1
Present
THE IMF AND THE WORLD BANK
FACE THEIR FUTURE
[Transcript prepared from a tape recording]
This event was held in Washington, DC
on Thursday, April 21, 2006, at 12:15p.m.
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P R O C E E D I N G S
MS. MATHEWS:
[In progress] -- who joined
the Center for Global Development as its first Vice
President three months ago, coming from the World
Bank, where he has spent more than 20 years.
His
first major contribution at the Bank was developing
the survey methodology that is still the Bank's
standard for measuring living standards and
assessing poverty.
He spent more than a dozen years serving
abroad in Indonesia, in Vietnam, and is the country
director for the five Central Asian Republics based
in Kazakhstan.
So he knows from an on-the-ground
perspective whereof he speaks about development.
The person we are really all here to honor
and to hear is Ngaire Woods.
Thinking about reform
of the World Bank and the IMF in this town is
virtually a cottage industry.
[Laughter.]
MS. MATHEWS:
Within a few blocks of here,
I would guess that there is probably a meeting a
week on the subject.
But there are very few people
who have thought for ten years about this subject,
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and there are far fewer than that who have no
personal conflict or preset agenda in what they see
as they look at these two giant institutions.
And
there are fewer still who combine a calling in
highest-quality scientific research and a passion
for the work of these two institutions in a world
where economic relationships and the factors that
make for good or bad governance are constantly being
tossed topsy-turvy by the forces of globalization.
Indeed, I think that that my categories for
few and fewer and fewer still have now brought us
down probably to a class of about one, because I do
think that Ngaire Woods is unique in the length of
time that she has thought about these questions, in
the objectivity of her work, and in the lucidity of
her analysis.
And that's why one more meeting on
this street is not just one more meeting but a very
special event and why so many of you have come
today.
Professor Woods is the founder and director
of the Global Economic Governance Program as Oxford
University, Dean of Graduates, and Fellow in
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Politics in International Relations at University
College, Oxford.
In addition to a distinguished
academic career, she's been involved in policymaking
as an advisor to many international institutions, to
the UNDP, to the Secretary General through his highlevel Commission, the British Commonwealth, and most
recently as one of a three-person panel appointed by
the IMF Board to look at its Independent Evaluation
Office.
The book that we are hearing about today,
"The Globalizers:
The IMF, the World Bank, and
Their Borrowers," which is for sale outside and
which I commend to you in that respect, is only the
most recent among many of her books.
She's also the
author of "The Political Economy of Globalization"
in 2000 and of "Inequality, Globalization, and World
Politics" the year before that.
So she brings a long history of both
practical experience and academic depth to this
subject, and we are looking forward to hearing her
newest insights.
Ngaire?
[Applause.]
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MS. WOODS:
Well, thank you, Jessica, for
that very kind introduction, and thank you all for
being here today.
Washington, D.C., is a wonderful city for
many reasons.
For someone who works on the IMF and
World Bank, it's a glorious place because there's so
many people interested in the subject, and I'm
delighted to be able to have a conversation with so
many of you today.
It's also, as I discovered right back when
I was doing my doctoral research, a place where as
an academic coming to look at U.S. policies, you get
a real feel for what open government can be, or
certainly I did in the early 1990s, coming and
finding that all you needed to do as a lowly
graduate student was knock on a door and people
would open the door and talk to you and share
documents with you.
And now it's even the case that
that culture is part of the way the IMF and World
Bank work, and I think that makes--that's made the
institutions much more open to research by a larger
number of scholars.
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That said, when I began studying the IMF
and the World Bank, it was a much more seriously
difficult operation because there were no documents
on the Internet.
confidential.
Everything was assumed to be
So to get access to information, you
really had to spend time honing the skills much more
of a journalist than of an academic.
You had to
force your way through doors or cajole people into
sharing documents with you that they might be not
really supposed to share with you.
That said, in brief, I just want to say I'm
delighted to be here in Washington and able to speak
with you on this subject.
There are so many people in this room that
I should thank who have helped in the progress of
this book.
Jim Boughton is among you, the IMF
historian, who for any academic is the sort of
treasure in the crown at the IMF because of his
incredible collegiality, his willingness to read, to
share information, to point you--to point out your
errors, and to point you in directions to other
information.
He's just one of many of you in the
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room, and I'm not going to start elaborating all of
you because I'll spend the whole time doing that.
But I do particularly want to thank today Jessica
Mathews and Tom Carruthers, who made it possible for
me to come and spend a glorious couple of months
writing here.
And for those among you who are
academics you'll know just how special that kind of
time is.
And, of course, to the librarians of this
fantastic place who make spending time here so
efficient and so worthwhile, and they get a special
acknowledgment in my book, and it's heartfelt
because that time was very precious and really
helped bring this book to fruition.
So to the book.
As Jessica said, this
began ten years ago after my graduate work on the
management of the debt crisis, and what I set out to
try to work out for myself was why the IMF and the
World Bank each do what they do the way they do it,
because at the time, as indeed still today, there
were sort of two views, which aren't necessarily
mutually exclusive, but one is the view of people
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working within the institutions that they're there
crafting the best possible economic advice and that
that explains pretty much what they do, it's a
rational enterprise; and the outside world which
sees them as hugely political institutions imposing
what some see as a very American-dominated view on
the rest of the world.
What I wanted to do was to try to work out
which of these institutions that--you know, which-how do these two views actually come together.
To
what extent are the institutions instruments of the
United States and their other major shareholders?
And why is that the case when these were born with a
potential for more independence than any other
international institutions?
And why do they give the advice that they
give?
Is it purely the result of economic analysis?
Is it really the best possible economic advice that
can be given?
And, finally, what impact do they have on
their borrowers?
Not what impact do they have on
the economy of their borrowers, but what impact do
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they have on the political system of their
borrowers, in particular, on the policymaking
process in their borrowing countries?
Some have alleged--and certainly did in the
1980s--that negotiations with the IMF and World Bank
shot down democracy, they closed off democratic
debate in countries, just at a time when other parts
of the international community were trying to foster
democracy in those countries.
And so that was the
other driving question behind my research.
What
really was their impact on the politics?
And with those questions, the first object
of my study was Mexico.
I had looked carefully at
its debt management strategies in my own doctoral
dissertation.
Now I really wanted to try to work
out what impact the IMF and the World Bank had had
on what was called the Mexican transformation.
Political scientists all said that the IMF
and World Bank has no impact at all.
It didn't
strike me as right, but to try to work out what
their impact was required, as I mentioned earlier, a
lot of doorstepping of politicians.
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And I was very
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grateful that so many Mexican Cabinet Ministers did
let me spend hours asking what to them might have
seemed very naive questions about how economic
policymaking was taking place.
But what they helped me put together was a
picture of what the relationship between the IMF,
the World Bank, and the Mexican Government was
during the 1980s and how it changed across that
period.
I learnt about IMF missions that would fly
in secretly before budgets were announced to advise
the government so that afterwards they could fly in
officially and say that they had had no role in
formulating the budget.
I learnt about World Bank economists who
would fly in unofficially before the unofficial IMF
mission to help prepare the Mexican Finance Ministry
for their negotiations with the IMF.
I learnt about the secret policy briefings
which were formulated in Washington, D.C., to help
the incoming President formulate economic policy.
What these things told me, apart from
fascinating me in detail, people don't realize--my
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undergraduates don't at first realize how
fascinating it is to study the IMF and World Bank.
But what I learnt was something deeper, which was
about a very particular kind of relationship of
intense interaction, debate, and trust which
developed between Fund and Bank officials and a very
particular group of officials in the Mexican
Government.
