Reforming the world bank: Twenty years of trial - and error

Reforming the World Bank: Twenty Years of Trial - and Error

Volumn , Issue , 2009, Pages 1-320

  Phillips, David A ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

EID: 84925043985     PISSN: None     EISSN: None     Source Type: Book    
DOI: 10.1017/CBO9780511814327     Document Type: Book

References (386)

1. Keynes’ many misgivings about the arrangements, invitees, and agenda for the conference are portrayed in Skidelsky, Robert, John Maynard Keynes: Fighting for Freedom, 1937-1946, Penguin Books, 2002, pp. 340, 347 et al.
2. Mason, Edward S. and Robert E. Asher, The World Bank Since Bretton Woods, Brookings, 1973.
3. IBRD Articles of Agreement, Article 1, pp. 1-2.
4. The World Bank Group also consists of several other organizations. In addition to the IFC, these include the Multilateral Investment Guarantee Agency (MIGA), the International Center for Investment Disputes (ICSID), and the Center for International Agricultural Research (CGIAR).
5. The value of the IDA's annual lending has been less, about two-thirds of that of the IBRD in recent years. However, its outstanding loans have recently grown to exceed those of the IBRD because of their longer average term (40 years as opposed to 16). Against this the IDA has recently started to forgive debt, resulting in a fall in the value of its outstanding loans.
6. Robert Chapman Wood and Gary Hamel, in theHarvard Business Reviewof November 2002, wrote, ‘[T]he development marketplace has laid to rest the broadly held suspicion that large organizations are incapable of grass roots innovation’. The marketplace is being extended to some of the Bank's overseas offices.
7. Global public goods are those that, once produced, provide net benefits to their consumers and users that are greater than could be gained by a private investor or an individual country, and so justify international public provision.
8. Peter T. Bauer, a professor at the London School of Economics, inEconomic Analysis and Policy in Under-developed Countries, Cambridge University Press, 1957;
9. Dissent on Development: Studies and Debates in Development Economics, Weidenfeld & Nicolson, 1971.
10. Myrdal, Gunnar, An International Economy: Problems and Prospects, Harper & Bros, 1956.
11. Bauer, however, wrote for forty years about misconceptions of central planning and state interference in development.
12. The term ‘the Washington Consensus’ was originally coined in 1989 by John Williamson of the Institute for International Economics, to describe the basic elements of liberalization reform that were accepted by major donors.
13. Source: ‘Global Development Finance: Mobilizing Finance and Managing Vulnerability’, World Bank, 2005.
14. Birdsall, N., ed., Rescuing the World Bank: A CGD Working Group Report and Selected Essays, op cit., pp. 74-75. Birdsall describes the IBRD at this point as a ‘global club’.
15. Kapur, Devesh, J. Lewis, and R. Webb, The World Bank: Its First Half Century, Brookings, 1997.
16. Helleiner, G. K., ed., The International Monetary and Financial System: Developing-Country Perspectives, Palgrave Macmillan, 11995. Naim describes the Development Committee meetings as ‘highly formalized, ritualistic events where no incentives exist to depart from the pre-established routine’. ‘Why’, he asks ‘is it so difficult to dismantle a body that, while perceived as necessary by some, is largely regarded as useless?’
17. Kapur, Lewis, et al., op cit. They write: ‘[A]s of the end of 1945, 87 per cent of European bonds outstanding, 60 per cent of Latin American bonds, and 56 per cent of Far Eastern bonds were in default. Of the twenty European borrowers, only three (France, Finland and Ireland) were in full service’, Chapter 14, p. 917.
18. Gardner, Richard. N., Sterling-Dollar Diplomacy in Current Perspective, Columbia University Press, 1980, cited in Kapur et al., op cit., p. 913.
19. Among the first hurdles was the need to amend regulations to establish the legality of the U.S. government guarantee on Bank bonds, while initially the IBRD was not allowed to lend unless potential borrowers had settled outstanding arrears on prewar bonds, giving it effectively a debt collector role. For an authoritative account of these events see Kapur et al., op cit.
20. The initial authorized capital as set out in the Articles of Agreement (Schedule A) was US$ 9.1 billion, of which the United States itself was to contribute about 33%.
21. This protective arrangement is de jure quite distinct from the ‘bailout’ arrangements applicable to some Wall Street banks in 2008, but there might be a de facto resemblance.
22. Other motives for setting up the IDA were to use up politically sensitive accumulated profits through a ‘charitable’ channel, and to forestall the UN's own plans to set up a soft loan agency, a reflection of the IBRD's discomfort at its subordination to UN control. The UN had been working on the establishment of the S.U.N.F.E.D (Special United Nations Fund for Economic Development).
23. Article 3, Section 4 states that all borrowings by non-government sources will be guaranteed by the government or acceptable agency, and that otherwise borrowings are through the government, which by implication gives its guarantee.
24. The Bank needed the permission of country governments before it could raise money on their national capital markets (the ‘consent rule’), and this made it vulnerable to political and economic events in those countries. The diversification of borrowings helped to circumvent U.S. capital export controls when the dollar weakened over 1968 to 1974.
25. A difference is that the regional banks concentrate most of the Bank Group's functions (developmental and commercial lending) into a unified agency. The European Investment Bank also makes loans to developing countries, but this is a small proportion of its activity.
26. Nevertheless, they have still been subject to criticism, as regularly depicted on activist Web sites such as ‘Bankwatch’.
27. ‘Resource Allocation and Control Study’, Bowman Cutter, 1983.
28. James Baker, then Treasury Secretary, was the main persuader.
29. Kapur, Devesh, J. Lewis, and R. Webb, The World Bank: Its First Half Century, Brookings, 1997, p. 1199.
30. A more covert agenda was to reorganize top management, reducing the power of Ernie Stern, an American who had effectively been running the Bank. Stern became the finance chief while Moeen Qreshi became the operations chief.
31. Kapur, Devesh, J. Lewis, and R. Webb, The World Bank: Its First Half Century, Brookings, 1997.
32. He had been an executive partner of Salomon Brothers in New York and head of its investment banking department, deputy chairman of Schroders Ltd. in London, president of J. Henry Schroders’ subsidiary corporation in New York, and managing director of Darling & Co. of Australia.
33. Other matrix options allowed for weaker or stronger control on the task/project axis (balanced and unbalanced matrices). In the full version of the Bank's system applied later, strong task control prevailed - through the country managers who had control over budgets, as explained in Chapter 4.
34. The Cost Effectiveness Review was carried out by the consulting firm, KPMG. The Cost Effectiveness Review, ibid, pp. 3, 17.
35. A typically inoperable regional declaration of purpose said: ‘[W]e will build teams that include the client through greater decentralization to the field, greater reliance on and empowerment of our national staff, more intense consultation and frankness in dialogue with our client, and greater participation of the various stakeholders in our work…. Building and sustaining team spirit is an art which we need to learn to appreciate and practice’. It went on: ‘[L]earning events will be customized and closely aligned to business needs…. Programs will be developed on a just-in-time basis, and will be refined based on experimentation; i.e. pilot, evaluate, strengthen and roll out more broadly’.
36. ‘Strategic Compact Review’, World Bank, 2001.
37. The DII head was Suzanne Rich Folsom, a Bush loyalist. Though originally hired by Wolfensohn in an attempt to co-opt external opponents, she was appointed by Wolfowitz to head the department.
38. Wolfowitz's sensitivity to the World Bank's possible corruption may have stemmed from his disquiet at the Iraq reconstruction effort that had been part of his own responsibility at the Pentagon. Transparency International's 2005 Global Corruption Report (p. 87) said that failing urgent steps, Iraq would become ‘the biggest corruption scandal in history’. Indeed, said Transparency International, ‘the US has been a poor role model in how to keep corrupt practices at bay’.
39. Balls, Andrew and Edward Alden, ‘Wolfowitz Anti-Graft Mission Triggers World Bank Strife’, Financial Times, July 12, 2005.
40. In April 2007, Wolfowitz was forced to resign because of the leadership crisis that followed the revelations regarding his misuse of the personnel system in favor of his personal friend, Shaha Riza.
41. Independent Panel Review of the World Bank Group Department of Institutional Integrity, Washington, DC, September 13, 2007.
42. Knight, Kenneth, ed., Matrix Management: A CrossFunctional Approach to Organization, PBI-Petrocelli Books, 1977.
43. These are not the actual titles used in the Bank but are for illustration here.
44. Especially problematic when the managers were expected to be ‘coaches’.
45. One of the main complaints of the client countries was the lack of continuity on the Bank's teams. For example, this was one of the points raised by the government of Russia (seeRussia, Country Assistance Evaluation, OED, May 2002).
46. Callahan, David, The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead, Harcourt, 2004. Callahan argues that aggressive behavior within organizations is fostered by incentive-driven structures.
47. Handy, Charles, Understanding Organizations, Penguin, 1983, p. 293.
48. Laffont, Jean-Jacques and David Martimort, The Theory of Incentives: The Principal-Agent Model, Princeton University Press, 2002.
49. Urwick, L. F., ‘The Manager's Span of Control’, Harvard Business Review, May 1956, pp. 39-47.
50. Source: Strategic Compact Review.
51. Financial Times, January 31, 2001.
52. Staff Association newsletter of June 2001.
53. ‘Strategic Compact Review’, op cit.
54. Davenport, Thomas H., and Lawrence Prusak, Working Knowledge: How Organizations Manage What They Know, Harvard Business School Press, 1998
55. For example, the ESSD network had a council under which were three sector boards including a ‘social sector board’ in which there were ‘thematic teams’ such as teams on social policy and social capital; the HD network had a council that included three boards among which is a social protection sector board.
56. Mc Elroy, Mark W., The New Knowledge Management - Complexity, Learning, and Sustainable Innovation, KMCI, 2003. November 2001 edition of Banks World.
57. ‘Improving the Banks Development Effectiveness - What Does Evaluation Show?’, World Bank OED, Nov 2005, op cit.
58. McElroy, Mark W., The New Knowledge Management, op cit.
59. Though the most popular resources on the intranet turned out to be newsfeeds and staff service information (three-quarters of hits received in 2000) rather than substantive development knowledge.
