Reforming the World Bank

The World Bank’s Governors has approved the first of a series of reforms aimed at amplifying the voice and influence of developing countries inside the World Bank Group.

The centrepiece of these much-awaited reforms, announced in mid-February, is an additional seat for Sub-Saharan Africa on the Bank’s Board of Executive Directors, a change that will allow developing countries a majority on the Executive Board.  The reforms, which also seek to bring the share of developing countries in Bank voting power up to 44 percent, now sit with the Bank’s 185 member countries for final approval.

Well-meaning people from across the world have fought long and hard to improve the representation of developing countries on the Bank’s board.  They have rightly pointed out that while the Bank’s decisions have a profound impact on the world’s poor – most of who live in developing countries – its board has always been dominated by the richest and most powerful states, which do not, in fact, borrow from the Bank. Its top five shareholders, France, Germany, Japan, the United Kingdom and the United States, are the key players, and have one seat each on its 24-member board (the remaining 19 are divided among clusters of countries organized along regional lines).  The “big five” command about 40 percent of the Bank’s votes, and together with other industrialized countries, about 60 percent.  Owing to a postwar bargain struck between the US and the major European powers, furthermore, the Bank’s president is always an American citizen nominated by the US government.

For an organization committed to “working for a world free of poverty,” this makes for an embarrassingly colonial image, and one that many insiders, who have backed the reforms, would rather see corrected.
For critics of the Bank, however, it may be far too soon to breathe a sigh of relief.  There is reason to suspect that the Bank’s reforms are little more than institution-preserving mechanisms, cobbled together in the face of mounting criticism of its undemocratic internal practices and ill-conceived policies.   It is unlikely that the additional seat for Africa, or the broader commitment to improving the organization’s “accountability” and “transparency,” will lead to any significant change in what the Bank does and how it thinks.  There are several immediate reasons why.

First, the Bank’s Executive Board is not, in fact, the organization’s primary decision-making body.  The Bank is often described as a staff-driven organization, which is another way of saying that it is the Bank’s staff and senior management who have the power that counts.  It is they, not the Executive Directors (EDs), who have permanent careers in the organization (some vice presidents have served the Bank for more than thirty years). EDs are in for shorter, 4-5 year terms, and can expect to be recalled if there’s a change in government in their home country.

It is the staff, furthermore, that negotiates directly with borrowing governments and hammers out the resultant agreements.  EDs typically nod through already-polished proposals that arrive before them, and are not privy to the debates over alternatives that may arise among staff.  Of course, neither is the public.  Indeed, no amount of publishing board decisions, minutes, and voting records in the name of “transparency” can compensate for the fact that the Bank’s most important work is done behind closed doors, through informal and fluid processes that are never captured by its official documents.

Apart from not having much power, the Bank’s EDs have little incentive to function as genuine representatives of the countries that have sent them to Washington.  It is the Bank that pays for their ample salaries, pension plans and boundless first-class travel.  Not surprisingly, some EDs choose to stay on with the Bank when their terms end, and move into senior management positions – a more attractive option, no doubt, than returning to a “transitional” country as yet another poorly paid public servant.

It also doesn’t help that the Bank’s EDs are almost always elite economic policy officials – former or recently serving finance ministers and central bank heads – rather than representatives of sectors such as health, education or agriculture, which are usually the most adversely affected by the Bank’s programs.  Many are ardent neoliberals who are more likely to advocate on behalf of the Bank than to entertain the complaints of those that oppose it.  In fact, some, who do return home, use their connections in Washington to strengthen their position against domestic opponents, especially those on the Left.
Incidentally, even though the Bank habitually describes its interlocutors in developing country as “development partners,” it negotiates its most vital deals with the elite economic policy officials of borrowing countries.  Its lofty goals of “ownership by the societies affected” and consultation with “civil society” are likewise hollow.  While the NGO-World Bank committee has admittedly become more active in recent years, in most cases, the Bank speaks with pre-selected NGOs that are relatively friendly.  Some of these are headed by former (and in some cases current) government officials that are already known to the Bank.  More militant groups, with links to radical segments of the Left and labour, are studiously left out.