And what that meant was that the Fund and
Bank did have a profound, if subtle, impact on
Mexico's transformation.
There are three aspects of
it that I think are particularly powerful.
First, the role of each of these
organizations--and, by the way, as an aside, I know
already that many of you will say:
How can you
possibly talk about the IMF and World Bank in the
same sentence?
institutions.
These are totally different
They are more, to quote what one of
you said to me yesterday, they're more culturally
different than any two institutions in the world,
which for an outsider is a curious comment given
that if you look at their staffing profiles, we tend
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to see a very similar training, a very similar
staffing profile.
They are separated by 20 meters
of asphalt, although connected by a car park.
They
work on very small areas, so to anybody from the
outside world, this always seems like a curious
comment.
I do understand what you mean when you say
these are culturally different institutions, but
don't lose your perspective on what that looks like
from the rest of the world.
Anyway, so what was their impact in Mexico?
Well, they were working very closely, albeit it with
plenty of turf battles between themselves.
First, they really did tip the cabinet
table, and what I mean by that is because they were
working with the two or three point agencies--the
Finance Ministry, Finance and Planning Ministry, and
central bank--and it's to those officials that they
could channel particular resources, technical
advice, and so forth, they tipped the cabinet table
so that it's those officials that could make use of
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specific timing, disbursed advice, disbursed
finances to push for particular reforms.
A second thing that I think we see happen
is what I would call the fracturing and the
polarizing of the debate about economic policy in
Mexico, so that the debate really did become one, by
the end of the '80s, between believers and nonbelievers or what others would call reformers and
non-reformers.
But, of course, it was never a
debate between reformers and non-reformers.
There
was always a rich debate among different kinds of
reformers, and I think what the Fund and Bank did to
that debate is polarize it and make it a debate
whereby you had believers and non-believers and that
became the reformers versus the non-reformers.
And, third, it introduced a very short-term
horizon into economic policy priorities in Mexico by
definition, because IMF and World Bank instruments
are short term, a one-year stand-by, a three-year
loan.
So when it's these instruments that come to
affect the policy priorities of a government,
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necessarily you get, or you got certainly then a
short-termism built into economic policy.
So I think that these were effects that the
institutions had in Mexico on the transformation
that hadn't been picked up by political economists
or economists.
But at the same time, the experience
in Mexico had profound effects on the IMF and World
Bank.
And the case of Mexico also illustrated to me
and highlighted the beginnings of an answer to the
question of why is it that the IMF does what it does
and the World Bank does what it does; or, more
specifically, what is it that shapes the advice that
they give to countries or what some would call the
prescriptions that they write out for countries.
And there was very clearly in the Mexican
case three factors which shaped that economic advice
other than the economic analysis itself.
The first
was an obvious set of political pressures coming
from Washington, D.C., in particular because of its
partnership with Mexico.
So clear priorities being
set by one of the major shareholders in each of the
Fund and the Bank.
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The second set of pressures were the
bureaucratic ones within the Fund and within the
Bank, that is to say, their need not just to make
loans or to be seen to be leading in the resolution
of crises, but their need to show success, which
Mexico became at the end of the '80s the showcase
for success.
More deeply the bureaucratic pressure leads
to the choice of some particular instruments at the
expense of others, and I think that the experience
for the IMF and the World Bank in Latin America in
the 1980s profoundly shaped their toolbox.
It was
far easier to go into these countries in economic
crisis and country by country to require them to
undertake structural adjustment programs than it was
for each organization to step up to the
international dimensions of these problems and
propose solutions to them, that is to say, to step
up to how international debt workouts were being
done right back in the early 1980s.
Why was that difficult?
It was difficult
because, to do that, you had to have agreement among
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the major shareholders, not just to command but to
act themselves.
Far easier for those major
shareholders was simply to direct the Fund and Bank
to require crisis-ridden countries to clear up their
own houses and to ignore the international
dimensions that since that time have only grown as
the global economy has become more globalized.
The most curious thing about the debate
about the IMF today is that, as globalization has
increased in intensity and in effect, this agency,
created par excellence to deal with some of the
economic dimensions of globalization, is seen even
by its major shareholders as less and less relevant.
That makes the challenge of thinking about its
future a terrifically important one, and I'm going
to come back to that at the end of my comments.
Having looked at Mexico, my next target was
Russia, for obvious reasons.
I think that Russia
defined a series of steps that each of the IMF and
World Bank took in the 1990s, steps I describe in my
book as mission creep.
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I also had a personal interest in Russia,
having long studied Russian in high school and at
university, and having persuaded the BBC to let me
go to Russia and to do a documentary about the
reform process in Russia.
And the joy of that is
that you then have access to the BBC's marvelous
fixers who set up your interviews, who make sure
that everything happens.
Having done it all myself
in Mexico, I was delighted to have somebody else
that could do some of that.
The study of Russia in my book is a lengthy
one, but it--I'm not going to go through the details
of it here, but just to say that what the experience
of each institution in Russia highlighted yet again
was the role that these three pressures were playing
in shaping what each of the IMF and World Bank were
doing.
First, most obviously, the political
pressures from the U.S. Congress, from European
countries, which were pushing them to--pushing each
of them to lend, pushing the Fund to look the other
way when Russia wasn't meeting its targets so that
political goals could be met, pushing the Bank to do
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large loans which, in the end, Russia couldn't use
because there wasn't a capacity on the ground to
actually use these loans, even once they'd been
approved.
The second set of pressures, obviously,
again the bureaucratic pressures--the pressure to
disburse, the pressure on the Fund in the 1990s to
find a new reason for existing and stepping up to
what some called a new historic mission, to
transform Russia, what became called as systemic
transformation, not something, of course, the
institution had attempted before, nor he World Bank.
And, of course, the third set of pressures
that were shaping what the Fund and Bank did with
the pressures of Russian politics itself.
For
example, when it was clear that tax reform was not
something that Russian politics was going to permit,
what it did to the Fund and the Bank was distort
their priorities so that in the end they were
presenting as priorities things that the Russian
Government could do.
When I say distort there, of
course, I'm not saying--what I'm saying is compared
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to what their economic reasoning and rationale
suggested was the optimal.
In brief, what we get is a picture from
both of these studies of institutions which each do
create and have at their disposal some 10,000
economists to help work out what is the best
possible economic advice, but that there is a
serious gap between the rational economic advice
that is generated or could be generated and the
advice that is actually on offer to borrowing
countries because of these three sets of pressures,
because of the political pressures, which are
exercise right from day one on any of these
programs, because of the bureaucratic pressures and
incentives within these organizations, and because
of what is possible or what is perceived as possible
within each program country.
And what this does is
really open up for us, if it's not the best possible
economic advice, then how indeed should it be
deployed and what weight should we be giving it?
The third case in the book is Sub-Saharan
Africa, not because I think of Sub-Saharan Africa as
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one case--very obviously it is not--but because what
I do in the sixth chapter of the book is look at how
the experience within different countries in SubSaharan Africa shaped the IMF and the World Bank in
themselves.
Africa was interesting because, seen from
outside, this is where we would really expect the
IMF and the World Bank to be at their most powerful
and at their most effective.
Why?
Because these
are the countries that have the most need of their
financial resources as well as their technical
expertise, because these are the countries whose
expertise and capacity is most stretched and in most
need of bolstering from outside, and because these
are the countries many of whom are heavily dependent
on aid from other donors for which the IMF and the
World Bank are the gatekeepers.
