Transcript Harnessing the Leviathan: How the World Bank needs to change to

Samuelson (1951): “the backward nations
cannot get their heads above water because
their production is so low that they can spare
nothing for the capital formation by which
their standards of living could be raised”
Friedman (1958): “despite the intentions of
foreign economic aid, its major effect, insofar
as it has an effect at all, will be to speed the
Communization of the underdeveloped
world”
Sachs (2005): The End of Poverty: Economic
Possibilities of our Time, Penguin Press
Jim Wolfensohn(1995-2005): We dream of a
World Free of Poverty
William Easterly (2006): The White Man’s
Burden, Penguin Books
I.
Does foreign aid work?


My conclusions from 30 years at the World Bank
(and 10 years since)
Analytical evidence on aid effectiveness
II. Recommendations for the Future of the
World Bank
1. Early experiences
 The knowledge Bank
 Apolitical Bank leadership
2. Working with the East Asian Tigers
 Leadership committed to development most critical
 Openness to external influences, but clients always
in driver seat
 Stick with the basics – simple approaches to
development
3. China: The Development Marathoner
 Get the best from others (the Bank), but make your
own decisions
 Policy and institutions are sui genres
 Start new ideas on small scale and then build up
 “Responsibility system” – no hand outs
4. NGOs: The new foes of development
 The Pak Mun episode and its ramifications
5. Discovery of Private Sector
 Pseudo reformers vs real reformers
 Failure of structural adjustment; more harm than
good
 Limitations of conditionality
6. The Wolfensohn Era
 Start of politicization of the Bank
 Showing holes in Bank governance
7. Rebuilding Failed and Failing States
 Unrealistic donor goals
 Clients as bystanders in a donor-driven show
 Donors draining limited capacity
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

Foreign aid works in countries that work and
fails in countries that fail
Foreign aid cannot drive development
Back to the forgotten concept of aid as a
catalyst
1. Project Outcomes – very mixed record
No. Projects
%
1971-2000 Satisfactory
%
Sustainable
Bankwide
5,590
71%
48%
Africa
1,790
60%
33%
Minus 5-10% ex-post evaluation disconnect
Overall success: 25-30% in Africa
2. Missing Aid/Growth Linkage
 No. of countries >2.5% per capita GDP
growth 1971-2000: 15
 No correlation between level of aid and
growth
2000-2008 Avg
Total Aid Aid/Capita/Y Avg GDP/Capita GDP/Capita
($billions)
ear ($)
Growth (% p.a) Growth (% p.a)
Asia
Bangladesh
China
Indonesia
India
Korea
Lao PDR
Malaysia
Nepal
Philippines
Sri Lanka
Thailand
Vietnam
35.3
38.0
33.0
48.5
2.1
3.8
3.5
7.7
18.2
12.1
14.1
15.0
11.0
1.5
6.5
2.1
2.2
29.0
7.6
13.4
10.0
24.0
8.5
8.0
0.7
7.1
4.2
2.5
6.0
NA (<2%)
4.3
1.5
1.0
3.2
4.6
NA (>2.5%)
Africa
Botswana
2.7
75.0
7.3
Ethiopia
15.7
10.8
NA (<0%)
Ghana
10.7
24.6
-0.4
Kenya
14.4
22.0
1.1
Lesotho
2.4
53.0
2.8
Liberia
2.4
38.4
-4.6
Nigeria
3.8
1.4
0.2
Senegal
12.0
55.4
-0.5
Swaziland
1.0
44.0
2.9
Tanzania
20.6
28.2
NA (<0%))
Uganda
10.3
18.2
NA (<1%)
Notes: N/A not available; author estimate in parenthesis
Source: World Development Indicators, The World Bank
4.1
3.8
3.8
5.9
3.9
5.0
3.1
1.5
2.9
4.1
3.7
6.1
2.9
5.4
3.2
1.5
2.8
-3.6
3.6
1.6
1.5
3.9
4.0
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
Overload of good intentions:
“The central challenge faced by the Bank is to reconcile the
expanding scope and ambition of its development agenda
with a need to improve project performance”
- 1992 Review of Portfolio Performance, OED, 1994

“The problems we are encountering in today’s projects are
the same problems encountered in projects many years
ago. We keep making the same mistakes because we did
not learn from earlier experience…. Most project officers
think that their project is unique and will succeed where
others have failed”
- The Wapenhans Report 1992

The ever growing “Safeguards”.


Obsession with volume of loans: Missing link
with actual performance
Successful projects do not equate to
successful development
Project Outcomes
1971-2000 Avg
GDP Growth
%
%
(% p.a)
Satisfactory Sustainable
Asia
Bangladesh
China
Indonesia
India
Korea
Lao PDR
Malaysia
Nepal
Philippines
Sri Lanka
Thailand
Vietnam
Africa
Botswana
Ethiopia
Ghana
Kenya
Lesotho
Liberia
Nigeria
Senegal
Swaziland
Tanzania
Uganda
World Average
0.7
7.1
4.2
2.5
6.0
NA (<2%)
4.3
1.5
1.0
3.2
4.6
NA (>2.5%)
67
91
81
74
90
59
85
64
70
74
84
100
31
85
54
47
81
53
80
38
54
43
64
67
7.3
NA (<0%)
-0.4
1.1
2.8
-4.6
0.2
-0.5
2.9
NA (<0%))
NA (<1%)
83
67
69
38
70
50
42
70
88
53
59
83
36
45
23
65
0
18
37
100
37
35
71
47
Why do we still want the World Bank?

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Still the most competent aid institution
Still deep expertise, but need to separate out
from large numbers of bean counters
Large balance sheet $200 billion
1. Strengthen governance
 Asking hard questions on past performance
 Reconciling conflicted recipient roles: forget
solidarity
 Resist fads and fashions
 Codify Board role; severely restrict papers; trim
staffs; transparency in all proceedings
 Voting power of developing countries not the issue
2. Depoliticize presidential selection


A qualification-driven process for the selection
of the president
Nationality not the issue
3. Make IEG truly independent and fully
transparent
4. Budget support instead of project lending –
no mix and match
 Project lending only for large, transformational
projects
5. A Leaner Bank as the True Knowledge Bank