60. The award followed a six-month benchmarking process that considered eighty different organizations.
61. ‘Update - Improving the Way We Work’, World Bank memorandum, May 21, 1999.
62. Shaines, K., ‘World Bank Intranet Content Quality Review’, World Bank, October 2000.
63. This was the view of Larry Prusak, a leading knowledge management expert, hired from the IBM Institute of Knowledge Management, in a 1999 review of the Bank's system. In setting up such a system there is a choice between a centralized approach, for transparency and consistency, and a customized approach to meet the local needs of particular groups. Local solutions, or rogue sites, tend to create maintenance problems and discourage use as employees become increasingly unwilling to contribute knowledge to a ‘black hole’.
64. Staff Association newsletter, August 2001.
65. Kapur, Devesh, J. Lewis, and R. Webb, The World Bank: Its Last Half Century, Brookings, 1997, p. 1183.
66. Reinventing Government - A Progress Report, Brookings, 1998.
67. The Strategic Compact, op cit., 1997, p. 7.
68. These were known as ‘regional functions’. They include financial management, loan accounting, and procurement, which are not strictly operational but are more connected with the burgeoning oversight, fiduciary, and safeguard obligations.
69. From 7% to 14% of the regions’ costs.
70. The number rose from 48 in 1998 to 119 in 2002 and 139 in 2003
71. They rose from about 6% in 1996 to about 21% of the gross administrative budget (as defined in Table 2) in 2003.
72. External relations expenditures rose from about $24 million in 1997 to about $29 million in 2001.
73. From about 50% in 1993 to about 40% in 2001.
74. $51 million against $99 million.
75. $150 million against $250 million. Between 1996 and 2002, the cost of lending and analytical studies fell from about 28% to 22% of administrative costs.
76. In 1963, George Woods had for a time considered the possibility of waiving guarantees for possible private sector loans from the Bank.
77. Most recently, its increased net profits have been channeled through trust funds into technical assistance services. The diversification of IFC activities into free technical assistance raises issues for its own corporate strategy.
78. ‘Serving a Changing World, Report of the Task Force on Multilateral Development Banks’, IMF/World Bank Development Committee, Washington, DC, April 1996, p. 14.
79. The groups were in telecommunications, mining, oil and gas, small enterprises, and a joint private sector advisory service, which incorporated several units from both organizations.
80. The Vice President, Nemat Shafik, in a 2001 newsletter to the new conglomerate mysteriously quoted one of the five principles of management of Juergen Schrempp, head of the Daimler-Chrysler merger: ‘[A]void the danger of a deadly wish for harmony!’
81. Crewson, Philip. E, ‘Public Service Motivation - Building Empirical Evidence of Incidence and Effect’, Journal of Public Administration Research and Theory 7(4): 499-518.
82. Perry, J. L. and L. R.Wise, ‘The Motivational Basis of Public Services’, Public Administration Review 50(3), May-June 1990.
83. Robinson, Sandra L., ‘Trust and Breach of the Psychological Contract’, Administrative Science Quarterly41, 1996.
84. De Meuse, Kenneth P. and Walter W. Tornow, ‘Leadership and the Changing Psychological Contract Between Employer and Employee’, Issues and Observations 13(2), 1993.
85. Communication from Robert Wade.
86. A number of incidents, including Wolfensohn's appointment of Nicholas Stern as chief economist in breach of the Bank's strict hiring rules, suggested that he was disengaged from the details. The issue was that his brother Richard was a staff member.
87. In the Bank's Corporate Strategic Directions Paper for 2001-2003.
88. Fidler, Stephen, Financial Times, January 30, 2001.
89. Financial Times, January 31, 2001.
90. Financial Times, September 5, 2001.
91. There was, however, cause for some doubt about the 2002 results. Some questions were not directly comparable to those of 1999 or could be interpreted differently. Missing from the survey were questions on ‘trust’. There was continued pride in the institution, but that was the norm, since even in 1997 it had been relatively high. The least positive group was the longer term professionals. Some of the worst results were in the corporate secretariat that worked most closely with the board of directors.
92. A guiding text was also by David Osborne and Ted Gaebler, Reinventing Government: How the Entrepreneurial Spirit Is Transforming the Public Sector, Addison-Wesley, 1992; another important reference was Donald F. Kettl, Reinventing Government? Appraising the National Performance Review, CPM Report 94-2, Brookings, 1994. Wooldridge, John and Adrian Micklethwait, The Witch Doctors: Making Sense of the Management Gurus, Times Books, 1996. The authors describe the program as a jargon-ridden series of management-reform fads.
93. In an attempt to lower travel costs, a preferred airlines policy was introduced. However, it did not target the airline agents but rather the airlines themselves in what was already a highly competitive market. Interference in a highly competitive market is likely to make it less rather than more competitive as hard-pressed suppliers seize the opportunity to secure safe, long-term contracts. Long negotiations took place. The oligopoly of four airlines selected excluded British Airways on a technicality, although it had previously been the most frequently used airline. In Latin America travel was going to be difficult, as only one airline was allowed.
94. This is the approach of the well-known management authors, Edgar Schein and Warren Bennis, in The Corporate Culture Survival Guide, Jossey-Bass, 1999, Chapter 1.
95. Kapur, Devesh, J. Lewis, and R. Webb, The World Bank: Its First Half Century, Brookings, 1997, pp. 1174ff
96. Caufield, Catherine, Masters of Illusion - The World Bank and the Poverty of Nations, Henry Holt., 1996, p. 170.
97. Ibid., pp. 225, 229.
98. Typically in the past, and currently, especially for adjustment-type projects, the receiving government was expected to ‘drop everything’ and form a special team to deal with major missions, and the mission itself usually developed a solidarity around shared experiences of living in strange places. The government was burdened at one end and the mission arrangers were burdened at the other end with feverish activity just before, during, and after larger missions. Sometimes the two sides developed a sympathy for each other from the shared burden. But sometimes the missions marked an unwelcome imposition after which the reluctant government teams reverted to their normal business of government, until the next time.
99. Urquhart, Brian and Erskine Childers, ‘Renewing the UN system’, Development Dialogue 1, 1994. In fact, in 1993, outside pressure finally ended first-class air travel for Bank staff, while in 1994, fifty-seven luxury hotels around the world were declared off-limits to Bank travelers.
100. Scandizzo, Pasquale. L., ‘The Purpose, Management and Governance of IFIs: A Case Study of Ambiguity’, EIB Papers, European Investment Bank, 3(2): 90-100, 1998. The number of employees rose from 750 to 2, 550.
101. These included such people as Rotberg, Clark, Chenery, ul Haq, and Stern
102. A critique of this attitude is in Ben Fine, ‘Neither the Washington nor the PostWashington Consensus: An Introduction’, paper for the UK Economic and Social Research Council (ESRC), 2000.
103. Nearly 80% received degrees from countries in which English is the first language, and nearly 90% received their degrees from six Western countries (United States, UK, Canada, France, Germany, and Holland).
104. Starting from the McCarthy era of the early 1950s up until 1986, newly hired U.S. nationals had to obtain loyalty clearances from the U.S. government.
105. Isabel Briggs Myers developed the index (based on the ideas of C. G. Jung) in the 1940s. MBTI results indicate the respondent's likely preferences on four dimensions: Extroversion (E) OR Introversion (I), Sensing (S) OR Intuition (N); Thinking (T) OR Feeling (F); Judging (J) OR Perceiving (P). There are sixteen possible ways to combine the preferences, resulting in sixteen MBTI types: ISTJ, ISTP, ESTP, ESTJ, ISFJ, ISFP, ESFP, ESFJ, INFJ, INFP, ENFP, ENFJ, INTJ, INTP, ENTP, and ENTJ. The type descriptions summarize the underlying patterns and behaviors common to most people of that type.
106. The Bank and Myers-Briggs, ‘Why We Are the Way We Are’, Staff Association newsletter, December 1996.
107. Ibid.
108. Attempts followed for some years to transform ODs into advisory OPs, but this also created outside suspicion that safeguard policies (e.g., on the environment) were being diluted.
109. Kapur, Devesh, ‘Do as I Say, not as I Do; a Critique of G7 Proposals on Reforming the MDBs’, Department of Government, Harvard University, February 2002, p. 17.
110. The simplification initiative chief was Jim Adams, a vice president.
111. For example, small firms (lacking in-house lawyers), especially from developing countries, can face difficulties with Bank contracts because of asymmetric information and unusual norms and definitions (e.g., on conflict of interest) designed to ‘set a higher standard’ while the Bank itself operates comfortably beyond the jurisdiction of the courts. Thus it is not obliged to make market-appropriate rules, but it is free to publish ‘blacklists’ of firms deemed to have breached the rules. For a discussion of the insecure status of private contractors dealing with international institutions, see Suzuki, Eisuke and Suresh Nanwani, ‘Responsibility of International Organizations: The Accountability Mechanisms of Multilateral Development Banks’, Michigan Journal of International Law 27, Fall 2005, e.g., pp. 182-183.
112. While it proclaims the cause of private sector development in theory, as a public sector entity the Bank's attitude toward the private firms with which it actually transacts business as suppliers of services seems to remain in practice one of distrust.
113. Scandizzo, Pasquale. L., ‘The Purpose, Management and Governance of IFIs’, op cit., p. 97.
114. Wade, Robert, ‘The US Role in the Malaise at the World Bank; Get Up Gulliver’, Proceedings of the APSA Annual Meeting, August 2001.
115. The Bank, unlike other UN organizations, does not have nationality quotas. But a statistical review is submitted to the directors each year, which reports on ‘over-’ or ‘under-’ representation of employees in relation to national shareholding. Americans account for about a quarter of all professional employees. This is about four times the next highest - Britain and India. Rich countries have for some time comprised slightly more than half of the total professional staff. English-speaking countries, including the United States, Britain, India, and Pakistan, have tended to be over-represented in relation to shareholding. There are also gender targets that led to an increase of women professionals from 22% in 1990 to 36% in 2002 in Washington, particularly from the United States. The American orientation is increased by short-term consultants.