So if you're
looking anywhere in the world where you might expect
the institutions to have considerable power,
influence, and possibility, most surely it's SubSaharan Africa.
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But, incredibly disappointingly, as I
analyze in the book, it's precisely in the neediest
countries of Sub-Saharan Africa that each
institution has deployed its lowest level of
experience and its lowest level of resources in
technical advice.
And we see this by looking at the
documented figures of how many and how senior and
how promoted the staff are that are dispatched to
particular countries.
It's in Sub-Saharan Africa that I think we
see most clearly the cost of having each of these
multilateral international institutions who are well
equipped, better equipped than any other
institution, to deal with international problems and
causes.
It's in Sub-Saharan Africa that we see the
cost of them focusing exclusively on a country-bycountry analysis of what each individual country
should do in its economic policy, instead of
considering and working on the other part of the
picture, the global imbalances, monetary
cooperation, exchange rate regime at the
international level and how this plays out in these
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countries, at commodity prices, at the supply side
factors that underpin investment, at regional
infrastructure issues.
These are the transnational,
international issues which we need the IMF and the
World Bank each to be stepping up to the plate on.
But, of course, that's very tough and difficult for
them because, for their major shareholders--for the
G-7 and other major shareholders--it's much easier
to command the institutions to go in and ask
countries to reform case by case than it is for
those same major shareholders to step up to the
plate and be part of a multilateral cooperative
scheme that would mitigate some of the international
constraints that developing countries face.
Within each institution, we see that it's
much--it's also much simpler to use a pre-existing
toolkit of policies and templates which can be
required of individual countries rather than to try
to take up and to push these more international
solutions.
Now, even as I say that, I'm certainly not
underestimating the extent to which brilliant and
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creative staff within each of the IMF and World Bank
have addressed some of these problems of sovereign
debt rescheduling mechanism or a commodity price
insurance scheme, speaking of the Fund and the Bank
specifically, but to get their major shareholders to
step up to the plate, pick up these ideas, and push
them as a priority is where the will has been
lacking.
And so what, what does this mean for our
topic today--the future of the IMF and World Bank?
I've prepared for today a policy brief, which some
of you will probably have received a copy of, which
just gives a very quick summary shorn of academic
details, all the history that's in the book, the
footnotes, and so forth, that just highlights very
simply the four pressures that mean that the IMF and
World Bank are probably more ready now to think
about a different future than they have been, and
four ways in which they could most constructively
move towards a glorious future, if you like.
The four pressures are very obvious, and
they're obvious to most of you in this room.
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the budget pressure.
Each of them, for slightly
different reasons, is now under considerable budget
pressure, as I detail in my book, in the last
chapter of my book.
In the 1980s, there was a
little noticed revolution in the financial structure
of the IMF and World Bank.
In essence, the major
shareholders, led very strongly by the United States
administration at the time, pushed for the entire
cost of the organizations--well, not the entire
cost, but a very substantial proportion of the core
cost of each organization to be pushed onto
borrowers and the income from borrowers invested
elsewhere.
In other words, the major donor
countries relieved themselves of significant
responsibility to the IMF and World Bank.
And that
worked pretty well for a little while.
The problem now is that having become so
dependent on income from lending to borrowing
countries, each institution is facing a lack of
borrowers or, in the Bank, a slackening off from
major borrowers and, in the Fund, a walkout from the
largest borrowers and a clear determination,
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certainly among its Asian members, that they will
not use the IMF's resources.
And that quite simply
means the tap is turned off on the incoming income
for each organization.
It's not as desperate a
problem for the Bank because of its investment
strategy, but it is a long-term problem for the Bank
and a very short-term immediate problem for the
Fund.
They are now under a real budget constraint.
The second real pressure, which is totally
related to that, is the disaffection of their
largest fee-paying clients, who are walking away and
creating this budget pressure.
The third is the vexed issue of
conditionality, which in both institutions has been
recognized as very problematic.
They've each done
their own reviews of conditionality, but we don't
have something to replace it.
The fourth pressure is that although in
each institution there are many who hope that their
new role will be that of impartial advisor, of
sharing their technical expertise across their
membership.
In my travels across their membership,
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what I take from senior officials is that they don't
see either institution as handing out impartial
advice.
They see the advice as less than useful or
less than it might be useful for at least three
reasons.
First, they see it as far too focused on
high-tech economics and far too little focused on
the practicalities of implementing economic policy.
To quote officials, they would much rather have a
former finance official who's tried to reform in
their own country giving them advice than a freshly
minted MIT doctorate in economics who may well have
shiny publications in economic journals, but when it
comes to advice on how you actually privatize
banking in a particular country is short on the
practicalities.
So what does this mean?
pressures for reform mean?
What do these
I think they mean four
things for the Fund as well as for the Bank,
although in varying degrees, and I'm just going to
conclude here and bring out that variance.
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The first, I think most surprising thing
about the Fund and Bank at this rather important
point in their history is how little attention they
have given to finding out what their fee-paying
clients most value in what they do.
The Bank has
done a little bit of this in its Country Assistance
Strategies, for example, but it never actually
pulled them all together into an overall picture
which gives an indication of what it is that its
fee-paying clients most value in what it does,
perhaps in different groups.
never done it.
The Fund has simply
In other words, each institution
acts in a sense on what they believe their
membership needs without doing an analysis of what,
as I said, their fee-paying clients most want.
And
I think if they were funded in the same way as they
were funded in the 1950s, that might be one thing.
But now that they are so reliant on their fee-paying
clients, they have to learn to be much more attuned
to what those clients actually want.
The second is about their advice.
It is
about the tremendous potential for the Fund and Bank
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to offer truly useful advice to all their clients.
Obviously, they do at the present time offer some
advice which is of use, but I'm saying how do we
really leverage that potential.
How do you get so
many economists, how do you best use them to really
improve economic policymaking in a poor country?
And the most obvious thing is that the incentives in
each organization have to shift.
They have to shift
away from privileging people sitting in Washington,
D.C., doing what you might call high-tech economics.
They have to shift towards incentives for people to
spend much longer working on specific countries or
in specific regions, and spending time doing very
applied work, very specific work.
How do financial
transmission mechanisms work in Tanzania?
very applied question.
That's a
It has a very specific set
of answers, and it's very hard to imagine that you
can generate those answers unless you're sitting in
Dar es Salaam doing that research.
Those incentives need to change, and I
think the structure of the organizations is going to
have to be radically rethought.
Why are they
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spending their budgets on research which is based in
Washington, D.C., when the clients who most need
their research need research which needs to be done
in-country?
That means a pretty radical reshaping
of what they're doing, and it's a reshaping beyond
the decentralization that the Bank's already engaged
in.
And I'm not ignoring that.
has decentralized.
effects, to be fair.
The Bank certainly
It's decentralized with mixed
In some countries, it's become
extremely attuned to what, if you like, the feepaying client wants.
In others, for all sorts of
reasons, including the seniority and authority of
chiefs in countries, it is simply still doing the
business of being a voice piece for what is being
formulated in Washington, D.C.
I think the Fund has further to go, a lot
further to go, in creating what I would call a
feedback loop from its fee-paying clients.
You just
had the sense, when you move among those countries,
that this is a one-way road and, the road is a road
that takes missions, that takes advice, that takes
economic expertise from Washington to that country,
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and there is simply no second lane that brings
information, expertise, learning, proposals for
change, policies back the other way for the Fund to
take seriously.
The third proposal in the brief is of their
decisionmaking bodies.
