In his recent speech at Chatham House, Douglas Alexander, the UK Secretary of State for International Development, set out an agenda for ‘remaking our international institutions to better tackle the global inequalities that persist today’. His specific focus was on the World Bank.
He argues that, in these interdependent times, a new brand of global governance is needed based on ‘effective and shared international institutions that can protect our common interests and help us to achieve our common objectives’. For the World Bank this means adopting a reform agenda that includes a greater voice for developing countries; moving more of the Bank’s operations outside Washington; and making the Bank more accountable for its results. Specific measures include: a more meritocratic selection process for the President of the Bank; proposals for a more equitable allocation of votes on the Bank’s board between developed and developing country members; and devolving board oversight of the Bank’s country work to regional committees so that developing countries can have more say in the decisions that affect them the most.
These measures have been gaining currency in debates about the legitimacy of the World Bank as a global actor and it would seem that the momentum building around the G20 summit in London in April may be a key opportunity to turn at least some of these, into reality.
In terms of the crisis, Douglas Alexander also stresses the need for the Bank to respond quickly by taking less time to process loans and placing fewer restrictions on where and how funds are disbursed. He calls for the removal of limits on the amount a country can borrow and on the share of lending that can be delivered as budget support in the poorest countries. At the same time, he is committing UK support to the creation of a Rapid Social Response Fund to help developing countries provide social protection for the poorest and most vulnerable, not just for this crisis, but also for crises in the future.
Even before September 2008 and the first obvious manifestations of the financial downturn, the World Bank was facing some big choices about its strategic direction and effectiveness. A conference on the future of the World Bank, hosted by the Dutch government and organised in collaboration with the World Bank and ODI, in July 2008 considered some of the choices facing the Bank in a rapidly changing global context. Issues on the table related to the future size and shape of the International Development Association (IDA), the role of the Bank as a partner rather than a sole trader and the possibility of the Bank as a ‘one-stop-shop’ for financial and knowledge services in an increasingly contestable international financial system.
The conference did not seek definitive solutions, but did come up with a number of key themes that have strong resonance with Douglas Alexander’s priorities for World Bank reform and suggest a growing consensus about the road ahead. In particular, the conference took the view that, if the World Bank is to remain the leading global development institution, it needs to decide how to:
1. Make itself more representative by reforming its internal governance structure, modernising its board and decentralising to where the clients are. Paradoxically, those with the most voting power on the Bank’s board are the members with the least need of its services. Addressing the need for greater representation while avoiding more complex decision-making processes is critical for the future legitimacy and continued relevance of the organisation.
2. Engage with reform of the wider multilateral system. A new paradigm of multilateralism is needed that includes reform of the UN system as well as the International Financial Institutions to provide more choice, more flexibility and more accountability in response to shared global challenges. With new funding sources coming on stream, the share of multilateral assistance is declining. Is this the beginning of a long march against multilateralism or is it time to renew the commitment to multilateralism with a truly multilateral Bank and its heart?
3. Develop new approaches to operating in risky environments and situations of crisis: including better analysis, more speed and flexibility, stronger, better partnerships and new instruments for fragile and vulnerable situations.
4. Adopt a more regional approach for tackling cross-border challenges and harnessing private sector investment for growth and development, working more collaboratively with regional development banks and devolving executive power to regional boards to oversee portfolio performance and results.
5. Emphasise its role as facilitator and catalyst of private sector development and engagement, including working more effectively with the private sector in climate change initiatives and developing structures to support entrepreneurship and job creation in the poorest countries.
It is often said that a crisis is a good time to drive through difficult political and institutional change. Clearly no one would wish for a crisis of these proportions, but the fact remains that the crisis does open a window of opportunity for reforms that might not otherwise have been possible, or not at this stage. The challenges facing the international community going forward are huge, from tackling climate change to increasing resource scarcity to security challenges and global inequality. A faster, leaner and more joined up World Bank is likely to be critical in tackling these challenges. Will the G20 grab the opportunity to make this change? More importantly, will they seek to engage the leaders of those nations not around the G-20 table to make sure that the proposals for a reformed international system serve their interests as well? I very much hope so.