116. The peak headcount was 9, 262 in 1998, or more than 11, 000 including temporarily hired consultants.
117. The proportion of all staff working in country offices outside Washington rose from 18% to 25%, and the increase of country professionals was higher than that.
118. The slow natural turnover of employment is partly because of the large proportion of non-U.S. citizens. Their status prohibits them from staying in the United States if they leave the Bank's employment and so they have to disrupt their families and homes to take another job.
119. The Wapenhans Report, ‘Effective Implementation: Key to Development Impact; Report of the World Bank's Portfolio Management Task Force’, pp. 19, 20.
120. ‘Report of the Financial Reporting and Auditing Task Force’, World Bank, 1993.
121. According to the Bank's statistics, over 1995-1999, donor country employees exited more than proportionately with their share in total numbers (62.5%), and UK and German staff more than other donor countries.
122. Cluster hiring normally refers to hiring for interdisciplinary teams - for example, to carry out a research project. Strategic staffing is a concept invented during the 1990s that means hiring according to a long-term corporate strategy, rather than short-term filling of vacancies. (But in practice the ‘filling short-term vacancy’ approach never existed in the Bank.)
123. For example, see McGee, Rosemary, Josh Levene, and Alexandra Hughes, ‘Assessing Participation in Poverty Reduction Strategy Papers; a Desk Based Synthesis of Experience in Sub-Saharan Africa’, Draft, Institute of Development Studies, October 2001.
124. Staff Association newsletter of June 2001.
125. Peabody, John W., ‘An Organizational Analysis of the WHO; Monitoring the Gap Between Promise and Performance’, Social Science and Medicine40(6), 1995.
126. Staff Association newsletter, ‘Broadbanding: An Idea Whose Time Has Passed?’, May 2003.
127. Strategic Update Paper 2004-2006; op cit., p. 13.
128. December 1996 Staff newsletter.
129. World Bank Staff Association newsletter, July 2000.
130. MacDonald, John, Calling a Halt to Mindless Change; a Plea for Commonsense Management, American Management Association, 1998.
131. As explained in William Easterly, The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much III and So Little Good, Penguin, 2006, p. 61. During 1992, Russian inflation rose to 1, 350% and recorded output and employment fell substantially for six straight years up to the financial crisis of 1998. By 2002, a total of $12.6 billion had been granted for fifty-five projects, of which only half of those completed were rated satisfactory. In the Ukraine, inflation rose to 3, 400%. The Ukraine received over 1993-2002 a total of twenty-five IBRD loans worth $3.4 billion.
132. Ukraine - Country Assistance Evaluation, World Bank OED, November 8, 2000. According to the evaluators’ assessment in 2000, the Bank overestimated the level of consensus and the speed of reform in the Ukraine. In eight years only two reform actions - small enterprise privatization and liberalization of prices - were regarded as ‘satisfactory’.
133. ‘Russian Federation - Country Assistance Evaluation, World Bank OED, April 2002. In Russia, which had been the location of Soviet-era governance and policy-making capability, up to the financial crisis of 1998 three Bank-Fund-supported structural adjustment programs were deemed to have largely failed to achieve their objectives.
134. Jeffrey Sachs was a leading advocate of rapid privatization; see ‘Privatization in Russia; Some Lessons from Eastern Europe’, American Economic Review 82(2): 43-48, May 1992. Critical positions on the privatization programs were taken by, among others, Stiglitz, Joseph, Globalization and Its Discontents, W. W. Norton, June 2002. See also Black, Bernard, Reinier Kraakman, and Anna Tarassova, ‘Russian Privatization and Corporate Governance: What Went Wrong?’, Stanford Law School, September 1999; John M. Olin Program in Law and Economics, Working Paper No. 178; and William Davidson Institute at University of Michigan Business School, Working Paper No. 269.; Svejnar, Jan., ‘Assistance to the Transition Economies: Were There Alternatives?’, World Bank OED, 2002, and Nellis, John, ‘Time to Rethink Privatization in Transition Economies?’, IFC discussion paper no 38, 1999, p. 9.
135. Pistor, K. and A. Spicer, ‘Investment Funds in Mass Privatization’, World Bank, Viewpoint No 10, April 1997.
136. See Svejnar, J., ‘Assistance to the Transition Economies’ op cit.
137. Collier, Paul, ‘Conditionality, Dependence and Coordination; Three Current Debates on Aid Policy’, in Christopher L. Gilbert and David Vines, The World Bank: Structure and Policies, Cambridge University Press, 2000, p. 299.
138. These were in Mexico, the Philippines, Bangladesh, Ecuador, El Salvador, Hungary, Ghana, Mali, Uganda, and Zimbabwe.
139. The Banks issues paper was ‘From Adjustment Lending to Development Policy Support Lending; Key Issues in the Update of World Bank Policy’, OPCS, June. The notes of one dialogue participant (from the Bretton Woods Project) claimed that there was annoyance on the part of Bank officials when confronted by NGO members, a lack of an advance agenda, and that the Bank was formally in the chair rather than in a participant role. Nevertheless, it conceded that there was a dialogue. Structural Adjustment Participatory Review Initiative (SAPRI), ‘The Policy Roots of Economic Crisis and Poverty’, Washington, DC, April 2002. The report criticized trade and financial liberalization, privatization of utilities, user fees in social services, and unregulated labor markets. Its solution was to increase the power of the state and control global trade and investment. SAPRI report, op cit., p. 24.
140. Wolfensohn had changed the original name, which was the ‘New Development Framework’, to accommodate some of the doubters.
141. Ruderfer, Emil, ‘Receivers of Development Aid Should Run Own Show’, Financial Times, October 4, 2002.
142. Naim, Moises, ‘Fads and Fashion in Economic Reforms; Washington Consensus or Washington Confusion?’ op cit., pp. 525-528.
143. See, for example, Rodrik, Dani Arvind Subramanian, and Francesco Trebbi, 2004, ‘Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development’, Journal of Economic Growth, vol. 9(2), pp. 131-165. Later, however, Rodrik lowered his expectations for institutional reform. See Rodrik, Dani, 2006, “‘Goodbye Washington Consensus, Hello Washington Confusion? A Review of the World Bank's Economic Growth in the 1990s: Learning from a Decade of Reform’, Journal of Economic Literature 44(4): 973-987. ‘Desirable institutions’, say the authors, ‘have a large element of context specificity, arising from differences in historical trajectories, geography, political economy or other initial conditions’. World Development Report, ‘Building Institutions for Markets’, World Bank, 2002. Djankov, S., R. La Porta, F. Lopez-de-Silanes, and Andre Schleifer, ‘Appropriate Institutions’, paper presented at the World Bank Conference on Appropriate Institutions for Growth, September 13, 2002.
144. 2004-2006 World Bank Strategy Update Paper: Questions and Answers. ‘Best-practice’ incentive bonus systems in a civil service often cannot compete with the remuneration of a relatively lowly position in an aid donor's office. In some former Soviet Republics young graduates in local donor agency offices in the 1990s were earning more than government ministers.
145. ‘Capacity Building in Africa: An OED Evaluation of Bank Support’, World Bank OED, 2005.
146. ‘Malawi - Country Assistance Evaluation’, World Bank, 2000.
147. The U.S. system is more rule-based while the Europeans put more weight on intent.
148. These include the so-called Kaufmann-Kraay (KK) indicators compiled by the World Bank Institute on the basis of a large number of (mostly external) assessments, Transparency International (TI) indicators, and Country Policy and Institutional Assessments (CPIA) compiled by the World Bank.
149. ‘Global Monitoring Report 2006: Strengthening Mutual Accountability - Aid, Trade and Governance’, Development Committee Paper, World Bank, April 20, 2006.
150. Giles, Chris, Governance Poses a Test for World Bank, Financial Times, September 26, 2006; FT.com. At the 2006 annual meetings in Singapore, Hilary Benn, Britain's Development Minister, threatened to withhold 50 million pounds of Britain's contribution unless the issue was resolved. Mario Draghi, governor of the Italian Reserve Bank, warned that anti-corruption programs should complement, and not substitute for, the commitment to development. The complaints were not only about the excessively onerous corruption conditions but also about country selectivity. For example, corruption in Indian infrastructure projects was targeted, but Pakistan remained unchallenged, leading to suspicion that the U.S. foreign policy agenda was influencing Wolfowitz's anti-corruption campaign. The plan that finally emerged after an unprecedented all-night sitting required board oversight ‘to ensure that the Bank's decisions were broadly based (that is not arbitrary suspension of lending), ’ and an instruction to the Bank to improve the effectiveness of its governance indicator. An early reaction to the anti-corruption proposals from the Chinese authorities was to inform the Bank that it was considering stopping borrowing because the Bank was exceeding its mandate. Since by 2007 China was by far the largest single borrower, such an action would have been a severe test of the program.
151. Rodrik, Dani, ‘Goodbye Washington Consensus; Hello Washington Confusion?’, op cit., 2006.
152. Sebastian Mallaby writes that Wolfensohn was strangely uninterested in the PRSPs despite his avowed concern for participation and dialogue because he suspected that they might compete with the CDF. He was also apparently irritated when he heard {later} that there had previously been a type of CDF in use, known as a PFP (Policy Framework Paper), which bore some of the characteristics of a CDF. See Sebastian Mallaby, The World's Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations, Penguin, 2004, p. 236. Financial Times, September 13,.
153. This was the IDS Participation Group. See McGee, Rosemary, Josh Levene, and Alexandra Hughes, ‘Assessing Participation in Poverty Reduction Strategy Papers; a Desk Based Synthesis of Experience in Sub-Saharan Africa’, Draft. Institute of Development Studies, October 2001. See also McGee, R., ‘Accountability Through Participation: Developing Workable Partnership Models in the Health Sector’, IDS Bulletin31, January 2000.
154. ‘The World Bank and the PRSP; Flawed Thinking and Failing Experiences’, Shalmali Guttal, Alejandro Bendana, and Helen Wanguza, Jubilee South, Focus on the Global South, AWEPON, and Centro de Estudios Internacionales, November 16, 2001.