About this I've written
probably far too extensively, but in brief, these
institutions, so reliant on their fee-paying
clients, both actual and potential, need to involve
those fee-paying clients much, much more in their
decisionmaking at the top.
And that doesn't mean
small board reforms, although I make some proposals
for that in the book.
The problem with the boards
that run the Fund and Bank is that they are
completely unbalances in their representation--not
because of weighted voting.
talking about.
That's not what I'm
I'm talking about the fact that the
eight countries who had their own director on the
board have complete accountability for those
organizations and for their director, who they can
recall, replace, dismiss at will.
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For the other 176 members of the
organization, they're lumped into groups who elect
an executive director who for their two-year term is
untouchable by the members of the group--in other
words, who is constitutionally independent of the
membership.
And so we have a completely unbalanced
representative structure where for eight members
there's a direct relationship and for the other 176
there's a completely indirect relationship, which
means that they might be represented, but, in fact,
there are constitutional enjoinders in the Articles
of Agreement of the IMF and of the World Bank
enjoining those elected directors not to represent
their members.
So the boards, in other words, hopelessly
fail to represent the whole membership, and they
also have no incentives built into their structures
to ensure that all members are involved in
deliberation and decision.
And it's for that reason
that I make proposals about how you might change the
way decisions are made in my book.
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And, finally--and let me end here.
You've
been incredibly patient, and I thank you for that.
The final point is for each organization to refocus
on the international dimension.
I'm not
underestimating the extent to which many countries,
including this one, need to reform their economic
policy.
That's obvious.
I'm saying that
globalization is bringing with it huge international
economic problems, vulnerabilities, and effects,
which we have two huge institutions that could deal
with.
What the main shareholders of these
institutions need now to do is to step up to the
plate through those institutions and start dealing
with those globalization, international issues,
whether it's monetary cooperation or whether it's in
development assistance and the coordination thereof.
And that's going to require a buy-in not just by the
major shareholders, but by the borrowers of each
organization.
For the Fund to be effective in
monetary cooperation at a global level, it will have
to re-win the confidence at least of its Asian
members.
That's going to require a pretty radical
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transformation.
Either the Fund will need to be
based in a different country, or it will have to be
transformed in its governance if it's going to
recapture a confidence of its Asian members.
For the World Bank, in development
assistance, if the Bank were to try to play a much
more serious role in the coordination of development
assistance, it would need the countries on the
receiving end to want it to play that role.
What we
see at the moment is that those countries would
rather deal with the costs of duplication,
fragmentation, and the overrun bureaucratic
pressures of having to deal with so man different
donors rather than rely on an institution which they
do not see themselves as having adequate voice in.
And so, in the end, I think there is reform
within the institutions that the major shareholders
have to step up to the plate to push and to take
part in, and then there's the reform of what these
institutions do that is urgent and called for.
And
for me, that charts out what I see as an important
future for the IMF and World Bank, which to me are
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indispensable organizations in a world in which
globalization is proceeding apace.
Thank you.
[Applause.]
MS. MATHEWS:
Thanks, Ngaire.
I have
seldom heard a Washington audience more still, more
hanging onto every word.
We're going to turn now to our two
distinguished commentators.
They've agreed on
length so that we will preserve at least half an
hour for your comments, and we will begin with
Sebastian.
MR. MALLABY:
Okay.
There's a lot to chew on now.
Thanks, Jessica.
I'll try and be quick
and direct.
One point I want to make to start off with
is that this idea that the Bank and the Fund are not
purely technocratic institutions but are influenced
by institutional bureaucratic interests, the
interests of their shareholders, the political
context, and so forth, on one level I think it's
exaggerated, and on another level I think it's a
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truism.
All institutions are obviously going to be
subject to bureaucratic internal pressures.
all have political constraints.
They
You never get a
purely technocratic institution anywhere.
But once you've stipulated that, it seems
to me that relative to what one might expect--I
mean, if you create a sort of reasonable benchmark
in your head, whether it's--I don't know--the U.S.
Treasury, which is actually much more political than
the World Bank or the IMF, or whatever you like, it
seems to me that these are more technocratic
institutions, not less technocratic, than one might
expect, certainly much less politicized than the
United Nations institutions.
So, you know, there are reasons for this.
They're essentially, first of all--and these are
alluded to and Ngaire already described more than
alluded to in Ngaire's book, you know, that there is
an independent financial base for the Fund which is
now in trouble, but it served it quite well.
And
for the IBRD side of the World Bank, equally, they
fund themselves from their own operations, and they
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have this large endowment they're sitting on.
So
they have more independence and, therefore, can be
more technocratic than a UN body which has to go to
its shareholders cap in hand, raising money for each
operation.
Equally, the governance structure, which
Ngaire has some pointed remarks about, is better, I
would submit, than anything you see in the UN
System.
It's better than the General Assembly
model, where everybody votes and so no one really
feels ownership or responsibility.
It's better than
the very narrow Security Council P5 system, which is
far less democratic than the World Bank Board system
or the IMF Board system.
And so, again, this allows
the World Bank and the IMF to be more technocratic,
not less, than one might expect for an international
institution.
And then the third thing is that the nature
of the people who work there leads it to be pretty
technocratic.
I'm sitting next to one of them,
Dennis de Tray, who spent time in both institutions.
You've got a Ph.D. economist who rises to a very
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senior level because he's a very good economist, and
this is
(?)
.
The World Bank's country director
right now in China, his previous job was to be
Director of Research in the Research Department of
the World Bank.
These are people whose aspiration
it is to publish in peer-reviewed journals, who see
themselves as sort of crosses between practitioners
and academics.
It is much, much more--
MR.
here.
:
Could you speak up, please?
MR. MALLABY:
me that.
Sorry.
VOICES:
back?
Is that better?
No.
MR. MALLABY:
tweaked?
Thank you for telling
It would be terrible to carry on speaking
with no one hearing me.
point.
It's hard to hear back
Can the microphones be
It's pretty much in my mouth at this
[Laughter.]
Okay.
Can you hear me now in the
Sorry.
So the point I was making is that the
staff, and especially the staff that seem to rise
very fast through the ranks of these institutions
tend to be people whose aspiration it is to publish
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in peer-reviewed economics journals or, if they have
a different specialty, to be serious water engineers
who are taken seriously in academia.
And it's more
technocratic than one would expect, as I was saying,
from a multilateral institution or from a U.S.
Government body or whatever other benchmark you
wanted to choose.
So does this mean that the technocratic
calls that these institutions make are always right?
No, of course not.
They make lots of mistakes.
But
does it mean that they are trying genuinely, and
probably as well as anybody can do, to get these
calls right?
Yes, I think it is fair to say that
they're trying as hard and doing as good a job as
any other rival institution one might want to posit
realistically.
So I think that's sort of the first point,
and the spread of the interests--I mean, it seemed
to me slightly, listening to Ngaire, that she was
saying on the one hand the World Bank and the IMF
should be more localized, and at the same time they
should be more internationalized.
And the truth is
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that they do try to do both, and so the World Bank
includes people like Scott Guggenheim, the
anthropologist in Indonesia, who spent--I don't
know--seven or eight years--I think he's still there
now, so now it's probably more than that--doing
community development projects and figuring out the
best systems for delivering aid in a way that could
circumvent -- [tape ends].
-- and so it has that kind of person in it.
And it also has people who do the global public
goods type research, and these people move back
between one and the other so that the lead author on
the World Development Report one year can find
herself--and this is a real example--as South Africa
country director the next year.
a healthy thing.
