Read my lips, says Jim Wolfensohn
World Bank turns to guarantees
Seven-point plan to save the world
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Wolfensohn:
low tolerance
for criticism |
Complex and mercurial, Jim Wolfensohn exudes a passion for the job. He considers his half-decade at the International Bank for Reconstruction and Development, more simply known as the World Bank, to be the most important task that he has tackled.
Wolfensohn has described his presidential role as a high-wire act of sorts. He's not been content to settle for a Bank which pushes countries into policies designed only to produce growth. Development, in his eyes, involves far more than that. He wants staff to think in more "human" terms.
"I am absolutely convinced that for the future it has to be a partnership of interests between the financial and macro and the social and structural."
The task is daunting. Dire poverty remains the lot of multitudes 40 years after the International Development Association (IDA) was set up as a World Bank affiliate to assist the poorest countries. "If that's the most celebrated initiative to usher in the new millennium," says Jessica Einhorn, a former managing director at the Bank, "we'd better have some humility about the complexity and challenge of this enterprise."
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Woicke:
a model of continuous
change |
The deck, indeed, seems stacked against Wolfensohn's cause. "We have approximately three billion people living on under $2 per day," he reminds us. "About 1.3 or 1.4 billion of them live on under $1 per day." That's out of a total world population of about six billion which probably will increase to some eight billion in 25 years' time. Half of those could well be living for under $2 a day. Bank officials frankly admit that the statistics depress them.
So, what should taxpayers who, let's not forget, own the Bank expect from the institution?
The answer coming from some of its staunchest supporters sounds, surprisingly, like not much. "It's too small, a trivial player in the global scheme of things," says Devesh Kapur, a professor at Harvard and co-author of the Brookings Institution study The World Bank: Its First Half Century. Kapur points out that the Bank works in some of the toughest places and says it should have a time horizon of two or three decades, not two or three years or even two or three months. "It clearly has fallen short of our expectations," Kapur concedes, "but the problem is our expectations."
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Shafik:
NGOs are significant
partners now |
Kapur gives the Bank an overall grade of B+ because he believes that it has performed best in some countries that themselves have done well. He points to China, Japan and South Korea as examples. The Bank, he says, also has played a constructive role in other large, complex economies such as those of India and Brazil. But its worst performance has been in Africa.
The lesson, for Kapur, is that the Bank can most effectively be utilized by countries which are large, have passed a threshold of capabilities and have "good" leadership. But the Bank can't do much if institutions and capabilities are weak and the country suffers from corrupt and bureaucratic leaders. "Bank funding under those conditions has overwhelmed countries and perhaps even made problems worse," says Kapur.
David Dollar, a researcher at the Bank who has studied the effectiveness of foreign aid including World Bank programmes, says he thinks it perfectly reasonable for taxpayers to have high expectations and demands. They made one-time capital contributions to the Bank and naturally should want to pay attention to whether that's being put to good use. Their investment and the subsequent returns, after all, could be spent elsewhere.
The Bank manages another fund IDA which gives concessional money to truly poor countries. Taxpayers from the wealthier countries pump new cash into IDA every three years or so. That, in turn, allows IDA to do about $6 billion or $7 billion in business every year, roughly one-third of the total for the World Bank Group. IDA aid consists of 40-year interest-free loans with a 1% commitment fee.
Dollar's research shows that foreign aid, particularly IDA loans, has quite a large positive impact in poor countries which have sound economic policies. He points out that many of these countries have performed in the 1990s and he believes that the World Bank, through IDA, does a reasonable job of channeling money to them. Once a government commits itself to reform, the evidence says that giving them money reinforces those programmes. But even Dollar admits that it is a lot harder to judge whether taxpayers are getting a good return on World Bank lending to middle-income countries.
Enter James Wolfensohn. There's no denying that he has put the Bank on the road to profound and far-reaching change. It began with his "strategic compact", an agreement between the Bank and its shareholders designed to improve its effectiveness. The compact reassigned more staff from Washington to the Bank's field offices. It shed employees whose skills no longer matched the Bank's needs. It gave the Bank a mandate to develop new financial products and services, called for beefed up social and environmental assessments of projects and loans and told management to clear away sclerotic procedures and make the organization more nimble.
Next came his "partnership initiative" (PI) which tries to put borrowing countries "in the driver's seat". The PI could go down as one of the institution's worst metaphorical disasters, with assorted wags and critics gleefully pointing out that the Bank's particular driving skills always have belonged in the back seat. But the point of the PI is serious and well taken. The idea is for governments, working closely with the major "stakeholders" in their societies, to produce their own national development strategies. And the Bank then responds to what it deems worthy in those plans. All of this is what inspired the new World Bank buzz term: "creating country ownership" (of the development programme).
Wolfensohn then rolled out his latest show stopper, the comprehensive development framework (CDF), early this year. It goes a step beyond the PI to recognize that there are many key players in the development process and that they need to work together as part of a coherent, coordinated strategy. The CDF reduces the interactions between all the various groups to a two-dimensional matrix which one Bank official calls "Wolfensohn's little checklist" for doing business with individual countries.