinator, Bretton Woods Project

Charles Abugre

Charles Abugre began by stating he had 4 major points to make during the presentation:

1. If the Bank's contribution to development in the last 25 years has been disastrous, the new focus on governance will likewise be catastrophic;
2. The Bank had its period of greatest growth when Robert McNamara was president;
3. The Bank needs to be broken up into smaller component parts;
4. And if the Bank is broken up, the reform agenda needs to be conceived of differently: the current focus on quotas and voting is too limited.

On the first point he argued that the Bank's own analysis shows that it has been a failure. He argued that it has lost the growth debate; accepted that the liberalisation of the capital account and trade does not necessarily equal growth; and admitted there is no one path to achieving growth. The Bank now recognises the need for public investment and accepted that income distribution is important.

He presented figures from assessments of projects (by the Bank's own analysts) which found a 61% rate of failure in governance projects and a 55% failure rate in education projects. Worryingly, the Bank is expanding its work in areas in which it has failed. This Abugre attributed to poor governance.

Abugre raised 2 major concerns. First, he criticised the International Finance Corporation (IFC) arm of the World Bank for being too involved in the running of privatised services and claimed the IFC was using Bank-mandated government decentralisation as an instrument to penetrate service provision at the sub-national level. Second, he said he was worried that policies countries had fought and defeated at the WTO were being pushed via bilateral channels.

He emphasised that the role of the Bank should be to provide subsidised capital in a pseudo market arrangement and not to provide resources for public goods such as healthcare or education. He argued that organisations such as UNICEF do social provisioning much more effectively and the Bank should not be involved in this area.

Prof Ben Fine

Prof Fine focused his remarks on the research and analysis capacity in the Bank. He drew a three way distinction between the Bank's scholarship, policy and rhetoric and said that although the Bank is a major player in terms of leverage and resources, the three elements are quite often inconsistent, of poor quality and subject to limited critical peer review and contestation. He discussed this issue in relation to privatisation and social capital.

On privatisation, he identified 3 major phases in the thinking:
1. A phase of no analysis with privatisation being the accepted creed in policy and in rhetoric;
2. A phase of selective interpretation of the evidence in favour of privatisation to support policy and rhetoric already in place;
3. More recently, a complete re-think on privatisation arguing that the Bank was wrong adopt it a policy unthinkingly and that there is a need for preconditions to be in place.

Fine identified the third phase as both good and bad news: good in the sense that the Bank has started to pay attention to the research; bad in the sense that it has led the Bank to the conclusion that loans should be focused on making the conditions right rather than the conclusion that privatisation was not appropriate in many contexts and should not be further pursued.

On social capital, he identified the same pattern of events with the Bank accepting criticisms in substance but not in practice.

He concluded that intellectuals within the Bank debate dishonestly both internally and externally. He called for better intellectual analysis and questioned what this said about the core issues at the Bank.


Tim Cullen

Tim Cullen covered voting shares, Wolfowitz's presidency, future direction, corruption and lending for infrastructure.

He began by arguing that altering the voting structure at the Bank would make little difference because:
1. It would not make a great difference to the workings of the Bank's board because decisions are based on consensus;
2. Wealthy countries are rewarded for large contributions by being allocated large shares of the vote. Changing this may lead to a reduction in contributions.

On Wolfowitz's presidency he said that it was unfortunate that he had taken so long to appoint senior staff. He criticised the new staff for being too heavily from the USA, lacking in development specialists, being linked to the US Republican party and for being inefficient in addressing pressing concerns.

Cullen highlighted changes in the direction of the Bank such as recognition of the importance of civil society and a change in lending patterns. On corruption, he stressed that policy should be even-handed and not influenced by the policy of the US government of the day.

He signalled a note of caution in allocating more funds to good performers on the corruption metric, stressing that this is very bad for poor people in badly governed countries.

On infrastructure lending, he emphasised that this is an important function of the Bank if it is done well. He pointed out the influence share holders can have using the example of the World Commission on Dams findings which were not adopted because some shareholders did not want to take account of human rights issues.

Discussion

The following points were covered in the discussion:

- Measuring failure rates of projects: Cullen pointed out that the Bank's Independent Evaluations Unit (IED) is very stringent on what counts as a failure and that may be why rates are so high;,

- Provision of services: Abugre argued that the Bank enters into the service sector because it sees an opportunity to create business, not because it is a particularly effective provider of health care or sanitation. Cullen responded by questioning whether it is realistic to expect the state to provide, for example, clean water for all given the funding constraints they often face. He said the private sector is one potential answer to the shortage of funds;

- The role of NGOs and the Bank: Cullen argued that these are complementary;

- Divergence between policy and practice in the Bank: anecdotal evidence shows there is both innovative and unsuccessful work on the ground;

- The relationship between scholarship and operations: how is the Bank able to sell its knowledge so that it becomes so influential?

- Admitting mistakes: Cullen argued that the work of the IED does get into the feedback mechanisms at the Bank, citing the example that the World Commission on Dams was created out of IED findings. Fine disagreed, saying there was poor feedback and monitoring and evaluation at the IED;

- Grants instead of loans: the decision should be appropriate to the project, not to levels of country wealth;

- The role of the International Development Association (IDA): Abugre proposed that the IDA should be separated from the Bank and work with agencies such as UNICEF and UNESCO instead. Related points were that moving some functions to the UN system is unworkable as the recipient is a recipient not a donor and that the World Bank (i.e. the Bank for Reconstruction and Development (IBRD)) and the IDA should remain under the same roof to influence each other;

- The Bank's role in middle income countries.

Description

This meeting will ask what role the World Bank should play in long-term development financing and how its governance structure can be improved to make it more effective.