And I think this is
This fills a niche that no other
institution fills.
And so I think there is quite a
successful balance of the global and the local of
the genuinely technocratic, admittedly bounded by
some political constraints and bureaucratic
constraints, of course, but then so would any
institution be.
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And so the point of this is not simply to
say, you know, the glass is half-full, the glass if
half-empty, and just generate argument for
argument's sake.
The point is that we live in a
world where everyone would agree that globalization
is here to stay, you can't roll it back; secondly,
that we have an institutional deficit for dealing
with globalization, so such good institutions as we
have, we should want to preserve them and not
necessarily risk undermining them.
And I think
there's a danger, not exhibited by Ngaire but
exhibited by a lot of people who criticize these
institutions, of losing sight of the fact that this
is kind of the best we've got so we might not want
to mess it up.
[Inaudible comment.]
MR. MALLABY:
Okay.
All right.
I'll back
off.
So I think--so that's an important point,
that one should not lose sight of these--of the
value that we do have in these institutions.
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And on this question of the embedding--sort
of the influence of the G-7, or sometimes the G-1,
over the two of them, you know, this is true.
They
do operate sometimes as sort of the Secretariat of
the rich world's ambitions.
This can be a problem.
But I think, again, one needs to keep sight of the
fact that there has to be a balance--that at one
time, on the one hand, you've got the fact that the
G-1 or sometimes the G-7 are going to want to have
policies in the world, and the question is:
Would
those policies on Russia, for example, have been
worse or better without the technocratic input of
the Bretton Woods institutions?
I would submit that
although the World Bank and the IMF cannot save the
G-7 from itself on a consistent basis, they
nonetheless improve G-7 policies against what they
would have been without the influence of these
players.
And, you know, you can think of
reconstruction after wars as a good example of this.
When the World Bank was quarterbacking
reconstruction in Bosnia, I would submit to you it
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went a hell of a lot better than when it wasn't
quarterbacking reconstruction in Iraq, not a totally
fair comparison, but I think that the point I do
insist upon is that if the Pentagon and the U.S.
administration had reached out to people who
actually knew about reconstruction before the Iraq
war, such as the World Bank, which had done it in
Bosnia, East Timor, and a number of other cases, it
would have been better off, not worse off.
And so I think they are an important
resource.
Being the Secretariat of the rich world's
ambitions has a value.
It shouldn't merely be
dismissed as something, oh, these institutions are
captive.
Now, finally, on the question of whether to
reform the boards and-[Applause.]
MR. MALLABY:
--change other things--I'm
not sure whether that was a clap for the sound
system or for-[Laughter.]
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MR. MALLABY:
It seems to me that there is
a big difference between reweighting the governance
of these institutions, which I would support, and
up-weighting them, which I would not.
If the
objective here is to make them as technocratic as
possible and as unpolitical as possible, then
increasing, quote-unquote, the voice of poor
countries by giving them bigger staffs on their
boards and more sort of block capacity and so forth
will create more political institutions, not less
political institutions.
And I think one has to be
wary of that.
On the other hand, shifting the weight from
economies that have been stagnating to those that
have been growing very fast in Asia, in the IMF's
case, seems to me to make perfect sense.
You do
want the Asian economies to feel more ownership in
the IMF, particularly, so that they have less of a
sense of the need to develop their own reserves.
So
I think not up-weighting the boards but reweighting
the boards makes a lot of sense.
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And I think in the World Bank's case that
there's more--actually, there's more mileage in
reforming not the board but, rather, reforming the
IDA Deputies process.
It's through the IDA
Deputies, through that triennial replenishment of
the soft loan arm of the World Bank, that the real
pernicious and excessive influence of rich countries
creeps into World Bank policy.
That's how all
manner of things which ended up, I think, biasing
the World Bank too much in favor of rich country
interest groups--notably, the environmental
movement--and too little in favor of the development
priorities of poor countries, that's where it creeps
in.
It's not actually so much through the board.
And, in fact, it was through the board in around
2002 that there was a sort of counterattack on the
IDA Deputies where, in developing the water
strategy--a fine example of a global strategy, by
the way, a global piece of research--for which poor
country finance ministries and other groups were, in
fact, polled to be--they were asked, you know, what
do you value in the Bank?
Precisely the kind of
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research that Ngaire is advocating took place for
this water strategy.
And then the author of this
water strategy made an alliance with the Chinese and
Indian Board Directors to push back against the
excessive influence of sort of anti-dam groups in
rich countries.
So I think the current governance structure
works better than one might think because there is
scope for the Indian and Chinese Directors and other
developing directors to represent their interests,
and that the real problem is not so much in the
board but in the way that every three years the Bank
goes cap in hand to the rich shareholders, and if
that was changed from once every three years to once
every six years, you might have a healthier
institution.
[Applause.]
MS. MATHEWS:
Thank you.
Dennis?
MR. DE TRAY:
Thank you.
So many issues,
so little time.
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This is a debate that's been going on for
many years and will probably go on for many years.
Let me start by thanking Ngaire for writing a very
readable book, a book that actually gives a nice
concise history of the institutions that attempts to
lay out how they got to where they are today, that
explores, I think in a very intelligent way, two
interesting case studies.
I was a little disappointed Indonesia
wasn't among your case studies because I think there
are still lessons to be learned there, but maybe
next time.
I was, in fact, the source of the quote
that there are no two more different cultural
institutions.
[Laughter.]
MR. DE TRAY:
And while I am guilty of
hyperbole occasionally, let me tell you that looks
can be deceiving.
institutions.
These are two very different
And if I have one overarching sort of
comment on Ngaire's book, it is, while she makes the
distinctions, I don't think she draws them clearly
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enough.
From the way the boards function in these
two institutions, to their roles, to the management
culture, to the way they systematically distrust
each other, to the management styles in one and the
lack of management styles in the other--we will not
point.
[Laughter.]
MR. DE TRAY:
These are very different
institutions, and I came away from--and I think it
was mentioned.
I worked in both at a reasonably
senior position, but I came away marveling that they
were able to work together at all given the basis-their differences.
But that's a quibble.
That's
not a major point.
There are so many issues, but let me just
comment on some of the points that Ngaire made and
that Sebastian made afterwards.
But let me start
with a short story.
I was at dinner last night at an
Ambassador's house--and I will not name the
Ambassador--with a group of what I would, I think,
fairly define, present company excluded, as
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heavyweights.
These were people who were
knowledgeable, some of whom were involved at very
senior positions in these institutions, some of whom
had been involved in shaping them in the recent
past, and so forth.
And it will come as no surprise
to you that the topic of conversation was reform.
There is reform in the air, no question,
and on that point, Ngaire got the timing of this
book dead on.
For all of the very interesting and
informed discussion around that table into the
evening, there was clearly no consensus on what to
do.
I will give you just one case in point because
I think it's an interesting one, and it's been
raised by both parties here:
the role of the boards
in these two institutions.
For those of us that have been inside these
institutions, we are painfully aware of how
expensive the boards are--not the dollar cost, but
the staff costs, and the distortive effects of a
board that fundamentally has the time to get into
everything.
That's not what boards are supposed to
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do.
Boards are policy organizations.
But I have
sat in some of the scheduling meetings for the
Bank's Board and heard requests for papers at
incredibly technical levels and really wondered if-where was the line ever going to be drawn.
So an improvement in governance of these
organizations, aside from, I do think, a reweighting
that Sebastian has discussed--I think that's
inevitable if we're going to keep Asia on the table-would be not to have a permanent resident board.
