Wednesday, 29 February 2012

World Bank Redux

Look on my works, ye mighty, and despair!

Tasked with eliminating global poverty and hunger, The International Bank of Reconstruction and Development aptly renamed The World Bank (WB), has fallen considerably short of carrying out its set of goals.

The WB was always a stillborn child of the five International Institutions set up by US policymakers at the close of WWII. Nicholas Crafts of Warwick University recently wrote lengthily on the success of the Marshall Plan; getting war ravaged European nations on their feet in the Bretton Woods Period with wunderous results. The World Bank had a minor role to play in initiating and carrying out the purview of the plan.

Without the effective management of the then former US defence secretary, Robert McNamara (1968-81), the WB would have been unforgivably absent in world affairs. Mr McNamara transformed it onto a slim fast diet of rural development and small scale investment projects.

Nevertheless over its 60 year history it is unfortunate that the WB has not received a comparable backing as that given to its sister institution, the International Monetary Fund (IMF). Its conditionality programs have either been too weak or monitored and enforced with lethargic lacklustre by a horde of soft-at-heart jetsetting PhDs. In many instances, the institutions of its recipients have had a legacy characterised by perverse incentives and insufficient accountability.

The erratic zeitgeist that comes with aid, no better seen than in 2005 just prior to the G8 Gleneagles Summit when Make Poverty History white wristbands were the then latest fads, has led to cyclical changes in the policies and institutions of the recipient countries. A government like that of Burkino Faso's, decides its government expenditure on consumption, such as salaries, in its fiscal year before any outlays for investment in schools or health clinics are made would live in constant fear of 'Aid Rebuke'. Aid unpredictability has laid to waste many an aid financed government investment project in Sub Saharan Africa (The Economist 2008).

It is suffice to say that aid does not lend the long term enforceability and time consistent solution towards eliminating world poverty. Despite the vagaries of Private Capital Markets; Capital offers a second-best, fungible and better alternative; albeit creating a race to 'the survival of the fittest' but eliminating inefficient forms of governance in the long term, in an ad hoc Arab Spring like Vox Populi.

WB's role as a development bank should be subsumed by the IMF, or better yet the myriad of regional Development Banks. Their is one silver lining though: if the new chief, replacing the ever effable Robert Zoellick, is one from the emerging economies wolfed by a McNamara sense of 'Enlightened Rationalism', it would lend the WB a new boost of credibility and enforceability that has been persistently the root of the problem.