March 2005

Nancy Alexander

What have activists won?

I agree with the points that Broad raises relating to activism in the 1980s and 1990s - namely, that there have been few significant and lasting reforms as a consequence of campaigning. A notable exception is in the area of information disclosure. There have been important gains in this area, although much more remains to be achieved. Some campaigns had or have largely unrealized potential (e.g., Extractive Industries Review (EIR); World Commission on Dams (WCD); safeguard policies; the Inspection Panel; Environmental Impacts Assessments (EIAs) and Poverty and Social Impact Assessments (PSIAs). We have not seen the results of still other campaigns (e.g., campaigns to engage parliamentarians in MDB oversight, the use of country systems, World Bank immunity in Bangladesh).

At the same time, there is no doubt that campaigning has broadened public awareness of the impunity of the World Bank. The end of 1999 was a high water mark for activism when huge protests that were mobilized at the WTO Ministerial in Seattle, also addressed the role of the international financial institutions (IFIs) in corporate globalization. Northern countries have a self-interest in trade agreements, because they are directly affected by them. It is notable that the Seattle mobilization around the WTO provided some of the greatest headlines on the IFIs in many years.

There are some historical points that have implications for future strategy. 1) The Bank's initiatives re the environment took place largely as a consequence of U.S. environmental NGOs working closely with the Republicans in the U.S. Senate in the 1980s and following the lead of allies in the South-particularly Brazil and India where dam debacles were occurring. 2) The Bank's initiatives regarding information disclosure and the Inspection Panel took place largely as a result of U.S. NGOs ? following the lead of various Southern groups -- working with the Democratic leadership in the U.S. House of Representatives in the late 1980s and early 1990s. This is not to say that other countries did not play a role; theydid. However, the U.S. Congressional "power of the purse" matters; the institution only reformed when the Congress threatened to withhold its contributions from the Bank.[1]

It is indecent that the U.S. is vested with so much power, but this is the situation. There are implications that flow from this..namely, the importance of U.S. NGO accountability to Southern groups and the NGO stance toward the U.S. Congress and Treasury Department. The Treasury Department is the main power behind the throne of the Bank. It has always seemed to me that, especially by working with academics, NGOs could usefully focus more on the Treasury Department.

Pyrrhic victories re social and environmental issues.

The pyrrhic, or toothless, victories described by Broad relate (for the most part) to social and environmental issues. It is implementation of the Washington Consensus policies that creates so much "collateral" social and environmental damage.

It may be worth asking whether more campaigning could usefully focus on the Washington Consensus. The Structural Adjustment Participatory Review Initiative (SAPRI) made some important contributions in this regard.
However, I have always wondered what SAPRI could have produced if it were forward-looking (Bank-NGO teams looking at what voices are heard in the design of new SAPs just being launched) rather than backward-looking.

The World Bank is especially vulnerable when it fails to meet its own economic objectives and, especially, its fiduciary responsibilities. The World Bank was shaken to its roots when, in 1991-92, the highly respected World Bank VP Willi Wapenhans demonstrated that many or most of the institution's portfolios were performing very poorly. Similarly, when the U.S. Congress (and others) investigate the Bank's record in fulfilling its fiduciary responsibilities, the institution panics.

Currently, the Bank is failing at its own functions as a Bank with high net negative flows. Perhaps the crisis of the IBRD explains, in part, why donors are attempting to expand IDA by 25% over the next three years.

The Bank also has failing portfolios. For instance, only 24% of the water components of Social Funds are sustainable (which imposes large costs on communities) and the portfolio that is intended to boost small and medium-sized enterprises (SMEs) is failing.[2] The NGO community could make more of these types of debacles in loans that countries are expected to repay.

One could measure WB changes over time by asking different questions.
Here are some examples:

Q: Is there greater awareness of and activism relating to the World Bank?

A: Significantly greater. There is much more external pressure on the Bank accompanied by much greater Bank hostility to advocacy NGOs, especially those in the North who are not working closely with representative NGOs in the South. There is also considerably more NGO collaboration with the Bank.

As Broad mentions, the transmission belt that relays local concerns to the global level is critical, especially when it conveys these concerns without embellishment.

NGOs have not taken much note of the Bank's adoption in 2002 of a new overarching strategy - the Private Sector Development (PSD) Strategy, which aims to privatize basic services and facilitate the process of state commitments to liberalize services under the General Agreement on Trade in Services.[3]

Q. Has the Bank's mandate grown or shrunk?

A. Grown significantly. In 1989, when the first generation of adjustment was crippling borrowing countries, the WB declared that it's mission was poverty reduction.[4] It's mandate expanded considerably with the second generation of adjustment (focused on institutions, labor market flexibility, and anti-corruption efforts) and third generation (focused on investment liberalization). Recently, the Bank took on the "high-risk, high-reward" agenda relating to large infrastructure while blaming NGOs from deterring them from this program of action ten years ago.

When the debt problem got attention, the institutions devised the HIPC initiative that mollified many in official circles. HIPC was another vehicle with which to expand conditionality.

