The World Bank in Transition
Taken From: Global Development: Views from the Center by Nancy Birdsall from the CGD
With Robert Zoellick’s announcement that he will step down from the World Bank presidency at the end of June, now comes the question of who his successor will be, particularly whether it will be an American. Just a few days ago I commented on the awkwardness of the situation for the White House. The White House has committed in international fora to an open, merit-based, transparent process, but domestic politics (including some would argue continued support for the World Bank from the Congress) dictates that it make every possible effort to place an American once again in that office.
It does matter who runs the World Bank and how she or he arrives there. Why?
First, the president of the bank has immense power. The bank is big and complicated (more than 10,000 staff in Washington and 130 countries around the world, and an annual administrative budget of about $2 billion). It houses impressive technical and financial resources. Last year it disbursed more than $20 billion in loans and grants; in 2009 when a global recession loomed the bank disbursed about $45 billion in response to G-20 calls for a global liquidity push. On one hand the bank’s size and decentralized structure make it hard to manage; it is famously, unlike the orderly IMF, full of upstarts and entrepreneurs at the staff level. On the other hand, the bank is a highly merit-based, performance-based bureaucracy. The staff respond to a fault to the priorities a president sets. Moreover the bank’s governance structure gives most of the “do” power to management; the large resident Board can at best slow things down – and because the president chairs it, the Board has minimal formal ability to hold management accountable.
Second, it matters who runs the bank because the world has big problems the bank can help to address, and big opportunities the bank can advance. In a 2006 in CGD report, we outlined five tasks for the then-incoming president (who turned out to be Paul Wolfowitz). To a large extent, despite Zoellick’s impressive performance in calming the waters and putting the bank back on course in the last five years, he did not manage to steer the bank in the new direction those five tasks represent. Let me mention three of them.
Taken From: Global Development: Views from the Center by Nancy Birdsall from the CGD
With Robert Zoellick’s announcement that he will step down from the World Bank presidency at the end of June, now comes the question of who his successor will be, particularly whether it will be an American. Just a few days ago I commented on the awkwardness of the situation for the White House. The White House has committed in international fora to an open, merit-based, transparent process, but domestic politics (including some would argue continued support for the World Bank from the Congress) dictates that it make every possible effort to place an American once again in that office.
It does matter who runs the World Bank and how she or he arrives there. Why?
First, the president of the bank has immense power. The bank is big and complicated (more than 10,000 staff in Washington and 130 countries around the world, and an annual administrative budget of about $2 billion). It houses impressive technical and financial resources. Last year it disbursed more than $20 billion in loans and grants; in 2009 when a global recession loomed the bank disbursed about $45 billion in response to G-20 calls for a global liquidity push. On one hand the bank’s size and decentralized structure make it hard to manage; it is famously, unlike the orderly IMF, full of upstarts and entrepreneurs at the staff level. On the other hand, the bank is a highly merit-based, performance-based bureaucracy. The staff respond to a fault to the priorities a president sets. Moreover the bank’s governance structure gives most of the “do” power to management; the large resident Board can at best slow things down – and because the president chairs it, the Board has minimal formal ability to hold management accountable.
Second, it matters who runs the bank because the world has big problems the bank can help to address, and big opportunities the bank can advance. In a 2006 in CGD report, we outlined five tasks for the then-incoming president (who turned out to be Paul Wolfowitz). To a large extent, despite Zoellick’s impressive performance in calming the waters and putting the bank back on course in the last five years, he did not manage to steer the bank in the new direction those five tasks represent. Let me mention three of them.
- The global commons and global public goods. The possible
deterioration of the global commons puts at risk the bank’s fundamental
mission of supporting sustainable, poverty-reducing growth and
development. Consider these examples: climate change, increasing
cross-border health risks ranging from pandemic flu to drug resistance the
collapse of fisheries, and politically and economically destabilizing
water and other natural resource scarcities. There are many experts and
many UN, civil society and academic institutions concerned with these
problems. But the World Bank may be the only single institution that can
bring the combination of financial, technical and political clout to
help shape a global response. So far that hasn’t happened. The bank is
involved in all those areas, but its involvement is ad hoc, heavily
constrained by its dependence on the country-based loan instrument (e.g.
no financing for intellectual property licensing, no mandate to provide
independent verification of forest changes) or on special rich country
donor initiatives (its climate investment funds are trust funds
dependent on UK and other special contributions). To address these
problems of the global commons and global public goods, the next World
Bank president will need the legitimacy and the persuasive powers to
corral the bank’s members, to win a clear mandate and associated tools
and financing to play a more central role – as catalyst, provocateur,
and innovator.
- The high hassle costs of borrowing for middle-income countries.
History and habits make the bank still too much of a nanny in countries
like Brazil, China, Turkey – even Peru, Morocco and Mauritius. Yes,
those countries often seek and indeed welcome the technical know-how of
bank staff. But it takes multiple “missions” and many months –
sometimes many years – to go from a request for a loan to actual
disbursements. That is why countries with access to private capital go
elsewhere whenever they can. The bank needs to find a way to pass more
of the risks of poor performance on a program or project it finances
from its own staff to the borrowers. It needs to act more like the credit cooperative its
founders envisioned. It needs to rely less of detailed planning of
inputs ex ante to sensible performance audits during implementation. To
deal with the risks of waste and corruption it needs to rely less on ex
ante “safeguards” and more on third-party independent audits, with the
legal ability to cut off funds where there are serious problems. It
needs to treat its borrowers more like clients taking on the risks and
responsibilities of programs, and less like children. The high
administrative costs of a nanny bank could be better used elsewhere.
- Fragile, flailing, failing, weak states. No one really knows how to
help the people of Somalia, Afghanistan, Congo, East Timor and other
troubled countries rescue their societies. The World Bank needs to
shift from a culture that feels it must pretend what it knows what to do
to a culture of trying, failing, adjusting and trying again. To a
culture in which the ideas and initiatives of others are welcomed. As a
simple start, the bank could revisit altogether its performance
criteria for soft landing and grants, and focus more, as my colleague
Alan Gelb has proposed,
on project and sectoral performance than on overall country
performance. That might help create space for municipal officials with
outside support to get something right in their own cities, or for
central bank or education officials to innovate in their management of
troubled school systems.
