The vision thing
The bank continually straddles several basic public purposes, which correspond to its separate constituencies. It has always been a key institution in the international economic architecture, helping to expand the liberal global economy. The bank has relentlessly pushed developing countries in the direction of the "World Trade Organization (WTO) system" of growth. In financial crises such as those in Mexico or Asia, the bank has been part of the attempt to prevent widespread financial panic. And it has been a key partner in helping transition countries join the international economy.
The bank is also the leading institution for alleviating poverty. It focuses on individuals, their crushing needs, and their soaring potential. In each country, the bank is expected to help the poorest citizens; it is for them that the bank pursues structural reform, trade liberalization, and the opening to the private sector. Many NGOs, much of the development community, religious groups, and parliamentarians associate themselves with the bank through this bridge, which has certainly been the hallmark of Wolfensohn's tenure.
Finally, the bank's role is growing in matters such as biodiversity, ozone depletion, narcotics, crime, and corruption. Postconflict reconstruction (in the Balkans and the West Bank, for example) and conflict prevention are also issues of the moment. The new century demands a new agenda for global cooperation that requires money, and this agenda can be adapted to the bank's operating style of making loans based on policy dialogue. Like Bretton Woods objectives, these issues are rooted in a global concern. Unlike such objectives, however, they are often less focused on the global economy and subsumed instead under "development" to fall within the bank's operating charter.
The bank has stressed vision, compassion, and charisma under Wolfensohn's leadership. At the same time, it has tried to pursue reform through greater transparency, broadened participation in project formulation, and increased links to civil society. The bank has also been open to the emerging agenda of global common issues. Words like "comprehensive" and "holistic" have come into common use as the bank struggles to encompass all agendas.
Like many institutions, however, the bank goes through phases. It is now clearly due for a "managerial" cycle to follow its visionary one. Bank officials must admit there is a problem and move with shareholders toward broad-minded reform. Although the bank has changed dramatically with the times, its mandate has expanded continuously toward more complexity, against ever more grandiose ambitions. Now the bank needs to focus on its internal management not begrudgingly but willingly, with candor born of self-knowledge. It must grasp the opportunity to revamp itself in fundamental ways.
There is no shortage of blueprints for reform among knowledgeable staff, shareholder governments, and special commissions. Different plans might envision breaking up the bank, scaling back its activities, or distributing some of its programs to other existing institutions with overlapping missions. But whatever the plan, it must recognize that the substance of reform is condemned to fail until the bank argues for modernizing and rationalizing today's proliferated development architecture. For example, there is no compelling reason why the bank should consider judicial reform as a development task under its umbrella rather than passing the job to an organization staffed by lawyers and judges. Of course, law is related to economics, and contracts and a functioning judiciary are fundamental to markets. But that relationship does not have to dictate organizational sprawl. Similarly, the bank's great vision and (much maligned) adoption of cultural heritage as a development objective would stand to gain if such an objective could be farmed out to an organization with more corresponding interests.
There is no single correct approach for reforming an international institution after 50 years of great achievement as well as severe disappointment. What the bank's shareholders can do is exchange ideas on guiding principles to achieve a new consensus. The developing world can contribute much to this dialogue, and those who have succeeded in transforming their countries in the past decades should be given a leading voice in any convocation. The following list of principles should set the process in motion.
First, the task of reforming the bank should be seen as intergovernmental. Civil society is present in every way through the democratic process, but it does not represent governments, which are the shareholders and clients of the bank. Shareholders should stop fleeing from that concept and instead exploit the opportunity to work together as state authorities. The global community needs accountable governments to establish realistic objectives for operating public organizations. A U.N.-style conference is not the venue for such a "management" agenda.
Second, national finance ministers (advised by development and environmental ministers) should lead delegations in considering reform and reorganization of the bank. Putting finance ministers in the lead will strengthen the hand of those policymakers who see the bank as a valuable central player in expanding the global economy, and they can simplify the bank's role as a partner with the IMF and the WTO in expanding global prosperity.
Third, the bank should raise its profile of core competencies. It has traditionally viewed the world through an economic lens, as it did when it proved that education and health care are essential building blocks for development. The bank should continue to contribute through economic research and position itself as the lead candidate to undertake any major economic tasks. Lending to implement a governmental agenda for economic reform will remain a comparative advantage of the bank.
Fourth, the bank should consider scale and distance. Although it is worthwhile to highlight the benefits of microcredit lending, for example, it does not make sense for an organization headquartered in Washington and staffed by international professionals to play an operating role in such local ventures. The bank's location, recruitment, and charter argue in favor of a wholesale, not retail, approach to development. Smaller organizations in the field are more appropriate for hands-on tasks.
Fifth, any discussion of development must acknowledge that private capital flows have decisively outpaced public assistance. The bank has traditionally lent to governments to create a "market-friendly" environment that will encourage the flow of private capital and the growth of savings on a constant basis. But it now increasingly finds itself marginalized in its capacity to finance development, except in the poorest countries. Last year, private net inflows to emerging markets exceeded net official outflows by close to $170 billion. The bank welcomes these private flows and is committed to expanding their scope. It can help by simplifying its program to take account of these flows and make sure that its funds complement them. In the poorest countries, not only are private flows unavailable, the bank's terms of lending are inappropriate. In emerging markets, the bank has the ability to focus its involvement with governments to advance the agenda of reform and attract and enhance the benefits of foreign investment.
Sixth, as the bank narrows its focus, it should shift it as well. It should open the door to the new agenda of global common goods and still commands the human and financial resources to make the greatest of strides in this area. This is why the bank should shed areas where its comparative advantage is no longer compelling. Without the bank, for example, the importance of education to development would have been overlooked. But today there is reason to consider moving the best of the bank staff in this area to a more focused enterprise.
In sum, governments should first survey the broad agenda that has become subsumed under the rubric of development and the emerging agenda of global concerns. They should then adopt a "Bretton Woods" frame of mind suitable to the new century and establish organizations that can achieve today's goals and align themselves with today's challenges. The World Bank is a great institution staffed by highly educated and motivated public servants, led by a committed president with compassion for helping the poor. But the proliferation of knowledge in the last 60 years has led to a complexity of tasks that defies operational definition -- and the new problems that have arisen require mature organizational attention and leadership. As the bank moves into its next stage of leadership in the coming years, its shareholders should be prepared to move both back to basics and into the modern era.
PHOTO (BLACK & WHITE): A man for all missions? World Bank President James Wolfensohn, Davos, Switzerland, January 28, 2001
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By Jessica Einhorn
Jessica Einhorn is former Managing Director of the World Bank and is now a consultant at Clark & Weinstock.
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