The agenda relative to failed states shifted from the U.N. to the Bank. Bank extension of grants rather than loans also may appear to make the U.N. redundant in the eyes of some.[5]

After the 1992 Earth Summit, the "answer" to environmental challenges was vested in the GEF.a sop to the movement.

While the Bank's rhetoric seems to take the high road on the environment, social development, gender, and poverty, the reality is disappointing.

Q. Has U.S. unilateral power grown within the institution?

A. The case could be made that U.S. power has grown, particularly after 9-11. In 2002, John Taylor, U.S. Treasury, declared that the Bank's mission was to combat terror. In 2002, the U.S. also succeeded in bullying the Board to accept a new overarching strategy for the institution - the Private Sector Development (PSD) Strategy, which focuses on privatizing basic services - healthcare and education and, especially, water and electricity services.

At the same time, the power of the U.S. Congress vis a vis the institution has arguably declined. After investigations of corruption at the Bank by the U.S. General Accounting Office (GAO), which is an arm of the Congress, the World Bank and the regional banks created a Multilateral Advisory and Audit Group (MAAG) that effectively blocks access to the Banks by investigatory bodies in borrowing countries.

Q. Is there greater country ownership of the development process?

A. Many argue that this is the case. Uri Dadush, head of the Trade Department of the Bank, argues that there is no such thing as trade conditionality; the Bank follows the lead of the country. Jan Janssens of the Water and Sanitation Department also argues that there are no water-related conditions in Bank loans. The Bank's Board and staff also assert that PRSPs have replaced conditionality.

These assertions display a disconnect with reality as conditionality still abounds (e.g., the OED and IEO evaluations of the PRSP detailed the top-down mechanisms of the PRSP). However, the institution's sense of denial is firmly in place.

The Bank derives legal cover by the fact that the Executive in borrowing countries writes a letter to the IMF or the World Bank requesting each loan along with a long list of policy conditionalities that the institutions subsequently impose. Needless to say, the Executives do not work through democratic channels when they request the loan or itemize the policy conditions that they are required to ask for.

Current and Future Initiatives

As Broad points out (p. 6), it is important that current or future initiatives be informed by the radical reforms that the U.S. and other governments are carrying out in the institution (what Broad appropriately refers to as the "neoliberal shrink" agenda). For instance, if NGOs want to plan campaigns to transform the Bank into a small grant-giving agency, it is important to know that this may be the plan of the U.S. government as well.
Otherwise, NGO goals can be more easily hijacked as has happened many times before, e.g., debt.
In 1999, the U.S. Congress commissioned an IFI Advisory Committee (a/k/a the "Meltzer Commission after its Chair Alan Meltzer) to make recommendations on the future of the IFIs. The Commission delivered its report in March 2000.
Although the Treasury Department has denied that the Meltzer Commission report is the blueprint for the future of the World Bank, the record is proving otherwise. The Treasury Department continues to advance the Commission's vision of the World Bank as a small grants-giving agency that primarily supports privatization of services. Grants are available (through "output-based aid," or OBA) to either make privatization profitable for corporations or to offset increased costs for poor consumers. Certainly, the U.S. government is desperate to reduce its huge trade deficit and its net gains in the area of "trade in services" help to offset its ballooning losses in "trade in goods." Like other wealthy countries, it is also desperate to maintain the value of its overseas assets by insisting that borrowing countries maintain a very low budget deficit or a surplus.

Notwithstanding the U.S. agenda, I count myself among those who would shrink the Bank in many of the ways enumerated by NGOs at global strategy meetings. For instance, increasingly, I've focused on how the trade-related operations of WB advance the interests of the North and undercut developing countries in trade negotiations. In areas where the Bank is the lead external donor (e.g., education and HIV/AIDS), one wonders if there are ways to bolster the U.N.'s role in policy-making. Fossil fuel-based projects are another obvious example where the Bank's lending should be cut back.

The Bank has massively expanded its work - namely, the Private Sector Development (PSD) Strategy, particularly as it relates to infrastructure services and other areas for corporate expansion. It is alarming that the PSD Strategy has launched a 3rd generation of adjustment in the area of investment liberalization, which would cede significant, new rights to foreign capital. While Southern governments and NGOs have been successful in staving off trade talks on investment, the Bank's new generation of adjustment may be achieving the goals that trade talks aimed for.

In order to achieve PSD and trade goals, the Bank is increasingly implementing its agenda at the regional level (e.g., The Regional Infrastructure Initiative for South American and the Plan Pueblo Panama) and the local (subnational) level. Disturbingly, the Bank's major decentralization efforts are lauded as "bringing government to the people."
There is little discussion of the negative outcomes of decentralization processes that leave local governments with insufficient resources and capacity to carry out their expanded mandates nor the long-term agenda of decentralization.[6]
Among other programs, the PSD Strategy is having a devastating effect on labor. At this link, one can see how the Bank has rated most economies in the world on the extent of their labor flexibility. As with other policies, developing countries are expected to emulate key developed countries:
http://rru.worldbank.org/DoingBusiness/ExploreTopics/HiringFiringWorkers/Com pareAll.aspx

Policy Advice, economic and social work (ESW) and research.