155. ‘Review of the Poverty Reduction Strategy Paper (PRSP) Approach. Main Findings’, Development Committee, World Bank, March 27, 2002.
156. Letter from Wolfowitz in the Financial Times of September 29, 2006.
157. McNamara was the main sponsor of the Consultative Group on Agricultural Research (CGIAR), founded in 1971, which supported agricultural projects.
158. ‘Focus on Poverty: A Report by a Task Force of the World Bank’, World Bank, 1982.
159. The new series introduced in 2002 was generally incomparable with the numbers from 1992 to 2001 except in four sectors. The new series for public sector management over 2001-2005 may still be an underestimate compared with the old series since the old series shows the 2000 expenditure share at 16%, and 2001 at 14.9%.
160. In 2005-2007, agriculture forestry and fishing averaged 7.6% of total Bank lending while finance and public sector governance took 22%.
161. ‘A Framework for Action on Agriculture’, World Bank, WSSD, September 2002.
162. Agricultural development took on special urgency in 2008 as cereal prices rose to record levels. ‘Because you don’t want everything to be a short-term response, we are really trying to upgrade our efforts in terms of increasing agricultural production, ’ World Bank President Robert Zoellick told Reuters. ‘World Bank lending for agriculture has averaged some $500 million a year, but there are plans to push it up to as much as $850 million in coming years’ (Reuters/Factiva) cited in World Bank Press Review, March 11, 2008.
163. The assumed threshold is $2.36 per day at 2004 prices. This is somewhat higher than the absolute poverty line usually used and would encompass some 2 billion people.
164. Kapur, Lewis et al., op cit., p. 1216.
165. Einhorn, Jessica, ‘The World Bank's Mission Creep’, Foreign Affairs Journal, September 2001.
166. DevNews Media Center, September 2002 commentary on ‘OED Annual Report on Development Effectiveness 2001’.
167. For example, see ‘Improving the World Bank's Development Effectiveness’, World Bank OED, November 2005.
168. See Kremer, M., ‘The Missing Mandate: Global Public Goods’, in Rescuing the World Bank, a CGD Working Group and Selected Essay, ’ Center for Global Development, 2006. Some commentators have proposed curiously that the Bank and other donors in fact set up a special GPG trust fund in order to do what should be their core job. Kapur, Devesh ‘Do as I Say, not as I Do; a Critique of G7 Proposals on Reforming the MDBs’, Department of Government, Harvard University, February 2002, p. 17. Kapur continues: ‘In seeking to reinvent the Bank's public image its management and staff have labeled all kinds of activities or “networks” as GPGs, meriting involvement on the basis of the moral claims that public goods invoke, and their ready slogan-appeal to Northern tax-payers. While many initiatives certainly do meet the criteria of public goods, the management also includes what one might call “Potemkin GPGs”. A good example was the Banks initiative related to the World Faiths development dialogue’.
169. The claim was filed by Roberto Bissio, coordinator of Social Watch and Latin American secretary of the Third World Network, and Dr. Carlos Abin, executive director of the Instituto del Tercer Mundo. They stated during consultations that the Gateway appears to represent unwarranted competition with existing country- and topic-focused portals that are genuinely independent.
170. The Gateway management was obliged to defend itself, arguing that it was independent, that it had special features like ‘global reach with local roots’, and it was the next logical step for the private and public donor communities to coordinate on ICT. The spin-off company received $13 million of Bank funds in its first two years, and $60 million of member government funds were mobilized for Internet development support from Western Europe, plus India, Pakistan, Korea, and Mali.
171. The research program started at the time of Hollis Chenery as chief economist. The research department has specialized over time, notably in issues such as growth, international trade and protection, economic adjustment, corruption, and aid effectiveness. There was an idea that the Bank was trying to build a research empire rather than spread research to borrower countries (according to Mahbub Ul Haq, in the Bank's oral history series). There was also some sense that the research capacity was ‘captive’ and not sufficiently independent. Ravi Kanbur, a senior former Bank manager, for example, resigned from the Bank over its insistence that the World Development Report on Poverty (1992), of which he was editor, should be amended to be more consistent with the Bank line. See Ravi Kanbur, ‘IFIs and IPGs: Operational Implications for the World Bank’, G24 paper, Beirut, March 2002.
172. Banerjee, Abhijit, Angus Deaton (Chair), Nora Lustig, and Ken Rogoff, ‘An Evaluation of World Bank Research, 1998-2005’, World Bank, September 2006.
173. See, e.g., Roe, Alan, ‘Research on Development - What role for the World Bank?’, OPM briefing notes, May 2007.
174. Wolfensohn's letter to the Meltzer Commission, February 28, 2000, supporting continuation of lending to investment-grade countries.
175. During the 1980s, up to 25% of Bank lending used credit lines through local banking systems. These types of projects have been largely abandoned despite continued interest from many governments. When carefully designed, they may, however, act as effective institution builders while TA loans specifically for institution building often do not.
176. ‘Serving a Changing World’, Report of the Task Force on Multilateral Development Banks, IMF/World Bank Development Committee, op cit., 1996, p. 10.
177. About fifty private sector infrastructure projects worth about $24 billion were cancelled over 1990 to 2001 (this excludes facilities sold by the original investor to other private sector companies). The cancellations were concentrated in the road sector, especially in Mexico, because toll roads had difficulties making a profit.
178. In practice, the currency pool loans, intended to provide a simple way for clients to protect themselves by spreading their currency risk, were complicated. They were also non-transparent in that repayments had to conform to the Bank treasurer's sequencing requirements for specific currencies, which could negate the risk spreading benefits for the debtor.
179. Proposals have been made to introduce instruments for risk management, including commodity price hedging and risk-sharing loans, and to lend funds borrowed in local capital markets. See Birdsall, N., ed., Rescuing the World Bank, a CGD Working Group and Selected Essays, Center for Global Development, 2006, pp. 27-29. Under President Zoellick there were signs that this might happen.
180. Salop, Joanne, ‘Has the World Bank Lost Its Way - au Contraire’, Euromoney, March 2000, responding to an attack by Adam Lerrick (Euromoney, December 1999).
181. The Wapenhans Report, ‘Effective Implementation; Key to Development Impact’, World Bank, 1992. Initially, for external purposes, the Bank played down the findings of the report, claiming that 25% unsatisfactory project outcomes was acceptable, even expected, in a high-risk environment. But in the meantime it set about strengthening its evaluation capacity.
182. Unsatisfactory meant that they were judged not to be capable of earning a rate of return of 10%, or the equivalent.
183. The Operations Evaluation Department (OED) put their failure down to commodity price declines, the lack of government commitment, weak management, weak operations and maintenance, excessive complexity, lack of flexibility in design, inept public sector oversight, and, finally, the problems of the 1973 oil price shock. Wapenhans Report, ‘Effective implementation; Key to Development Impact’, op cit., annex B, p. 5.
184. Ibid, annex C, p. 3 (box 1).
185. These are broken down by projects. The Bank also publishes results weighted by project value (disbursement amount) in which success with large projects counts as more important than success with small projects.
186. Transport projects improved the most up to 2004, while the 2005 results showed the biggest improvers were in energy, mining, and environmental programs, albeit from a poor start. Water supply projects also improved markedly from very poor results up to 2000. Those that recently got worse included particularly health and social protection projects.
187. In the publication Bank's World Today, March 13, 2001.
188. This was in 2002, which was the first year in which a large number of entry assessments (from 1996) could be matched to exit assessments.
189. At risk means that the quality controllers consider that sustainability is in doubt. The realism index is the operational unit's estimate of risk in relation to the QAG estimate.
190. The QAG's Annual Review of Portfolio Performance reported: ‘[W]ith staff and management adapting over time to the mechanism of the system the methodology has lost some of its heuristic value’.
191. Sustainability is defined as ‘the likelihood that the project will maintain its results in the future’ - that the benefits exceed the depreciation, operational, and maintenance costs. Institutional development is defined as the extent to which a project has improved an agency's or a country's ability to make effective use of its human and financial resources.
192. The time lag for project preparation (from the concept paper to the Board) was reduced from 24 months to 13.5 months, but rose in 2000 back to 15.4 months. In addition, several months were needed for the development of the concept, and for loan signing and project startup. The reduction in the more complicated and labor-intensive investment loans was less, from 26 months to 17 months, returning to 19.5 in 2000. Source: ‘Refueling Current Business Activity’, World Bank, 2001. Subsequent experience suggests further reversions.
193. 16
194. Letter from R. Picciotto to Alan Meltzer dated March 1, 2000.
195. ‘Supervision Quality. A QAG Assessment’, World Bank, October 1999. Supervision quality of human resource projects alone was judged to have leapt from 56% satisfactory in 1997 to 81% satisfactory in 1998.
196. That is, by about 25% compared to the annual average for the previous few years.
197. In April 2003, during a board discussion on the ‘Strategic Update Paper’. ‘Improving the Management of Technical Assistance for Institutional Development’, Organizational Design staff, World Bank, August 1994.
198. ‘Reviews of Technical Assistance Loans in the World Bank’, Internal Report, QAG, February 1997, cited in Rich, Bruce, ‘The World Bank under James Wolfensohn’, in Pincus, Jonathan R. and Jeffery A. Winters, Reinventing the World Bank, Cornell University Press, 2002. Despite the poor record, projects with large elements of technical assistance may have been looked on favorably by the Bank's quality overseers because they ‘build institutions’. Technical assistance lending increased significantly despite poor past performance, and by the end of the 1990s there were more than 122 technical assistance loans in the portfolio.
199. ‘Russia - Country Assistance Evaluation’, World Bank, 2002.
200. Learning and innovation loans (LILs), introduced in 1999 as small, quick loans for experimental and risky projects, were supposed to be fast (six- to nine-month processing and three to five years’ implementation) and did not have to be approved by the board. After three years a review found that the average processing time had grown from seven months to seventeen months, with approvals slowing significantly, and this trend has continued. The Bank's corporate strategy paper for 2004-2006 still talked about the ‘work under way’ toward a more flexible set of lending products and streamlined processes.
