Top level government ministers, UN agency brass and the requisite number of ‘civil society’ personages will meet Bali Indonesia in mid-October.
Bank-Fund staff represent some of the last dinosaurs to roam the earth. Like their anti-diluvian peers from the Mesozoic Era, they have failed to evolve with the times. Yet, rather than face extinction, these dino-sapiens face only cocktails and econometric regressions.
At the meeting, they will review their work on international economic development. I can save them about $5 million in expenses right now. It is dismal.
A slew of academic evidence has shown that the Bretton Woods institutions’ work has often done more harm than good. Of course, not all development has hurt.
Scholars with cooler heads have rightly pointed out the good work done by governments, some limited interventions, and at limited times. Yet, countries with their own raison d’etat governle the World Bank and International Monetary Fund.
As one student put it, “the Bretton Woods Institutions claim to have embraced development partnerships, but they clearly still seek to control the political environment in the developing world.” They seek control, not for themselves, but for their largest shareholders.
Yet, that has not stopped the industry of other diplomats, pundits and experts who opine on making development institutions like the Bank-Fund work better.
In a recent review of aid effectiveness, most of the experts point to fragile conclusions about the ineffectiveness of aid. Yet, most of these names serve as very high-paid, regular advisors to the organizations they evaluate.
Even aid’s failure has brought about an industry aimed at reforming it. In 2005, the Organization for Economic Cooperation and Development (OECD) spearheaded the Paris Declaration and Accra Agenda for Action. So many others make money giving advice on reforming the Bank and Fund.
The Development Industry works for everyone, except the poor. Yet, two glimmers of hope point to the evolution of the development set.
First, the ever-mandate hungry institutions have taken on some responsibilities that have helped. The World Bank has spear-headed important research on the role of banking in economic growth. They also remain one of the go-to places for data.
The International Monetary Fund’s work on financial crises and surveillance has had some important effects – though not as much as its own evaluation of itself shows.
Second, a veritable Cambrian Explosion of work on alternatives to the Bank-Fund point in promising directions. Proposals for development finance institutions, such as a fully-private development bank, represent one legacy of the post Bretton Woods era.
The UN’s work on tackling corruption and looking at cross-border crime have important roots in early work done by the Bank and Fund.
So how to transform these relics of the post War era into something more modern?
First, changing their governance represents their existential challenge. Countries like Indonesia and China want more say. But I am talking about something bigger. Giving companies and civil society organizations a say.
The World Wildlife Fund, Transparency International and even scholars from Tsinghua make far more policy today than they did in 1945 (when lumbering giant nation-states ruled the global economic-political landscape).
How to give Médicins sans Frontières a role in a World Bank focused a lot more on health policies since a medical doctor took up its reigns. How to make Morgan Stanley a responsible stakeholder in global financial governnace (rather than simply a reactor)?
Second, how to give these institutions authority and effective enforcement powers in the countries where they do their work? Most poverty in Africa, Latin America and South Asia comes from corruption, nepotism and theft. The Bank and Fund can not influence politics in their member states, nor pay the people they hurt.
Yet, organizations like the European Union clearly show how deep, deep, deep integration – along with enforcement powers – helps ensure development goes to the right people. The EU can influence poverty so profoundly in Poland, Romania and Greece (for better and worse it seems) because they have the ability to audit, enforce judgments and impose rules like budget and even criminal rules. Imagine a dark world where the Bank-Fund had such an ability!
Why not completely go back to the root of the evolutionary tree (as it were)?
Why start over with the Bretton Woods institutions? Literally take a blank page, see what needs doing and then redraw the IMF, World Bank and WTO from scratch. We do not have a gold standard anymore. Or reconstruction lending. And the WTO doesn’t seem to be helping start the Trump trade wars.
Such blank page thinking restored competitiveness to the West’s bloated industries in the 1980s and 1990s. Yet, like the mutant/zombie that refuses to die, the Bank and Fund shift mandate – failing at every turn.
Could Bali be the asteroid that helps wipe out the beasties? Probably not. But they could discuss the institutions of a post Bretton-Woods world (40 years too late is better than never). Their existence crowds-out smaller, smarter and nimbler entities.
Why couldn’t Bali be the Bretton Woods of the 21st century?
Homo sapien sapiens could not flourish until the dinosaurs bought it. Maybe the reptiles of the Bretton Woods need the same treatment so new institutions can thrive in the 21st century.