Over the last decades, heterogenous approaches to development have been delegitimized and swept out of university curricula and research.[7] Hence, the movement ends up trumpeting the views of senior individuals, such as Dani Rodrik and Joe Stiglitz, that no longer have much to lose by speaking the truth.

The idea that the IFIs should provide menus of suggested policy choices is a good one. This suggestion is particularly key to drawing parliamentarians into a role in oversight of the institutions.[8] Some of us have promoted that idea, but it hasn't had broad-based buy-in from the movement.

The Bank has vastly increased the amount of Economic and Social Work (ESW) that it performs in order to justify and provide the basis for lending operations.

In my view, data gathering/statistics, ESW and research should be farmed out to an independent body.

While it seems imperative that we continue to expose the negative outcomes of the neo-liberal model, two other directions are interesting as well - i.e., a focus on all those who are handsomely benefiting from the neo-liberal model and a focus on the Bank's violation of its own fiduciary responsibility. [9]

Personally, I have long wanted to see a possibly DC-based Southern-led training institute that would acquaint waves of Southern leaders with the IFI and demystify their roles in economic development. Have Northern NGOs hung onto their lily pads of authority? I don't know. However, it is clear that we need to hear many more leadership voices from the South and bridge differences that may exist (e.g., key priorities for some of us (e.g., transparency, accountability) may not readily translate into the lexicons of other countries.

Historical moment: Presidential Selection.

Insofar as Wolfensohn is stepping down, I agree that we are at a turning point with respect to Bank work. It seems likely that the U.S. will select a successor who is more brazen with respect to pursuing U.S. interests.
Although the U.S. appears to be proceeding "business as usual" to select a President in a unilateral fashion, campaigns (www.worldbankpresident.org
<http://www.worldbankpresident.org/> ) have been successful in challenging the process and mobilizing media criticism in the lack of U.S. transparency and participation.[10]

Groups might consider taking a proactive stance in feeding questions to the U.S. Senate when it vets Wolfensohn's successor. From my contacts with the staff of the US Senate Foreign Relations Committee over the last few weeks, it seems apparent that their main (only?) interest relates to identifying and curbing Bank corruption. It may be worth considering whether a campaign on MDB adherence to their fiduciary responsibilities, or corruption, would have some mileage. I'm not suggesting that we conform our campaigning to the priorities of the U.S. Congress or any other legislature (!), but rather take into account the significant political will on this issue.

I hope that these initial thoughts are helpful to our discussion.
_____

[1] During this year, the U.S. Congress will be financing replenishments of the soft loan windows of development banks. Historically, advocates lobby the Congress for policy conditions that they believe that the Congress should attached to its contributions, or replenishments. Although contributions to IDA will grow 25% in the next (14th) replenishment, Congress appears to have little appetite for confronting the Treasury and placing new demands on it in exchange for the anticipated increase in contributions.

[2] See OED's Lines of Credit evaluation, January 2005.

[3] The Bank considers operational NGOs as part of the private sector because, like private firms, they help dismantle the state. NGOs are part of the movement to gain entry to progressively more sectors and provide services (in lieu of the state). Although operational NGOs could collaborate among themselves to promote changes in the Bank's agenda on trade in services, there is little motion in this direction.

[4] In 1999, the IMF made the same declaration. Prior to those dates, the institutions disavowed any role vis a vis poverty. It was the "kiss of death" for an official's career, when s/he worked on poverty issues.
[5] Importantly, legislatures never approve or shape the purposes of grant assistance. Some legislatures have no power to modify loans, but most have a marginal role even if only to raise the debt ceiling.

[6] Among other things, the decentralization agenda entails:

• limiting fiscal transfers from central to subnational governments.
• allowing the creditors of local governments to "intercept" its transfers to local governments in order to collect debt-related obligations.
• central governments refraining from "bailing out" indebted subnational governments.
• choking off budget subsidies (and domestic credit) to services and enterprises.

[7] With regard to the UNDP and its Human Development Report, perhaps some of us could work to stem the vicious criticism of this document (and other heterodox initiatives) from UN members. Also, it is not clear to me what results NGOs have to show for providing intense input to the WDR, which as Broad implies, has few operational implications. On a side note, the first WDR I worked on was the 1990 edition which focused on "labor-intensive growth" - a term that has disappeared from the Bank's lexicon.

[8] The only place that I've seen a Bank really spell out the kinds of parliamentary reforms it wants to see is in "Latin America After a Decade of Reforms, Economic and Social Progress in Latin American, 1997 Report," IDB, pp. 123 - 184. Interestingly, I can no longer find this volume on the web!

[9] It is also possible to change issues that we work on. For instance, by pressuring the U.S. Congress/Treasury to obtain external audits of the internal operations of the World Bank, we would be able to bring claims against the Bank when it violates it's Articles of Agreement (e.g., by, for instance, interfering in the politics of a member country) or doesn't realize the stated purpose of a lending operation.

[10] If Americans must preside, the Pundita blog makes a good case for nominating Eliot Spitzer for Bank President.