201. This average life has remained quite constant despite the advent of fast disbursing loans. In 2005, for example, the cohort of ‘exiting’ projects evaluated by the OED (IEG) had an average age of about seven years since approval.
202. In fact, Dollar and Svensson showed that the Bank's supervision effort had no significant effect on project performance in the case of structural adjustment programs, which is affected more by variables representing political stability. Dollar, D. and J. Svensson ‘What Explains the Success or Failure of Structural Adjustment Programs?’, draft, World Bank, 1997.
203. ‘Annual Review of Portfolio Performance’, World Bank, 2002.
204. These include concept, approach, technical setup, economic rationale, safeguard policies, environment, information disclosure, participation, social impact, financial management, institutional capacity, implementation capacity, risk assessment, processing timetable, and internal review.
205. ‘World Bank Operational Effectiveness; Preliminary Results from OED and QAG for Fiscal Year 2000-01’, World Bank, February 13, 2002, p. 1.
206. I am indebted to Ray Newbold of Louisiana Technical University for the following calculations. A six-inch diameter tree will have about 0.04 cord and a nine-inch tree about 0.10 cord of wood. A cord will produce something in the neighborhood of 1.25 tons of paper. So, 160 tons of paper would require 128 cords of wood. 128/.0.04 = 3200 six-inch trees, or 128/0.10 = 1280 nine-inch trees. About a third of the tonnage of paper will be from residual sawmill chips (lumber production) from trees used for other purposes, so consumption will range from 2134 new six-inch trees to 854 new nine-inch trees each month, plus an amount of tree ‘waste’ from elsewhere (say the equivalent of 20% additional full trees).
207. ‘Demandingness, Complexity and Riskiness of Evaluated Operations - Exit Year Groups 1990-94, 1995-98, 1999-00’, OED World Bank, 2000.
208. ‘Retrospective Review of FY00 IBRD/IDA Work Programs and Budgets’, World Bank, July 13, 2000, p. 9.
209. The Wapenhans Report noted that economic analysis was not being effectively used. Report interviewees complained that pressure to deliver projects, work fragmentation, and administrative overload prevented proper appraisals even where they could be done. In the mid-1970s, the Bank assumed the lead on the design of economic analysis methodology, incorporating income distribution. However, the work was not adopted within the institution and largely forgotten outside academic circles. Caufield, Catherine, Masters of Illusion - The World Bank and the Poverty of Nations, Henry Holt, 1996, p. 102.
210. In ‘Improving the World Bank's Development Effectiveness: What Does Evaluation Show?’, World Bank, IEG, October 2005. Monitoring and evaluation in the health, education, and urban sectors was found to be so weak that little was known of outcomes, and almost 40% of the lines of credit had no information on effects such as the repayment rates on bank loans.
211. The first texts on cost-benefit analysis in developing countries, produced by UNIDO and the OECD, in fact focused on industrial products.
212. Benefit indicators might include measures such as capacity development, morbidity decline, number of graduates, employment generation, and physical output change. ‘OED Reach’, World Bank, Spring 2000, no. 24.
213. Source: World Bank, World Development Reports (2002 and others).
214. It was after only 2000 that GDP growth rates worldwide increased substantially. Over 2000-2005, Sub-Saharan Africa averaged 4.2% and Eastern Europe and the former Soviet Union area 5.4%.
215. ‘OED Reach’, World Bank, Spring 2000, op cit.
216. From ‘Improving the Bank's Development Effectiveness’, op cit.
217. Dollar, David and Lant Pritchett, ‘Assessing Aid’ - What Works, What Doesn’t and Why, World Bank and Oxford University Press, 1998. The net effect of an average dollar of aid has been to increase public investment by only the average of 29 cents.
218. ‘Lessons and Practices’, OED, World Bank, November 1997. The classic representation of the counterfactual is the control group used in trials of new drugs. This is the group that gets the placebo while a treatment group gets the real thing. However, it is not possible to administer a placebo to those who don’t get the benefits of a development project (e.g., to assess a school lunch program you cannot give real food to one group and artificial food to another). It is necessary to ‘construct’ a counterfactual, usually after the event. The IEG constructs counterfactuals by observation, focus groups, and surveys.
219. Matched samples may be difficult to identify and use, and errors in data may result from several causes, both theoretical and practical. The latter include the fact that those who receive and those who don’t receive assistance have different motivations for answering questions, and poorly paid field workers often write down interviewees responses regardless of whether they make sense.
220. Odeng, Pete, in The Nation newspaper (Kenya), February 23, 2003.
221. The government, like many others, preferred the simplicity of the traditional financial intermediary loans that the Bank has tried hard to phase out.
222. Herzberg, Benjamin and Andrew Wright, ‘Public-Private Dialogue: The PPD Handbook: A Toolkit for Business Environment Reformers’, World Bank, December 2006.
223. The Bank has been active in the development of the carbon market, first through the Prototype Carbon Fund to demonstrate how to cost-effectively achieve GHG reductions, and more recently through other funds such as the Community Development Carbon Fund (CDCF) and the Bio Carbon Fund (BioCF). Source: World Bank
224. ‘Improving the World Bank's Development Effectiveness: What Does the Record Show?’, OED/IEG, World Bank, October 2005.
225. ‘Capacity Building in Africa; an OED Evaluation of World Bank Support’, World Bank, 2005.
226. Bourguignon, Francois and Mark Sundberg, ‘Aid Effectiveness - Opening the Black Box’, World Bank, 2007, p. 1.
227. To name some famous cases, the Bank rejected loans to Poland in 1948, Egypt in 1956, Chile in 1973, and Vietnam in 1978 on political grounds, while approving loans to Zaire under Mobutu and the Philippines under Marcos. In the 2000s, the effort to make loans to, for example, Pakistan, Turkey, and Tajikistan, appear politically colored.
228. Armenia was subject to an energy blockade from Azerbaijan, with whom it had a territorial dispute over the province of Nagorno-Karabakh, and difficulties with Turkey to the West and Georgia to the North.
229. Belarus has had a history of a similarly traumatic nature to that of Armenia. Both countries are highly vulnerable to energy boycotts. Armenia lost much of its historic land and was in dispute with Azerbaijan over part of what was left, and its Diaspora had been subject to mass killings under the Ottoman Empire. Belarus had been a victim of constant foreign invasions. During the Second World War it lost one-third of its population. It surrendered its nuclear weapons. It was the main victim of the Chernobyl nuclear accident, which contaminated one-fifth of its territory.
230. U.S. displeasure at Belarus’ leader originated in the inadvertent but unexplained shooting down of a U.S. air balloonist in 1994. Then, in 1998, the diplomatic corps was told to move to residences away from the presidential compound. Warnings (e.g., of pollution from a poultry farm) went unheeded and finally ditches were dug across their driveways. These were filled in again, but too late. The Western ambassadors withdrew, citing breach of the Vienna Convention.
231. Belarus was a country featured at a Bank workshop in 1998 entitled: ‘Tough Love; Should the Bank Lend to Non-Reforming Countries?’ ‘Tough love’ from the United States has continued for many years. Congress, with the vocal support of Sen. McCain and Condi Rice, found time in the midst of urgent world business to pass the 2004 Belarus Democracy Act to punish ‘Europe's last dictator’. The 2008 State of the Union address featured Belarus alongside Zimbabwe on the Bush list of undesirables. In 2008, the United States all but severed relations over a political detainee. If reforms arrive, they will, however, be more due to Russian economic pressures than Bank or IMF conditions, or political sanctions.
232. The $50 million Post-Chernobyl Recovery Project was approved in April 2006, twenty years after the accident. The Bank stated that the project, to provide cleaner energy, ‘would change people's lives for the better in the contaminated zones’. The loan submission to the board was delayed for several months by Paul Wolfowitz, and the U.S. executive director was the lone vote against the project because it was not ‘humanitarian’.
233. Financial Times, March 12, 2002. Stek responded to a charge of being passive, but not to that of lack of evaluation independence. He wrote: ‘[F]ar from being passive, the Board oversees the independent evaluation function through a standing committee on development effectiveness. This committee meets twice a month to review all the main OED products and reports to the full Board, thereby ensuring that evaluation findings and recommendations are acted on by the World Bank management’. Banks World, March 2002.
234. Report of a Blue Ribbon Commission chaired by Paul Volcker and Jose Angel Gurria, April 26, 2001. Carnegie Endowment for International Peace.
235. ‘Indonesia Country Assistance Note’, OED, World Bank, February 4, 1999.
236. ‘Development Effectiveness at the WB; What Is the Score?’, OED Reach, World Bank, Spring 2000.
237. ‘Managing for Quality and Development Effectiveness’, World Bank OED, January 10, 2000.
238. For example, the QAG publishes an ‘Annual Report on Portfolio Performance’ that monitors quality-at-entry (QAE) (aspects of design) and quality-of-supervision (QOS) (how projects are being managed); its project-at-risk measures look at generalized risk indicators. The QAG's entry evaluations are carried out using about fifty criteria over nine areas of assessment. Project-at-risk measures are based on a twelve-point rating. Low scores on three criteria or more means ‘at risk’. It is too expensive for the QAG to look at all projects, so a sample of around 10% is taken. The IEG looks at post-project outcomes of projects at the country, theme, sector, and project levels. It publishes the ‘Annual Review of Development Effectiveness’.
239. ‘Evaluating Development Outcomes. OED Lessons and Practices’, World Bank, July 1997, describes the process as ‘embedded in self-evaluation’. One of the results of the Wapenhans Report was to change the name from ‘project completion reports’ to ‘implementation completion reports’ on the grounds that the former signified that the project was ended when the loan was repaid, when in fact it was usually still operating.
240. Data from Volcker Commission report on the Department of Institutional Integrity, Appendix A, Table 1. The report focused mainly on borrower corruption but also devoted two chapters to internal investigation.
241. From $18 million in 1997 to $26 million in 2002, and above $30 million in 2006.
242. ‘The conclusions of a conference in September 2008 at the third anniversary of the Paris declaration admitted to lack of progress on this statement of resolve’.