I
raised that issue last night, and it was dismissed
almost immediately, and these were, I want to say,
like-minded types.
These weren't sort of off-to-
the-edge people.
So I think--and it just underscores the
political nature of these institutions and why
they're never going to be, as Sebastian points out,
purely technical institutions.
Which brings me to a point that I want to
sort of agree with both and disagree with both, and
that's on the technical nature of these institutions
and the statement "the best possible economic
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advice."
That statement is meaningless if it's not
made in the context of the politics and the
institutional structure of the countries to which
it's given.
Sebastian described me as a Ph.D.
economist--guilty--actually from Chicago--guilty
twice--who sort of grew up in an environment where
publishing in academic journals was the name of the
game.
I left that exactly because I didn't find it
interesting.
I spent the last 12 years outside of
the Bank because I think the environment in the Bank
in Washington is distorted along the lines that
Sebastian is suggesting, and Ngaire I think pointed
out even more clearly.
It's not that the economists in the Bank
are bad or good.
It is that they, like all people,
respond to incentives and that the incentives that
they face are incentives to be technically cuttingedge economists.
That a vast number of the
countries with whom the Bank deals doesn't need
cutting-edge economics is sometimes lost in the
translation.
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One of the great frustrations of a
decentralized Bank country manager is the inability
to get technical staff, particularly economists, in
Washington to do accessible work for our clients.
This was something that bothered me for the entire
time I was at the Bank.
I never made any progress
on it, as far as I can tell.
And I think it's a
serious management issue that needs to be addressed
because if we were--if the Bank--we?
If they were
full of bad economists, I wouldn't care.
But
they're actually full of good economists, and it
would be nice to have them working on the issues
that matter.
I think Ngaire's point--there's a lot of
talk about the roles--and I'm going to concentrate
more on the Bank than the Fund because I know much
more about it.
But for both institutions, there
clearly needs to be a refocusing and a narrowing of
focus.
I watched the Fund struggle to become a
poverty Fund.
it.
I have to tell you, the staff hated
They're not equipped for it.
The Fund doesn't
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have the instruments for it, and the overlap with
what the World Bank does is enormous.
Who put that pressure on the Fund?
Fund staff.
Bank.
Not the
The people that own the Fund and the
So let's be careful where we sort of allocate
blame going forward.
But I think the Fund would be
a much better institution if it refocused on its
core business, and I think the Bank would be as
well.
As I said, I'm known for flip remarks, but
I have been quoted several times as saying that
there's nothing wrong with the World Bank that a 40percent reduction in its staff wouldn't fix.
[Laughter.]
MR. DE TRAY:
That's a different way of
saying it needs to refocus.
It is also a way of
saying, I think a bit contrary to at least some of
the points that Ngaire made, the World Bank's
problem is not budget.
It has a ton of budget.
I
can promise you I could find 25, 30 percent of that
budget, cut it out tomorrow, and the developing
world would never even know it was gone.
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not a matter of budget ceiling.
It's a matter of
management of the existing budget.
And this is what
frustrates the board of the Bank so much, because it
cannot get through this--it knows, in effect, that
not enough money is going to front-line services,
but it can't make that happen so it basically keeps
the overall ceiling, which is fine.
It doesn't--as
I said, the need is for management, not for more
money.
The issue of incentives was raised, and
this is actually, it seems to me, at the core of
reforms.
Both institutions, but particularly the
World Bank, have engaged in regular reforms that
have had marginally little effect on the core
culture of these institutions.
Why?
Because the
basic incentives that drive these institutions
haven't really changed.
They've gotten better.
don't want to be too critical.
I
I actually think
that Ngaire makes the point in her book about in
some ways the centrality of these organizations in
Washington and their lack of knowledge about and
access to local conditions.
First, I think that's
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an issue that's very different for the two
institutions.
And, second, I think it's an issue on
which the Bank has improved in the past decade since
they started the decentralization process.
it was a great value.
More needed?
I think
Absolutely.
But a real recognition that reality on the ground is
a fundamental building block for any set of policies
is, I think, there.
of decentralization.
It is why I am such an advocate
You cannot make policies
sitting in Washington, I'm sorry, and you really
can't write policy papers sitting in Washington, a
point that Ngaire made.
So those are all structural
issues that are large scale and are going to take a
very long time to resolve.
Just I'll finish with a comment on--two
comments on some of the points that Sebastian made.
One, really I completely agree that the
World Bank and the IMF are the best institutions of
their kind in the world, but that's damning with
faint praise.
Both these institutions are not
nearly as good as they could be, and that's the
target to which we should aim.
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By the way, there is only one Scott
Guggenheim in the Bank, which is a fairly important-and I mean that not just personally but in terms of
what--there is--some of us would say, "Thank God
there's only one Scott Guggenheim in the Bank."
[Laughter.]
MR. DE TRAY:
There is only one Scott
Guggenheim in the Bank, and that's an interesting
question in its own right.
The final issue of institutional deficit,
this is not an issue of the organization of the Bank
and the Fund.
It's an issue of empowerment.
If the
G-7 and the power makers of this world are unwilling
to empower international organizations, that means
abide by the rules they set.
creating a Fund.
mandate.
There's no point in
There's no point in creating a
It will be a mandate that will be ignored.
I think the experience of Kyoto just demonstrates
that, you know, the problem is--shifting the problem
of the global public goods to these institutions, as
if that's solving it, is simply the same point that
Ngaire was making about shifting the problem, the
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bilateral problems that they have with governments
to these institutions because they really don't want
to deal with it.
It's not going to fix the
problems.
So I think the focus on the nature of the
governing structure of these organizations is
essential going forward, and I think it's going to
be a very thorny and very difficult issue.
Thank you.
[Applause.]
MS. MATHEWS:
Well, the management here may
fall short of either the World Bank or the IMF since
we do not have half an hour, but we have time for a
good discussion, and I certainly do hope that it's
possible to write some policy papers in Washington,
because if it isn't, I have some major rethinking to
do here.
[Laughter.]
MS. MATHEWS:
floor is open.
There are three mikes.
The
Please do speak into the mikes so
that our television audience can hear.
Back in the middle there?
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MR.
(ph).
:
My name is Wade Channel
I'm with USAID, and I thank you for your
three very useful perspectives on the Bank, and with
those perspectives--and the Fund, although I'm more
focused on the Bank.
I am curious.
One of the
things that to me is a weakness in development, not
necessarily institutionally for the Bank, is they
are limited to lending only to sovereigns, sometimes
some of the least credit-deserving groups on Earth
who have a monopoly on power, and it has a
distorting effect on the role of the private sector
and the role of other voices within a country.
Do you see a credible role for the Bank or
the Fund with those shackles taken off?
If they
could lend to others, what would that do?
MS. WOODS:
I guess my first answer to that
would be part of a larger answer about the future of
the organizations, which is that these are large
public institutions.
institutions.
They're multilateral
And what they should do is what they
are uniquely placed to do, and too often the debate
about the future of the IMF and World Bank starts
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with, well, what do they do best?
been doing best?
What have they
What could they do?
And it
becomes sort of a basket of all the different things
that they could do.
And I disagree with that approach.
I think
a lot of lending to the private sector can be done
by the private sector, and it should be done by the
private sector.
And when it comes to the IMF and
World Bank, as I said, we should be asking what is
it--given that this is an intergovernmental
organization that has these specific resources and
potential, what is it that it can do for the world
economy and no other organization can do?
And that
should be our starting point for thinking about what
they do.
MS. MATHEWS:
I'll tell you what.
