Toothless Tiger

The World Bank wants to fight poverty. Yet its organizational structure prevents sustainable policy. Rough times lie ahead for social development, human rights, conservation and climate protection.

The World Bank has a legitimacy problem. Many developing countries see it as an extension of Western influence. Therefore, it is not at all regarded as immoral in developing countries to make money from interactions with the World Bank. The foreign committee of the US-Senate blocked further funds for the World Bank in April 2010 with the explanation that the bank is not able to control fraud and collusion, overpricing and bribery.

A bitter pill

World Bank and IMF have recently begun to appoint more executive directors from developing and emerging countries. The influence over policy that was traditionally exerted by industrial countries – especially the US and the European powers – has thus been put under pressure. But it has not been broken yet. The effectiveness of World Bank development policy has been rather bleak in retrospect. The countries that managed to sustain economic growth and develop their economies – like China, India, Brazil, Malaysia and Indonesia – have all pursued a policy of partial market protection over the past thirty years while investing into their economies and into economic differentiation. It is hard to find similar successes in countries where economic policy followed World Bank recommendations.

What significance has the per capita income of 2000 US Dollars in Angola when 90 percent of the population live in abject poverty? What does the World Bank do about it? It helps to organize a voluntary transparency initiative of the oil-conveying industry and wants to find and bring back stolen money. Until now that has left the rulers rather indifferent. One positive side effect: The World Bank gets involved in a worldwide initiative to improve the effectiveness of its aid. But it does not act as an advocate for developing countries at the World Economic Forum. Even if Mr. Zoellick, the president of the World Bank, gives advice at the G20, WTO and climate conferences – as has been the case during the recent G20 summit in Seoul – about the reinstitution of the Gold Standard, the World Bank still is a slowcoach when it comes to questions of world trade and financial markets.

Rough times for social development, human rights and climate protection

Today, China, India & Co. are in a situation of increasing resource demands which they want to satisfy in Africa. Their policy with regard to World Bank, IMF or G20 is simply aimed at receiving a bigger share of the cake. Their development policy is limited to economic prosperity, private sector development and infrastructure. Compared to 1985, that is a step into the wrong direction. Today, the G20 consider the World Bank and the IMF to be their executive bodies, their secretariats, as can be read in the Seoul-summit communiqué. Rough times lie ahead for social development, human rights, conservation and climate protection.

To fight poverty effectively, the World Bank needs legitimacy and influence. It needs to become the center of capacity for the careful nurturing of the national economic and social development between the need for protection and useful competition. Furthermore, it needs to make the realization of human rights to its universal maxim. At the G20 there was no sign of political will for this. Given these constraints, the role of the World Bank will be marginal at best. The optimism for an effective fight against poverty needs to come from somewhere else in the second decade of this new century. Despite their professionalism and huge resources, the World Bank can do only very little.

Read more in this debate: Núria Molina, Fernando Cardim de Carvalho.

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