243. See Fox, Jonathan, ‘The World Bank Inspection Panel and the Limits of Accountability’, in Pincus and Winters, eds., op cit. In the first years of its existence the panel handled seventeen cases, the most controversial being the Arun lll dam in 1993 and the Western China Poverty Reduction Project in 2000, the first of which was cancelled under activist pressure, one of Wolfensohn's early actions, and the second withdrawn by the government of China. The panel was ultimately set up to provide an early warning to the Bank's management of outside opposition - ‘to prevent surprises’. Hammer, Michael and James Champy, Reengineering the Corporation; a Manifesto for the Business Revolution, Harperbusiness, 2001.
244. Interview with Prem Garg: ‘Bank Portfolio Healthiest in Two Decades’, Bank's World Today, March 13, 2001.
245. The Asian crisis loans provided in 1998 and 1999 have now been partly prepaid. As a result, over 2001 to 2007 the average IBRD net lending amount was minus $6 billion a year. The negative position is likely to continue unless there is a sustained recovery in total lending. If we count the repayments as well (that is, the total net transfers), then most regions of the world are paying back to the Bank every year more than they are receiving.
246. IDA grants were introduced in 2003. The donors agreed on a partial switch to grants that now comprise about 20% of the total financing, averaging around $2 billion a year since 2003. The total IDA outstandings were reduced significantly from 2006 under the MDRI debt reduction program, but have since remained slightly higher than the outstanding IBRD loans.
247. See Hurst, Christopher and Eric Peree, ‘Only a mid-life crisis? The future for IFIs in an integrated world, EIB Papers’, European Investment Bank 3(2): 24, 1998. Returns on equity in private banks were significantly higher than for the World Bank over 1992-1996.
248. When it is up against its allowed lending ceiling (so that its equity/debt ratio is at its minimum level) the average cost advantage is quite small (equal to around 1.5%, or 150 basis points) while just after a sizeable increase in paid-in capital, such as in 1988, it could be quite large.
249. Another useful advantage was that the IBRD could borrow from other central banks. In 1973, for example, this amounted to nearly half of all borrowing.
250. The split between loan income and investment income has fluctuated according to factors like the total amount of lending, the fees and margin on loans, and the changes in interest rates on investments.
251. There are a variety of definitions of administrative cost used. This one is based on what the Bank calls its gross administrative budget, but excluding the cost of its development grant facility and before counting fee income. Other measures put the administrative cost ratio at a higher level, surpassing 10%.
252. Productivity measures are in fact difficult to define. The 1996 report of the Task Force on Multilateral Development Banks commented that a lack of efficiency yardsticks ‘makes it all the more important that the Boards and management remain alert to the dangers of letting costs, e.g., staffing costs - get out of hand… the scale of their operations must not be allowed to inhibit… expeditious decision-making’. In Serving a Changing World, Report of the Task Force on Multilateral Development Banks, IMF/World Bank Development Committee, 1996, p. 20.
253. Cash and investments rose temporarily as a result of prepayments, but there has been a rundown in this item since 2004 through a sharp fall in borrowing, in order to bring liquidity down to the level required by the operating rules. The swap entries do not represent the IBRD's main business but coverage of risks from currency and interest rate changes. These items are excluded from some versions of the balance sheet.
254. Of this total $6.9 billion has been paid in convertible currency by twenty-two OECD Development Assistance Committee countries of the United States, Canada, Western Europe, Japan, Australia, and New Zealand. The United States has paid $2 billion of this amount. Article 3, Section 4 states that all borrowings by non-government sources will be guaranteed by the government or an acceptable agency, and that otherwise borrowings are through the government, which by implication gives its guarantee.
255. Lending terms are broadly the same for all borrowers, regardless of each country's track record (such as previous or potential defaults on bonds).
256. The negative pledge caused trouble in the case of the very first loan - to France. The French government accused the Bank of infringing on its sovereignty but agreed to go ahead because it was persuaded that weakening of the rule would adversely affect future Bank lending. The rules were partly amended in 1993, in the case of Russian oil and gas producers who wanted U.S. Eximbank loans. The amendments were limited to pledges of up to eighteen months’ worth of payments on long-term loans to mainly privately owned export enterprises.
257. Gavin, M. and D. Rodrik, ‘The World Bank in Historical Perspective’, American Economic Review 85(2), 1995.
258. Cited in Caufield, Catherine, Masters of Illusion - The World Bank and the Poverty of Nations, Henry Holt, 1996. Caufield writes: ‘[T]he Bank's excellent repayment record owes a great deal to the sacrifices of its rich members. In 1992 alone they reduced or forgave US$10 billion worth of debt owed to them by 40 developing countries…’.
259. The minimum is now set at the highest six months of debt service obligations plus one half of the projected net loan disbursements for the year. The maximum is set at 50% above this level. In 2005 the level was just under the maximum.
260. Since the first case (Nicaragua) some seventeen countries have fallen into arrears at some time or another to the IBRD, but of these fourteen were back in eligible status by
261. 2007.
262. The size of the hypothetical shock is determined by a portfolio risk analysis, which covers 95% of the possible outcomes - i.e., all but extreme cases. The test is whether under the supposed shock the Bank will maintain adequate equity capital to cover a loan growth of 3% per annum.
263. The exposure limit is based on the lower of 10% of its total authorized capital and reserves and a risk measurement based on income.
264. The rules on provisioning require that all the loans to a country are generally placed in non-accrual status if any payments are more than six months overdue. At such a time all unpaid interest and other charges accrued on loans outstanding are deducted from the IBRD's current income.
265. See World Bank Annual Report, 2001, p. 36.
266. It could only meet 1.6% growth compared to the stress test growth rate of 3%.
267. The diversification of IBRD investments into higher risk assets was one of the initiatives attributable to Robert Zoellick after assuming the presidency.
268. Letter from Wolfensohn to Professor Meltzer, dated February 28, 2000.
269. Report of a Blue Ribbon Commission chaired by Paul Volcker and Jose Angel Gurria, April 26, 2001.
270. Birdsall, Nancy, ‘The World Bank of the Future: Victim, Villain, Global Credit Union’, Carnegie Endowment for International Peace, April 13, 2000.
271. The Bank spends about $400, 000 to 500, 000 on loan preparation, and altogether more than $1.5 million on preparation and management over the life of a typical project. The average direct costs of producing a formal advisory report are around $150, 000, while the total including an overhead factor would be nearly US$400, 000.
272. There was a fall in interest rates on liquid assets from over 4% in 2001-2002 to 3%, which reduced investment income to the lowest level since the 1980s. Further falls in interest rates in 2002-2004 brought the average yield down from 3.2% to 1.8%, reducing investment income further.
273. Hammer, Michael and James Champy, Reengineering the Corporation; a Manifesto for the Business Revolution, Harper Collins, 2001.
274. The organization theorist, Charles Handy, said in a similar vein: ‘[O]ne cannot eliminate bureaucracy by decimation, by firing people or cutting inputs, or by top down demands for reform’. Charles Handy, Understanding Organizations, Penguin, 1983.
275. Kotter, John P., ‘Leading Change; Why Transformation Efforts Fail’, Harvard Business Review on Change, 1998.
276. Davenport, Thomas H., Laurence Prusak, and H. James Wilson, What's the Big Idea? Creating and Capitalizing on the Best New Management Thinking?, Harvard Business School Press, April 2003.
277. ‘Trust Fund Annual Report’, World Bank, 2006.
278. In 6, 000 separate trust fund accounts, of which about 900 are active programs.
279. Costs are 10 to 15% of the fund value for the smaller funds.
280. For debt reduction, health, the environment, consultancy services, and other needs.
281. Of these, the Japanese PHRD fund is the largest single fund. One source of operational funding, the Consultant Trust Fund (CTF), supported by twenty-six donor countries, expanded from $2 million in 1986 to a peak of $75 million in 1998 in support of more than 1, 000 activities, before falling back to about $50 million per annum because of freezing of some funds when incidences of fraud were discovered.
282. Serving a Changing World, Report of the Task Force on Multilateral Development Banks, IMF/World Bank Development Committee, 1996, p. 21. The report stated: ‘[W]hen too many conditions are attached these trust funds can complicate the application of institutional priorities’.
283. In 2000 three employees were fired and the Bank had to reimburse about $450, 000 to Sweden and bar seven Swedish firms, one Dutch firm, and two individuals from future business. An international conference with donors in Paris in January 2002 started to try to rationalize the system, and the Bank introduced new rules after strenuous efforts to simplify, streamline, and integrate just one part of the trust fund system, the small funds provided by bilateral agencies.
284. Staff Association newsletter, June-July 2001.
285. The phenomenon of ‘groupthink’ occurs in closed or exclusive teams. Groupthink leads to poor judgment and bad decisions under peer pressure to conform, supported by the perception of safety in numbers and the implicit rejection of uninitiated outsiders. Group pressures lead to a deterioration of ‘mental efficiency, reality testing, and moral judgment’ (p. 9). A group is especially vulnerable to groupthink when its members are similar in background, when the group is insulated from outside opinions, and when there are no clear rules for decision making. See Janis, Irving L., Victims of Groupthink, Houghton Mifflin, 1972.
286. ‘The Cracks in Quality’, The Economist, April 18, 1992, pp. 67-68; and ‘The Straining of Quality’, The Economist, January 14, 1995, pp. 55-56.
287. The Wall Street Journal ran several reports on the issue. For example: “‘Total Quality Is Termed Only Partial Success’ (October 1991) cited the McKinsey study of 30 quality programs and studies of 584 companies by Ernst & Young and the American Quality Foundation. In May 1992, under the title ‘Quality Programs Show Shoddy Results’, it cited an ADL survey of 500 manufacturing and service companies. An article in July 1993 was entitled ‘Many Companies Try Management Fads, Only to See Them Flop’. The life cycle of management ideas has been researched by L. J. Ponzi and M. Koenig. For example, see ‘Knowledge Management: Another Management Fad?’, Information Research 8(1), October 2002.
288. Davenport, Thomas H., Laurence Prusak, and H. James Wilson, What's the Big Idea? Creating and Capitalizing on the Best New Management Thinking, Harvard Business School Press, April 2003, p. 107.
