Reforming the World Bank

As the largest international aid agency in the world today, the World Bank exercises profound influence over the lives of billions of poor people. World Bank loans represent nearly 30 percent of all official development aid and serve as critical signals of creditworthiness for developing countries seeking to tap into the global pool of private capital. As the largest site for research and data production on development issues, the World Bank is also the intellectual leader in defining how poverty alleviation and equitable socioeconomic growth goals are conceptualized, measured, and pursued. Because of this prominence in global governance, the World Bank is a magnet for criticism from large transnational non-governmental organization (NGO) campaigns, national parliaments, local civil society groups and academic experts who disagree with its policies. Critics from across the political spectrum depict the World Bank today as an institution suffering from a tripartite crisis of irrelevance, illegitimacy and ineffectiveness (Birdsall and Subramanian, 2007). They increasingly see the Bank as an institution that at best mitigates and, at worst exacerbates, poverty and inequality in the developing world. These criticisms are compounded by widely held perceptions of inequalities in the outdated and Western-dominated governance structure of the Bank, as well as the poverty of ideas within an organization largely dominated by narrow economic orthodoxy. Yet even when member states demand reform, and when World Bank leadership commits itself to change, transformation remains elusive. Why? To many, the task of reforming the World Bank is akin to the plight

of Sisyphus. The deluge of contrary pressures from donor states, borrowing countries, NGOs, and civil society groups has contributed to mission creep at the same time as the Bank’s legitimacy and financial viability have come under attack. Moreover, the sheer size and scope of the Bank’s bureaucracy dampens hope for fluid and rapid change. Like the fate of Sisyphus to perpetually push the rock to the top of the

mountain only to have the stone fall back from its own weight, those seeking to compel the Bank in new directions face the prospect of reform attempts stalling or backfiring because of the inevitable friction of external political resistance and internal bureaucratic inertia. The challenge of reforming the Bank, amidst myriad calls for reform

of the foreign aid regime as a whole, looms in a surprising absence of a clear understanding of how to reform these complex international bureaucracies. Indeed, the focus falls heavily on the demand side of this question, limiting discussions to the need for change and lofty reform goals. Little systematic attention is given to the supply side of World Bank reform: the nuts and bolts of constructing politically feasible and coherent organizational reform programs, implementing them, and assessing their results. In the case of the World Bank this is even more striking given the institution’s involved history with repeated reform programs. Over the past 65 years, the Bank has engaged in numerous internal reorganizations, with mixed success in achieving desired changes in its governance, policies, and operational performance. Few, if any, efforts have been made to systematically look at these past experiences to draw critical lessons for future reform. On a more impolitic note, discussions surrounding the reform of the

World Bank today are disproportionately geared toward the goal of democratizing the institution, specifically through proposed changes to the representation of member states on the Board of Executive Directors and the selection process of the Bank presidency (see, for example, Buira and Ocampo, 2005; Birdsall, 2006; Einhorn, 2006; Powell, 2007; Woods, 2008; Ramachandran et al., 2009). Certainly, one cannot deny the inherent value of improving the Bank’s legitimacy and accountability through governance reforms, even in light of cynicism regarding the political feasibility of implementing these proposals. However, it is not clear whether such measures offer a panacea for the institution’s perceived ineffectiveness and diminishing relevance. Indeed, these democratization discussions noticeably neglect blunt questions of how these adjustments at the top will “trickle down” to genuine change within the policies and practices of the Bank’s immense bureaucracy. Are the policy experts too obsessed with rearranging the deckchairs on the Titanic while ignoring what it takes to turn such a large ship mid-course and address the fissures beneath the tip of the iceberg? Ultimately, how to reform the World Bank is central to the broader

question raised in this volume regarding how institutions and systems of global governance might be redesigned to be more effective in addressing issues of poverty and inequality. This chapter poses three sets of driving questions to this end. First, how can we think about the

process of reforming such large international governmental organizations? Conceptually speaking, who is driving reform and what are the mechanisms and processes that reform can engage to effectively engineer change in international bureaucracies like the World Bank? Second, what have we learned from past attempts to reform the World Bank that might inform how we design and tackle current change agendas? A reflection on the Bank’s last major reorganization, the Strategic Compact initiative from 1997-2001, illuminates many of the promises and pitfalls in designing and realizing reform goals. Finally, given the cacophony of demands facing the World Bank, what may be the most significant reforms that member states and Bank leadership could undertake in the near term? In other words, what might be the most pragmatic priority for Bank reform that would have the farthestreaching impact on the institution’s relevance, legitimacy and effectiveness? Strengthening the representation and voice of developing countries in the governance of the World Bank remains a top concern and a necessary measure to address the marginalization of developing country voices, as evident in the on-going work of the new High Commission on the Modernization of World Bank Governance. At the same time, I argue that it is just as necessary to direct attention to the selection of the Bank’s management and staff as a mechanism for changing how the Bank thinks about development, as well as enhanced transparency and evaluation policies that would more directly affect the Bank’s operational accountability and organizational learning with respect to its “dream of a world free of poverty.”