It’s the ideology that counts…

The selection of staff and senior management at the Bank has never been “transparent.”  What is well-known, however, is that ideological positioning is more important in their appointment and promotion than are academic credentials or, for that matter, even skin colour.  The Bank, like the IMF, its neighbour across Washington’s 19th street, employs mainly economists, or more accurately, neoclassical economists, most of who are cherry picked from elite universities in the West, and many of who are developing country nationals.  In fact, the Bank’s always inducted plenty of developing country nationals into senior posts – even in the 1980s, the heyday of “structural adjustment” – so long as they’ve carried the requisite degrees from a Harvard or a Cambridge, and demonstrated a preference for Friedman over Marx.

If anything, the colour scheme at the top has become even more varied in recent years.  Today, nearly two-thirds of the Bank’s staff and nearly 42 percent of its managers are from developing countries.  Seven of the current president Robert E. Zoellick’s nine senior appointments are from developing countries (Zoellick assumed office in July 2007).  But even though the Bank’s cafeteria probably serves more curry and couscous than it’s done before, there’s been no perceptible shift in the institution’s orientation.  The Bank still promotes growth as the highest good of economic policy, and continues to take a dim view of labour unions and government spending, other than on a few “targeted” poverty reduction programs.  This suggests, once again, that a stock commitment to “representation” will not translate automatically into the Bank’s acting or thinking differently.  Nor will it be any less swayed by the demands of its largest shareholder, the United States.

Indeed, when the Bush administration appointed neoconservative icon Paul Wolfowitz as the Bank’s president in 2005 – ignoring a wild public outcry as well as grumbling among insiders (who felt the ham-handed turn would damage the institution’s still-fragile reformist image) – it drove home the true nature of the institution’s relationship with the US government.  Bush made it plain, as only he could, that the country that pays the proverbial piper also expects to play his tune (fortunately, for the Bank’s image-keepers, Wolfowitz became embroiled in various scandals and resigned his post in 2007).
It is tempting to shrug off the Bank’s impending reforms as a shallow move, but one, nonetheless, that’s in the right direction.  There are, however, some troubling implications.

The impression of improved “governance” may be used to justify a further expansion of the Bank’s already far-reaching and extraordinarily intrusive mandate.  The conditions it attaches to its loans can affect basic decisions about the budget in borrowing countries, along with other issues that normally lie within the sole jurisdiction of national governments, such as judicial and civil service reform.  As explained by Ngaire Woods, a reputed scholar in the field, no matter how thoroughly international institutions are reformed, they cannot be made as democratic as national governments.  One should be wary, therefore, of shifting decision-making from potentially more accountable governments to the “necessarily democratically stunted international organizations.”

Another equally worrying implication is that these reforms will help the Bank further depoliticize its image, and promote itself as a value-neutral organization, stacked with “experts,” that is committed to rational problem-solving on behalf of the world’s poor.  Nothing could be farther from the truth.  The Bank always was, and still remains, a keen ideological warrior with mammoth resources.  The Bank’s incursion into the policy terrain of national governments has tended to pull it into combat with opponents in both civil society and the state.  Resistance has been especially fierce in countries such as Argentina, Mexico and India, which have a strong Left and nationalist commitments to state interventionism.

The Bank’s strategy, in these cases, is not one of winning over hearts and minds, as the pretty platitude of “ownership by the societies affected” might suggest.  Rather, the Bank has functioned as a formidable political strategist, by creating its own allies within the state – in core economic ministries such as Finance – and equipping them with the necessary wherewithal to marginalize domestic opponents.  Rewards for allies have included vigorous lobbying on their behalf, privileged access to the Bank’s incomparably well-funded research, and, most importantly, the promise of jobs at headquarters in Washington, especially if the political heat at home gets too hot to bear (this, ironically, has helped the Bank improve its record of “representation”).

MITU SENGUPTA, Ph.D. is an Assistant Professor in the Department of Politics & Public Administration at Ryerson University in Toronto.