International Monetary Fund,World Bank,AIIB, ADB and India

Issues faced by World Bank and IMF

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Bretton Wood Twins

Mains level : Transparency issues is International Organizations

This article discusses some inherent issues with the international organizations (IOs) i.e., the World Bank (Bank) and International Monetary Fund (IMF) (aka Bretton Woods Twins). This comes in the backyard of the WB decision to scrap its flagship publication, the ‘Doing Business’ report.

Issue over chair: A monopoly of the West

  • Common individuals to head: The individuals which are common to them: Paul Wolfowitz, Jim-Kim, David Malpass, Rodrigo Rato, Dominique-Strauss Kahn, Christine Lagarde, and Kristalina Georgieva.
  • Monopoly of US/EU: They have all become heads via a dual monopoly selection procedure: Only an American can head the Bank and only a European can head the IMF.
  • Personal integrity: This has been called into question, the most recent being the revelations of malfeasance at the World Bank where data was apparently massaged to make at least two major countries — China and Saudi Arabia— look better than they would otherwise have been.

Issues with these heads: Hypocrisy

  • Political accountability: Within countries, we expect reasonable standards of integrity from heads of important institutions, and democratic political accountability mechanisms exist to ensure that.
  • Probity: The effectiveness and legitimacy of these individuals and indeed of the international institutions they head require personal qualities of probity.
  • Non-virtuous preachers: These heads often go around the developing world, preaching the virtues of good governance, from arguing against the scourge of corruption to improving data integrity.
  • Undue parameters: There are even World Bank indices to rank countries on those metrics.

How has this impacted these institutions?

Ans. The credibility of the institutions is lost.

  • It is not just the charge of hypocrisy, but also the effect on the morale and motivation of the staff of these institutions.
  • Many of them chose to work here because of a commitment to public service.
  • The recent letter by more than 300 former World Bank staff, expressing their anguish at the recent revelations on the Doing Business index, captures this sentiment.

Why such issues grapple these institutions?

  • Goal definition: International institutions operate in a grey zone of neither clearly being in or outside the realm of formal politics and hence have weaker mechanisms of accountability.
  • Selection of heads: The selection procedure for choosing heads of the Bank and the Fund has been a dismal failure. Compromised heads are potentially more biased.
  • Indoctrination: Contrast this with the growing alarm and anxiety that characterizes the rise of China and its attempts to place its own nationals in existing IOs as well as creating new ones.

Chinese has intruded even into these

  • Countries place their nationals to head these institutions, both for prestige and to pursue their national interests.
  • China has its own nationals now head four of the 15 UN specialized agencies (it suffered a rare setback to head the World Intellectual Property Organisation last year).

Conclusion

  • The contest between the West (and especially the US) and China to shape the global order is becoming manifest.
  • China’s efforts, its success, and more broadly its influence in IOs should certainly raise deep concerns, most notably the suppression of the inquiry into the origins of the coronavirus.
  • Looking ahead, if the US and Europe do not hold themselves to the standards they exhort to the rest of the world, their credibility and legitimacy will continue to degrade.
  • This will cede ground and soft power to geopolitical rivals.

Way forward

  • So, global political leaders convening next week for the annual meetings of the Bank and Fund must act with urgency and conviction to stem the rot.
  • They must open the selection of the heads of these institutions to the best candidate, regardless of nationality.
  • And to pave the way, they should clear up the current mess over the Doing Business saga.

Back2Basics:

International Org. | Part 7 | Bretton Woods Institutions – World Bank Group

 

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