What I'd
like to do is collect maybe two or three comments or
questions and then all three can participate, can
answer as they feel best.
The lady in the red dress that's right next
to the--sorry, and then I'll take Sherman and
as well.
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MS.
:
(?)
Klepinger (ph).
I
work with the Bank in a central capacity doing world
finance.
What I've seen as one of the best things
about the Bank is having global experience, learning
from one region, putting it over in the other
region, getting people together.
I do a lot of
South-to-South work, really not going out trying to
teach people to do something, but learn from each
other.
Now, if we decentralize and we have one
region--and I see a lot of country officers that are
wonderful in their country, but they don't get the
input elsewhere, and they do nice work in Tanzania,
but they don't know what works in India, which would
work very well in Tanzania.
How do you imagine--how
do you keep that global perspective while going
local?
And the Bank--and we have been looking it
all over, and I don't see an easy solution.
MS. MATHEWS:
MR. ROTH:
The gentleman right here.
I'm Gabriel Roth.
I also used
to work in the World Bank, and I would like to thank
the speakers for wonderful presentations, but come
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back to the question raised:
What happens when
governments do not represent the interests of their
people?
Because these organizations deal with
governments.
You mentioned Mexico.
When I was in
the Bank, Mexico was privatizing its telephone
system on the basis of giving the contract to one
big monopoly.
Argentina was doing the same.
This
is clearly not in the interests of telephone users.
What are Bank staff--what is the Bank to do
when faced with this sort of situation?
MS. MATHEWS:
Thank you.
Sherman?
MR. KATZ:
Sherm Katz, Carnegie Endowment.
Thanks very much, Ngaire, for an eloquent
presentation and for the comments of the others.
As you described the problems, I thought
you referred to the desirability multilateralizing
the approach of the Bank and the Fund to some of
these problems.
But I'm not sure I understand
exactly how you plan for that to work.
And I
mention it in part because yesterday at a meeting
across the street, Rodrigo Rato also said he
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recognizes the need to multilateralize the approach
of the Fund.
So can you tell us a little more about what
you have in mind there?
MS. MATHEWS:
one more.
Okay.
Now, let's just take
Then we'll turn to the panel.
MS. KIRBY-ZAKI:
from the World Bank.
I'm Jane Kirby-Zaki
Thank you very much for the
excellent presentations.
MS. MATHEWS:
Hi.
Is this on?
Yes.
MS. KIRBY-ZAKI:
Okay.
I wanted to ask if
there is a reweighting, for example, of the IMF's
Board to allow a greater voice by some of the large
Asian nations, what that appears to imply is a
potential decline in influence from Europe; and
given that Europe is probably the largest provider
of concessional resources at the multilateral level,
plus they are probably the most positive on the
global public goods agenda, how can these
institutions manage that issue, which will be very,
very political?
And could there be a difference--I
mean, traditionally the Bank and the Fund have kind
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of followed one another in tandem on these types of
weighting issues.
Do you see the possibility, for
example, for the Bank to have a large European
voice, a larger intermediary of these types of
concessional funds?
Or do you think that, you know,
that's unrealistic?
MS. MATHEWS:
Okay.
Ngaire, why don't you
start, and we will hear from all three as to what
they found most interesting in the questions.
MS. WOODS:
One thing I would want to
clarify, which I think the discussion on this panel
showed up my own sort of sloppy framing of in my
initial comments, is that when I talk about the
constraints which shape the advice of the Fund and
Bank, my intent is not to say that that advice is
not useful.
It's to say because the advice has
been, if you like, to some degree infected by these
political pressures, by these bureaucratic
incentives, it erodes the basis on which he advise
is used in an impositional way, in an inflexible way
to make demands of countries.
legitimacy of doing that.
It erodes the
That's my point.
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not to say that the institutions cannot generate
useful advice.
It's to say if we look seriously at
what shapes that advice, we find the claim that it
can be legitimately forced down reluctant
governments' throats, if you like, eroded seriously.
The other point I wanted to raise that my
co-panelists raised is about the governance
structure.
I think it's dangerous complacently to
say, well, after all, we're much better run than the
United Nations, right?
It's not a high standard.
But it's not just for that reason.
It's because if
we look at the issues that the IMF and World Bank
are addressing, if we look at international monetary
cooperation, we find that countries do want a
multilateral debate, and they're not using the IMF
to have it.
They're using the G-20.
the G-7 plus invited members.
They're using
They're going outside
of the Fund to have that discussion and have been
doing so for some time.
That means we do have to
relook at the Fund.
If we look at development assistance, we
find that although the World Bank is there with all
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of its capacity, the discussion on coordination of
development assistance is happening in the OECD DAC.
We find that in the last 20 years there has been a
profusion of other global development assistance
organizations and institutions created.
In other
words, there is some reason why the members of these
organization are going elsewhere to have their needs
met, and that should give us a cause to focus on
their governance.
Let me just then pick up the very last
question about the IMF and what happens if the Asian
countries get much greater voting rights at the
expense of European Union countries.
Just one
possible solution to that is for a small legal
change to permit the EU to hold one seat, which
would make the EU, with a small legal change, the
largest shareholder, which would require the IMF to
move to a European seat, which might in a way be a
deal, right?
So it loses some of its voting power,
but the headquarters shifts.
I mean, really to illustrate that all of
these are moving parts and that it's going to be an
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overall deal that changes the organization.
And I
didn't expect that proposal to be popular in this
room-[Laughter.]
MS. WOODS:
and schools.
--where people have their jobs
But I think really my main point is
it's all got to be part of a deal, and I think all
the elements have to be part of a new deal.
Let me let my other panelists answers some
of these great questions.
MR. DE TRAY:
Thank you.
I'll just two.
One is the effect of decentralization on global
experience, and I do think actually the Bank is
getting this one wrong as well.
It's creating two
banks, a group of people who spend their career
overseas, as I did, I was very happy and I fought to
do that.
But that's not the right way to manage
this process, particularly among the people who are
supposed to be designing and setting policy, those
people should be rotating back into Washington, not
simply--they should be rotating among regions, but
also back into Washington to bring the reality of
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their experience back to the centrality of the
organization.
I also don't think the existing transfer of
knowledge among regions works very well right now,
and I--I mean, I was embedded in a set of countries
in Central Asia that essentially had African-like
problems, and I had a lot of trouble getting
transfer from actually very good and knowledgeable
people from Africa.
When the governments and the interests of
the people diverge, I think this is the fundamental
problem, fundamental issue, the fundamental
challenge.
And my favorite example is Uzbekistan.
Uzbekistan is a country in which they have strong
leadership and they have a clear policy platform,
and our experience over the last four years suggests
it's the wrong policy platform.
What do we do?
I
tell you what I wanted to do as country director.
I
wanted to find areas where I could demonstrate that
I could do something that would improve the lives of
the lower half of the income distribution, and we
had a very good example in health and education.
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Mr. Wolfowitz has decided that the reputational
risks of working with Uzbekistan are too high, so we
have no lending program now.
We can debate for a very long time which of
those two stances is correct, but they do capture
the moral dilemma of working in difficult settings.
And it is not black or white.
This is a continuum
from the sort of North Koreas and Turkmenbashis on
one hand up through all of the people with whom the
Bank--it's only a matter of degree, folks.
So it is
a moral dilemma that you have to--that operational
people have to make.
So I--and I would come down on
the side of if you can demonstrate that you're
helping at least the bottom half of the income
distribution, you at least have a prima facie case
for continuing engagement.
MS. MATHEWS:
Sebastian?
