Development and Cooperation


	Contributions from the Column Focus In pursuit of Global Public Goods “A failure of US and EU leadership” “Analytic culture” Self-serving giants in a multipolar world Back to San Francisco Strategic partnership 05/2006		“Analytic culture” The World Bank is the single most influential institution in global development affaires. The advanced nations dominate its decision-making. When Paul Wolfowitz took office as president last year, many feared he might impose decisive change. One year on, however, such worries seem exaggerated. As Nancy Birdsall, a Washington-based scholar argues, Wolfowitz’ agenda so far is one of continuity. [ Interview with Nancy Birdsall ] Can one already discern some kind of Wolfowitz agenda at the World Bank? So far the Wolfowitz agenda at the Bank seems to be one of continuity. It is a Wolfensohn agenda with more emphasis on corruption. Mr. Wolfowitz appears to be even more reluctant to lend to countries and projects where there is substantial apparent risk of corruption. As Mr. Wolfowitz played a leading role in planning the Iraq war at the Pentagon, there were wide-spread fears that he might subordinate the Bank to the State Department or even the Department of Defense. There is no indication at all that Mr. Wolfowitz is subordinating the Bank to the State or Defense Departments – or, for that matter, to the US administration in general. In any event, there is a natural coincidence of ideas and goals with the USA on the big issues such as open markets, transparency, good governance and fiscal discipline. It seems that Mr. Wolfowitz is facing hostility among Bank staff. Can he rely on his ideas being implemented? To the extent he emphasises continuity – for instance, by focussing on poverty in Africa, lending to middle-income countries or stressing good governance and open markets – whether or not staff are hostile will not be relevant. They will carry on. There was initially hostility to Mr. Wolfensohn as well. Professional staff are mostly interested in doing their work well, and are committed to their work. The World Bank’s culture is analytic. If Mr. Wolfowitz’ ideas and leadership make analytic sense, staff will want to try to implement them. In other words, ideas and management will matter more to implementation success than how staff feel about the president. Some Bank staff seem to fear that they will be at the receiving end of Mr. Wolfowitz’ hard stand on corruption. Is abuse of funds within the Bank really a major problem? I would be surprised if abuse of funds is a core problem within the Bank. Amazed actually. People who want to get rich don’t end up at the Bank. It may be the case that there are incentives for staff to turn a blind eye to corruption within the countries where they are working, because exposure puts a loan or a programme or a project at risk that they believe, despite corruption problems, will have benefits for growth or for people. That is where, as we say in English, »the rubber hits the road«. How much corruption is too much? Can the Bank be effective at all in helping fight corruption? Should it stop lending for schoolbooks or nutritional supplementation programmes because of corruption in the office of the head of state? What impact will Mr. Wolfowitz’ line on corruption have on leaders in developing countries? Leaders in developing countries will be impressed if that is translated into some practical indicators. For example, the Bank has been working on a transparent measure to assess whether and, if so, how much lending the Bank should do. Publishing such data will be especially important for the leaders who are considered “bad guys” in colloquial terms. Moreover, the Bank could help to design, implement and evaluate specific practices, policies, programs that fix the corruption problem, in cooperation with the political leadership. Doing so would especially matter to those leaders who are “good guys”, in other words: willing and enlightened but without the administrative, bureaucratic and skilled managers and other staff to design and implement anti-corruption efforts. If asked to do so, what advice would you give Mr. Wolfowitz? Regarding advice to Mr. Wolfowitz, I co-chaired a working group together with Devesh Kapur. We drew up a paper for the Center for Global Development, outlining five crucial tasks for the new World Bank president last year. In my view, those are still the top priorities. The Bank should revitalise its role in China, India and other emerging market economies – especially by offering “hassle-free” loans to those that meet certain requirements and by developing new products to help those countries catalyze more private sector lending. In the poorest countries, especially in Africa where so many donors are active, it needs to focus on setting priorities rather than trying to do everything. The president should take leadership on the Bank inviting truly independent evaluation of its own aid programmes, and encouraging independent evaluation of all aid-programmes. Moreover, the president should push the member governments of the Bank to give it a serious mandate and grant financing on some global public goods – such as vaccines for tropical diseases, and research on agriculture in dryland areas. Finally, the governance of the World Bank itself must become more legitimate and representative. For that to happen, the member governments have to agree on reforms. Would you also give Mr. Wolfowitz some personal advice? I would suggest that he find someone inside the Bank who knows the Bank well and whom he can trust and who is clearly respected widely inside the Bank and ask him or her to take on day-to-day management. If there is no insider, then he should find a former minister, ideally of finance, to do the job. Joseph Stiglitz, a former chief economist at the World Bank, used to speak of a post-Washington Consensus emphasising aspects such as governance and popular participation and going beyond the principles of market-led liberalisation. Later, he prominently accused the IMF of stubbornly adhering to out-dated doctrines. Do the Bretton Woods institutions have a common agenda today? Yes, they have a common agenda for developing countries: steady, long-term growth with poverty reduction. Officially their Boards and thus they will not differ on any major issue since their member governments are the same. But of course their staffs may differ on how to achieve apparent common goals. Among staff there is as much debate within each institution on specific issues as between them. This was in fact the case at the time of the Asian financial crisis. To the extent that the IMF then was hewing to the policy position of the US, you might say that Joe Stiglitz was critizising the US government. In any event, debate is on about the best path for that agenda at different times and in different countries. It is true that staff in the World Bank may put a higher premium for example on spending on health while staff in the IMF believe the key is to stabilise prices.In that sense, Joe Stiglitz was fighting the IMF – and the US Treasury – for imposing too much austerity on countries during the Asian Crisis, from his seat at the World Bank. But for the most part the fundamental differences between the two institutions on what the Asians should have done were really rather small. It was just that the IMF had the big money and was running the process. Why has debate on the IMF become so calm lately? The Fund risks loss of relevance for many reasons. Spreads are low, important developing countries have self-insured with high reserves, big borrowers like Brazil and Argentina are pre-paying loans, partly for domestic political reasons. Their governments want to be “independent” of the Fund, which has lost some legitimacy and at which they feel no sense of ownership. The Asians are setting up their own central bank swaps — perhaps to never again be subjected to the humiliation they felt at the time of Asian Crisis, when they had to submit to the Fund. But primarily, public debate is quieter now because there is no crisis. If the dollar really takes a fall, or the global economy slows for some other reason, we’ll see... Questions by Hans Dembowski. Dr. Nancy Birdsall is the president of the Center for Global Development in Washington DC, an independent think tank. president@cgdev.org On the web: Center for Global Development Working Group, 2005: “The hardest job in the world. Five crucial tasks for the new president of the World Bank” www.cgdev.org/content/publications/detail/2868