289. Davenport, Prusak, and Wilson identified 680 separate books on change management, plus thousands of articles. Management authors often bewailed their rapid obsolescence (reflected in low second-hand prices on EBay) compared to textbooks in economics, sociology, and psychology. Davenport et al. measured the popularity of an idea by a ‘bibliometric estimate’ based on citations in professional journals.
290. Eileen Shapiro, Fad-Surfing in the Boardroom, Perseus, 1996.
291. See, e.g., Rainey, Hal. G, Understanding and Managing Public Organizations, Jossey-Bass, 1997 and 2003. Rainey, of the University of Georgia, and others have conducted research into high-performance public organizations.
292. See Bergeson, Helge and Leiv Lunde, eds., Dinosaurs or Dynamos?: The United Nations and the World Bank at the Turn of the Century, Earthscan, 2000.
293. ‘Leadership for America; Rebuilding the Public Service’, The Report of The National Commission on the Public Service, Washington, DC, 1989.
294. Osborne, David and Ted Gaebler, Reinventing Government: How the Entrepreneurial Spirit Is Transforming the Public Sector, Addison-Wesley, 1992. This was a guidance text for the reinventing government initiative. The authors proclaimed ten user-friendly principles for successful change: steering rather than rowing; empowering instead of merely delivering services; encouraging competition rather than monopoly; a focus on missions more than rules; funding outcomes rather than inputs; focusing on the needs of customers, not the bureaucracy; concentrating on earning, not just spending; investing in preventing problems rather than seeking to cure them; decentralizing authority; and leveraging the marketplace instead of creating public programs.
295. See Collis, David and Cynthia Montgomerie, ‘Creating Corporate Advantage’, in On Corporate Strategy, Harvard Business Review (paperback), 1999.
296. ‘Strategy Update Paper’, World Bank, 2004--2006, p. 10.
297. April 2003 discussion of the 2004--2006 Strategic Update Paper.
298. See Spiller, P. T., ‘Politicians, Interest Groups, and Regulators; a Multiple Principles Agency Theory of Regulation, or “Let Them Be Bribed”’, Journal of Law and Economics33: 65-101, 1990.
299. Muir, R. and J. Saba, ‘Improving State Enterprise Performance’, World Bank Technical Paper 306, 1995, Chapter 2.
300. Shirley, Mary and L. Xu, ‘The Empirical Effects of Performance Contracts’, Policy Research Working Paper No. 1919, World Bank, May 1998.
301. ‘Corporate Governance - A Framework for Implementation’, Bank/OECD Memorandum of Understanding, World Bank, June 1999.
302. Ibid., pp. 29-30.
303. Unpaid subscriptions result in the actual votes of the ‘part 2’ countries being below their actual entitlement.
304. Larry Summers, the U.S. Treasury secretary under Bill Clinton, thought that the Bank, having striven to accommodate the critics, was being excessively influenced by unelected groups.
305. Scandizzo, Pasquale, ‘The Purpose, Management and Governance of the IFIs: A Case Study in Ambiguity’, EIB Papers, European Investment Bank, 3(2).
306. Gwin, Catherine, ‘US Relations with the World Bank 1945-92’, in Kapur, Devesh, J. Lewis, and R. Webb, The World Bank: Its First Half Century, Brookings, 1997. Wade, Robert, ‘Showdown at the World Bank’, New Left Review, Jan./Feb. 2001. Ibid., p. 8. This was also the view of Harvard Professor of Government James Wilson: ‘Americans always entertain the suspicion that the Government is doing something mischievous behind their backs and greet with outrage any indications that important decisions were made in a way that excluded any affected interest - no matter how marginal’. Wilson, James Q., Bureaucracy - What Government Agencies Do and Why They Do It, Basic Books, 1989, p. 304.
307. Stockman, David, The Triumph of Politics; How the Reagan Revolution Failed, Harper & Row, 1986.
308. Robert Kasten and David Obey held more than twenty hearings on the environmental and social impacts of Bank projects and its apparent abuses and errors. Caufield, Catherine, Masters of Illusion, Henry Holt, 1996, p. 172.
309. The U.S. share of IDA 10 was $3.75 billion out of $18 billion.
310. See, for example, ‘Developments Over IDA Fund Replenishments. Poor Nations Get Wrong Signals’, World Bank Press Review, January 23, 2002.
311. He was regarded as an able chairman of the House Ways and Means Committee
312. Cited in Kapur, Lewis et al., op cit., p. 1202.
313. A behind-the-scenes battle was waged by Larry Summers, former Bank Chief Economist and at that time at the U.S. Treasury.
314. Report of the International Financial Institutions Advisory Commission (IFIAC), 2000, p. 43, Table 3-5.
315. The assumption made for the value of risk exposure on U.S. callable capital is based on one-half of the market valuation of the average risk premium over five years on emerging market sovereign debt.
316. Public Statement issued by Joint Economic Committee of Congress in January 2002. O’Neill did not approve of the way the Bank was being run (in contrast to his own leadership at Alcoa Aluminum). But Wolfensohn was steps ahead of O’Neill's somewhat unsophisticated assault, enlisting the support of Condeleeza Rice, an occasional musical partner. These events are recounted in Sebastian Mallaby, The World's Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations, Penguin, 2004.
317. Executive directors currently receive a salary of US$212, 000 per annum net of tax, equivalent to a Bank internal director.
318. To enhance its relevance, the name of this committee was changed from the CODAM to the COGAM, where DAM had stood for ‘Directors Administrative Matters’. GAM stood for ‘Governance and Administrative Matters’.
319. ‘Development Bank Transparency, ‘Issues and Opportunities for 2002-03 - Promoting the Public's Right to Know’, Bank Information Center, March 2002.
320. The groups were the Bank Information Centre (BIC), CEE Bankwatch Network, Jubilee USA Network, Government Accountability Project (GAP), and CRBM.
321. Naim, Moises, ‘From Supplicants to Shareholders; Developing Countries and the World Bank’, in G.K. Helleiner, ed., The International Monetary and Financial System: Developing-Country Perspectives, Palgrave Macmillan, 1995.
322. Michael Irvin in the Cato Institute newsletter (1990) cited a remark made by a vice president (Robert Picciotto) in May 1989, namely, that the board should get the ‘mushroom treatment’: ‘[K]eep it in the dark; feed it garbage’. Picciotto went on to be director general of the OED, in constant contact with the board.
323. Kapur, Lewis et al., op cit,. p. 1183.
324. The board director was Per Kurowski. He also wrote: ‘[W]e are drowned in too many written and spoken words about too many topics so that our power, as a body, is completely diluted to such an extent that we could easily qualify as the most expensive rubber stamp in mankind's history’.
325. Board workflow is a frequent topic. See also Woods, Ngaire, ‘Making the IMF and World Bank More Accountable’, in Reforming the Governance of the IMF and the World Bank, Ariel Buira, ed., Anthem Press, 2005, p. 154; Kapur, Devesh, ‘From Shareholders to Stakeholders - The Changing Anatomy of Governance of the World Bank’, in Jonathan R. Pincus and Jeffery A. Winters, Reinventing the World Bank, Cornell University Press, 2002; and Catherine Caufield, Masters of Illusion, Henry Holt, 1996, p. 237, who wrote: ‘[F]or many years management fed information to the Board sparingly; today the directors have access to any document in the Bank. The trick is that in order to ask for a document it is necessary to know of its existence’. Rich, Bruce, ‘The World Bank under James Wolfensohn’, in Jonathan R. Pincus and Jeffery A. Winters, Reinventing the World Bank, Cornell University Press, 2002, p. 53.
326. As reported by the OED in 1990. Over 1981 to 1983, the board unanimously approved more than $400 million for the project. At the initial approval several directors congratulated the Bank staff and Brazilian authorities ‘for their conception and design… their truly integrated nature and the comprehensive approach to development they represented…’. The project was halted after lengthy outside protests, in 1985.
327. Some are diplomats, while others and all their staff (except for the United States) have the G4 official visa.
328. An example of this was the exception made for the directors when a new Bank head office was constructed. At the request of some directors, a special smoking lounge was constructed with its own ventilation system while in the rest of the Bank smokers had generally to go out into the street.
329. Woods, Ngaire. ‘The Battle for the Bank’, in Rescuing the Word Bank, A CGD Working Group Report, Nancy Birdsall, ed., Center For Global Development, 2006.
330. The final committee report on this affair agreed that Wolfowitz had not been given clear advice by the Board's Ethics Committee on how to deal precisely with Shaha Riza's employment, but that any doubt he may have had did not excuse the issuing of instructions that breached staff rules, and it did require that he should have consulted the Bank's legal counsel, which he had not done.
331. Riza was a foreign national (a British citizen of Libyan birth); see Blumenthal, Sidney, ‘Wolfowitz's Girlfriend Problem’, The Village News, April 19, 2007.
332. Among the internal watchdogs was the head of the Department of Institutional Integrity, Suzanne Rich Folsom, a Republican loyalist although appointed previously by Wolfensohn to strengthen relations with the U.S. administration. She was given by Wolfowitz a second title of counselor to the president, creating a dual role that turned out itself to involve a conflict of interest. The top managers that left included Shengman Zhang, who took a job at CitiCorp.
333. Bennett's presence antagonized the directors because it transformed an internal administrative enquiry into a quasi-legal battle in which terms like ‘smear campaign’ and ‘circus’ were publicly bandied about, and countercharges made to sway outside opinion. The hiring of a high-profile lawyer reflected Wolfowitz's apparent tendency to ‘ride roughshod’ over opposition, and it probably sealed his fate.
334. The directors approached were from the UK, Canada, and Mexico.
335. The exoneration was a statement from the board accepting that Wolfowitz had acted ethically and in good faith (contrary to its previous findings) and an agreement that he remain in office for six weeks, allowing time to carry out further functions such as a planned farewell trip to Africa. When board members went to discuss the final terms they found that he had left his chief adviser, Cleveland, to deal with them.
336. The unlikelihood of the board dealing with the case on its own was evidenced by the fact that the Ethics Committee had in 2006 refused to deal further with the issue after receiving an anonymous e-mail from a ‘John Smith’, presumably a member of the Bank's personnel department, detailing the terms of Shaha Riza's departure. The side negotiation that secured a compromise satisfactory to Wolfowtiz was also a form of insider deal.