MR. MALLABY:
I'll just pick up on the
question about the danger of underweighting the
Europeans in the Bank if it followed the IMF reform.
I think that's a very good point.
In the case of
global monetary imbalances and exchange rate
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policies which are having an external effect that
the world should care about, which ought to be the
IMF's core mission, clearly right now the Asians are
not disposed to listen to the Fund, and so the Fund
is on the sidelines of a debate on which it should
be central.
And I think that clearly makes the case
for reform very strongly.
I think the situation with the Bank--and I
don't see why these couldn't be decoupled, frankly-is different.
You know, as usual, I'm a little bit
less pessimistic than Ngaire about the Bank's
ability to be a convening center for issues that
people want to discuss.
I'd just cite, you know, in
the last few years there was a big push to do
Education for All, universal Education for All,
which, you know, initially the agency that looked
obvious to lead that was UNESCO, except that you
could never have raised any money from donors if
you'd said that UNESCO was going to manage their
money.
And so the World Bank ended up being, you
know, a sort of central place where the money would-where the initiative was organized from, and it's
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the same story actually with the Global Fund for
AIDS, TB, and Malaria, you know, where the financial
trusteeship part of that job of looking after the
money and managing it again is being done by the
World Bank, with the World Bank on the board,
because otherwise people wouldn't give money.
So there are these competences, and there's
another example which I think has potential right
now following the Gleneagles Summit last July, which
has to do with global warming where you have an
impasse, a blockage on Kyoto, but you have a
potential to take the different governance structure
of the World Bank as a place where you can convene
the big emerging economies which are going to be
causing a lot of the incremental carbon emissions
over the next 20 years with the countries that want
to reduce those carbon emissions in Europe, and to
some extent even in the U.S., and try to figure out
a way using the Bank's technical expertise of
financing greener scale-up of energy production in
India, China, and Brazil and so on.
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So that's another example which was
theoretically launched at Gleneagles.
I don't think
it's actually gone very far in practice, but it
seems right in principle.
So I think the Bank can
be a useful place to resolve and work on these
multilateral problems.
It's not doing a bad job of
it now, and dealing the Europeans out would probably
be a setback to that, and what you would see is the
sort of trust fund trend, where a particular country
from--often from Europe, you know, has a particular
type of development interest and makes a sort of
earmarked grant to the Bank to work on X.
And
that's a terrible thing, I think, for the World
Bank's managerial culture.
It sort of Balkanizes
the budget and makes it very difficult to run it.
So I think that's a very good point.
MS. MATHEWS:
Yes, we'll take two more.
There and over in the corner.
MS. LEE:
Lee.
Thank you.
Right here.
My name is Paulette
I'm a communications specialist, and I just
came back from Ethiopia, and there is a phenomenon
occurring there that I'd appreciate your addressing
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in a little bit more detail if you could about the
role of governance in the recipient countries.
While I was there, the country director
announced that the World Bank was no longer--was not
going to be contributing anymore to the direct
budget but, in fact, just to projects.
And that was
because of what's happening politically in the
country, to be very brief.
The other phenomenon that one sees,
particularly in Sub-Saharan Africa, is sort of the
least amount of cooperation that's necessary in
order to meet the conditionality and structural
adjustment requirements.
So the issue of governance and public
policy vis-a-vis the role--and I'm speaking here
just about the Bank because I am more familiar with
that than I am with the IMF--the perception that
we'll do the least that we have to do, and there
seems to be this game going on between both the
government and the Bank in terms of their
relationship.
Thank you.
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MS. MATHEWS:
Thank you.
And the gentleman back in the corner?
MR. BELLOW:
Yes, I am Walden Bellow from
Focus on the Global South, Thailand.
It's been--the
Asian financial crisis was described as the
Stalingrad of the IMF, and it doesn't seem to have
recovered from this.
It's now almost ten years, and
we have an institution that from the description by
a number of authors, including Ms. Woods, is still
in a state of paralysis.
And it seems like you have
the same sort of stasis at the World Bank.
The question that I'd like to pose then is
that what I could gather from Dr. Woods was that
these two institutions seem to be becoming less and
less relevant over time because of entrenched
paradigmatic and bureaucratic structures.
question that I would pose is:
The
Would the Asian and
Latin American and African countries be better off
spinning their own financial and development
institutions, maybe on a regional basis, maybe on a
South-South basis?
Thank you.
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MS. MATHEWS:
Thank you.
We have to have three very crisp answers.
MS. WOODS:
On the good governance
question, I think everybody in the development
assistance debate recognizes that good governance is
essential for aid to be effective, not necessarily
perfect governance but at least some good
governance.
The problem for the whole development
assistance community is that their tools are
governance-eroding.
In other words--and this is
bilateral donors as well as the IMF and World Bank,
that many are now trying to promote good governance,
but let me just say two things about it.
governance takes a long time.
institution building.
One, good
It's about
Almost every development
assistance agency in the world has a one- or twoyear time horizon and budget.
And that means that
in project by project it is not building governance.
It's building bits and pieces that never come
together--right?--and that's what we look--that's
what we find when we look at the evaluations.
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in that sense it can be governance-eroding.
It
needs to be much longer term to be governancebuilding.
The other way in which it's governanceeroding is a much more practical point, which is
that if you go to any recipient country and look for
the most capable officials, you can be almost
guaranteed that when you return six months later,
they will have been hired by the World Bank, the
UNDP, Oxfam, Christian Aid, the WHO--you name it.
They will have been hired to sit in the office of a
donor in that same country and to be part of what I
would call a parallel government in that country,
and this is in the name of capacity building.
So I think that the issue of good
governance is one which the development assistance
community recognizes, but it is appallingly badly
equipped to make any inroad into.
Just very briefly on--I don't have a
perfect answer to Walden Bellow's question of
whether these countries would be better off having
their own arrangements, except to say that certainly
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they should, in every way they can, have their own
regional arrangements because I'm a great believer
that competition enhances performance, and not just
that, but even more importantly, if each of the
developing country regions had more opportunity to
share with one another and work out what their own
needs were, they would have a more effective voice
in the international institutions that they
participate in, and the international institutions
themselves would gain hugely more from their input.
So it's rather strange to me that there is
some resistance at times from the multilaterals to
strengthened regional capacity in a real way, in an
alternative way that isn't governed by the
multilaterals themselves.
MS. MATHEWS:
Really quickly, because we
have kept people over.
MR. DE TRAY:
I will pass on the first
question because I think Ngaire's--I agree with some
nuances on it.
On the second question, basically two
points.
The Asian crisis had very different effects
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on the Bank and the Fund.
The Fund's problem is
that its mandate has gone away, and the Bank's
problem is that it still has too many mandates.
And, second, there are regional development
institutions, and a key unanswered question to date
is how this whole system fits together or should fit
together, and that I think is the next great debate
in the multilateral institutions.
MR. MALLABY:
Just quickly to add to that,
on the development banking side there are regional
institutions, and they're of mixed quality.
And on
the IMF side, it obviously makes sense to have a
collective insurance mechanism because risks across
regions may not be correlated.
overall risk.
So you reduce the
If one region is in great trouble but
the other two are okay, you are better able to
insure yourself against that through a collective
mechanism.
MS. MATHEWS:
slightly over.
Well, I apologize for going
I do hope that everybody will go and
buy a copy of "The Globalizers" so they can have the
wisdom that they couldn't get today.
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But I want to
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thank our two panelists for wonderful commentary and
Ngaire for a really terrific piece of work and
presentation.
Thank you.
[Applause.]
- - -
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