337. Naim, Moses, ‘Report of the Ad Hoc Committee on Board Procedures’, World Bank 1992.
338. Naim, Moises, ‘From Supplicants to Shareholders; Developing Countries and the World Bank’, in G. K. Helleiner, ed., op cit., 1996, p. 293.
339. ‘Serving a Changing World, Report of the Task Force on Multilateral Development Banks’, 1996, op cit.
340. Ritzen, Jozef, A Chance for the World Bank, Anthem, 2005, p. 98.
341. Holland, Robert B., ‘The Real World Bank Scandal - Why the Bureaucracy Wants to Oust Paul Wolfowitz’, WSJ.com, April 20, 2007.
342. It delegates decisions on PPFs, LILs, and APLs (unless a meeting is requested). These procedures apply to routine operations, i.e., except SALs, HPIC, deviations from CAS, innovative and complex projects, lessons to be learned, and large projects. It also reviews one a year for all borrowers, and it reviews all guarantees.
343. Behar, Richard, ‘Wolfowitz vs. the World Bank Board: It's Trench Warfare’, Fox-News.com, January 31, 2007.
344. One proposal would have placed an IMF official as an adviser on the staff of an African director, despite the apparent conflict of interest.
345. ‘Voice and Participation of Developing and Transitional Countries in Decision Making at the World Bank - Options Paper’, World Bank, October 11, 2007, p. 5.
346. Experience with Enron, Global Crossing, WorldCom, Adelphia, and other major firms that were found, or were suspected, to have hidden from their boards significant data about their performance.
347. For an analysis see ‘Comparative Study of Corporate Governance Codes Relevant to the European Union and Its Member States’, European Commission, January 2002. There is a lively debate on the pros and cons of each model. As seen from the United States and UK, there are problems with the two-tier model because of possible conflict and excessive management leverage, while a unitary board is simpler. But information flow, rights and responsibilities, size, and personalities are probably as important as formal structure. (See Pannier, Dominique, ed., ‘Corporate Governance of Public Enterprises in Transitional Economies’, World Bank Technical Paper no. 323, May 1996, p. 17.)
348. Both the revised combined code of the UK and the revised French principles of corporate governance, of 2003, strengthen the presence of independent directors. Charan, Ram, Boards at Work, Jossey-Bass, 1998.
349. Ibid., p. 241.
350. Notably in Buira, Ariel, ed., Reforming the Governance of the IMF and the World Bank, Anthem Press, 2005. The voluminous literature is probably not a good sign for those hoping for action, and indeed the discussion on voting representation has so far continued for five years.
351. Sebastian Mallaby provides a detailed portrait of Wolfensohn's personal background in The World's Banker, Penguin, 2004.
352. Lomax was reportedly unsure whether she had been appointed as his chief adviser or his chief office assistant.
353. These were Suzanne Rich Folsom, Robyn Cleveland, Kevin Kellems, and Karl Jackson. Of these, Christiaan Poortman reportedly resigned rather than open a Bank office in Iraq, partly influenced by the death of the previous UN representative in a bomb explosion.
354. Bernard Bass was a leading contemporary author on transformational leadership. See, for example, Bass, B. and B. Avolio, eds., Improving Organizational Effectiveness Through Transformational Leadership, Sage, 1993.
355. Henry Mintzberg is a leading author on corporate leadership. See his Mintzberg on Management: Inside Our Strange World of Organizations, Free Press, 1989.
356. Sebastian Mallaby recounts that Wolfensohn changed his citizenship in 1980 to qualify for the job when it was suggested by Robert McNamara that he could be a candidate. When it was finally in sight, he lobbied aggressively and got round the initial opposition of such a person as Bob Rubin, Treasury Secretary. As Mallaby puts it, the Bank's top management took exception to the ‘showboating newcomer’ who thought he was doing the institution a favor by taking the job.
357. For an illustration, see Mallaby's account of Wolfensohn's public face-off with Kim Jaycox, who was vice president for Africa, in Mallaby, op cit., 2004. Kim Jaycox himself was a transformational figure who had been an architect of the 1987 reorganization. This is recounted in Mallaby, op cit.
358. Personal communication.
359. Fidler, Steven, ‘Who Is Minding the Bank’, Foreign Policy, September 2001.
360. Maccoby, Michael, The Productive Narcissist, the Promise and Peril of Visionary Leadership, Broadway Books, 2003.
361. Leo Strauss's ideas centered on, among other things, the ‘natural order’ of leadership, and the need for the elites of powerful nations to assume national and world leadership to preserve traditional social values against the dilutions caused by mass empowerment. Such philosophies were preconditions of the aggressive neo-conservative Middle-Eastern policy, and the interest in a ‘Pax Americana’. See Drury, Shadia, Leo Strauss and the American Right, St. Martins Press, 1999.
362. Ricks, Thomas E., Fiasco: The American Military Adventure in Iraq, Penguin, 2006.
363. Wolfensohn was particularly keen on the ‘Bosnia model’, where a group of Bank staff went above and beyond the call of normal duty to broker deals in difficult personal circumstances in the midst of a war. See Mallaby's description of this. This ideal, however, is not necessarily one that would be compatible with effective organizational performance.
364. Out of the 4, 500 who left the Bank over five years from 1997, about half would have been over and above the normal attrition rate of 4 to 5% per annum. Allowing for greater than normal rates of voluntary departure, either because of monetary incentives or dissatisfaction, it may be reasonably concluded that close to 2, 000 employees left the Bank involuntarily over the period.
365. Many of the layoffs meant not just unemployment but also a change of country because the Bank's non-U.S. employees only hold temporary residence permits.
366. See Woods, Ngaire, The Globalizers; the IMF, the World Bank and their Borrowers, Cornell Studies in Money, Cornell University Press, March 2006.
367. Kapur, Devesh, ‘From Shareholders to Stakeholders: The Changing Anatomy of Governance at the World Bank’, in Pincus, Jonathan and Jeffery Winters, Reinventing the World Bank, Cornell University Press, 2002.
368. E.g., recent studies have been conducted by Ngaire Woods, op cit., and Buira, Ariel, ed., Reforming the Governance of the IMF and the World Bank, Anthem, 2005.
369. See Hopt, Klaus J. and Leyens, Patrick C., ‘Board Models in Europe - Recent Developments of Internal Corporate Governance Structures in Germany, the United Kingdom, France, and Italy’, ECGI - Law Working Paper No. 18, 2004.
370. As under the Sarbanes-Oxley Act of 2002 that followed the collapse of Enron and other companies, which establishes new or enhanced reporting standards for all U.S. public company boards, management, and public accounting firms.
371. Similar ideas for board structure at the IMF have been aired. One proposal, by Peter Kenen at Princeton, is for a combination of a managing board that would replace the present executive board, and a council. The managing board would consist of about sixteen individuals nominated by the managing director. The council would comprise ministers of finance or equivalents, appoint the managing director, ratify appointments to the managing board, adopt the Fund's budget, and deal with funding approvals beyond the norm.
372. These suggestions are partly based on a communication from David Vines.
373. Gilbert, Christopher L. and David Vines, The World Bank: Structure and Policies, Cambridge University Press, 2000.
374. Pincus, Jonathan R. and Jeffery A. Winters, Reinventing the World Bank, Cornell University Press, 2002.
375. In Birdsall, Nancy, ed., Rescuing the World Bank: A CGD Working Group Report and Selected Essays, Center for Global Development, 2006.
376. Mervyn King, Governor of the Bank of England, speaking about the IMF, also suggested a non-resident board that meets some six to eight times a year. Directors would comprise senior finance ministry or central bank officials, subject to a clearly defined remit and guidelines on accountability.
377. then, and certainly by one author who wrote: ‘[T]he degree of radical change called for and often implemented was in reality disastrous to the long-term interest of the organizations involved… a few years later companies are beginning to understand the price of their decisions. They had sacrificed many of their best people’.1
378. Ten years after the start of the reorganization, the pattern of the World Bank's lending operations is returning to where it was a long time ago. From 2005 IBRD lending recovered a little, partly as a result of new infrastructure loans to India and other Asian countries. Infrastructure loans to India were among the first the Bank ever gave to a developing country. The unexpected return to its roots is perhaps an epitaph for the years of re-engineering. It was, for the most part, not worth it. It would be best to leave behind that heroic era and simply work on the serious problems that have to be dealt with in the interests of world economic development, without fanfare, under leadership that wants to work on the details, with rational corporate management, and without poorly conceived doctrinaire pressure from outside, or inside.
379. Effective organization of the World Bank has taken second priority throughout its history behind the special interests and objectives of its constituencies. Yet effective organization is a key to effective practice and, by extension, a determinant of developmental effectiveness. The reorganization of governance is a key to organizational effectiveness, and therefore must also impact development effectiveness. Reform of governance will not of itself improve the quality of development assistance. But it is a necessary condition. It is equally necessary to remove the dead weight of reviewing and checking, reintegrate knowledge with practice, and restore the judgment of individuals in doing the best that can be done.
380. A LAST THOUGHT ON FOREIGN AID
381. As well as having an ambiguous effect on economic growth, foreign aid is at best quite marginal to the world's economic activities. Its resource
382. Estimate by Friends of the Earth at the Johannesburg Development Summit of September 2002.
383. Riddell, Roger, Does Foreign Aid Really Work?, Oxford, 2007, is a recent, serious part of the enormous human resource pool dedicated to the aid industry. The voluminous writing on aid effectiveness does not, however, seem to adequately address its rapidly decreasing importance as foreign private investment flows and personal wage remittances overwhelm it. The marginalization of aid might be more likely explained by the sociology of post-colonial societies than by earnest attempts to evaluate its development impact.
384. Zoellick spoke at the Center for Global Development, Washington, DC, on April 2
385. Reported in World Bank Press Review, April 3, 2008.
386. MacDonald, John, Calling a Halt to Mindless Change; a Plea for Commonsense Management, American Management Association, 1998.