World Bank

Is G-20 bulletproof?

Over on The Multialateralist at Foreign Policy Magazine, David Bosco asks whether the G-20 is hard to protest:

But there’s a critical difference of course. Those protesting the G -7 and G-8 could plausibly claim to be railing against an elite and unrepresentative club taking decisions that affected the world as a whole. Ditto for the IMF and World Bank, where large voting shares afford the United States and the European countries an effective veto over the activities of both organizations.

In theory, the G-20 should be a harder target. Its members account for about 90 percent of the world’s gross national product and more than two-thirds of its population. It includes major developing economies such as India, Brazil, China and Mexico. Internally, the G-20 tries to operate by consensus and gives its most powerful members no special voting rights.

Without making a value judgement on whether the G-20 or the aforementioned organizations deserve protest or not, I’d argue that it is not necessarily so hard to imagine. Think of the planners in William Easterley’s White Man’s Burden, or the ‘electronic herd’ in Paul Blustein’s The Chastening.  Such characterizations of global financial players would apply equally to emerging powers like Brazil and Mexico. A global sentiment similar to the Occupy Wall Street movement if you will, in which nationality is not so much the problem, but an unaccountable elite.

 

Mission Creep and the IMF & World Bank

There’s two things about this pair of Bretton-Woods sister institutions.  That hold true.  First, they are both very controversial because of their expansive influence on the economies of countries.  Second, people often conflate the two together.  True the World Bank and the IMF are similar–they were birthed together, they are huge bureaucracies, they have similar governance structures, they’re located next to each other, they both give out conditionality,  etc.   There’s one similarity they share that paradoxically highlights one of their differences, and this is the idea of “mission creep”.

I do not know where this term originated, but I first saw it used by Jessica Einhorn, former Managing Director of the World Bank.  She charecterized mission creep as the Bank’s tendency to take on an increasingly wide number of issues, saying that, ” its mission has become so complex that it strains credulity to portray the bank as a manageable organization. The bank takes on challenges that lie far beyond any institution’s operational capabilities. The calls for greater focus through reform seem to produce little beyond conferences and consternation, since every program has a dedicated constituency resisting change.   She was rather critical of that, recommending that the Bank  “shed areas where its comparative advantage is no longer compelling”.    She portrayed the World Bank as eagerly taking on these new tasks.    This increasingly ubiquitous presence of the World Bank implicitly shines through in it’s own evaluations that recommend that the Bank expand into areas such as the environment or AIDS.  They’ve also had presidents like McNamara and Wolfowitz who had large visions on what the Bank should be doing, such as corruption for example.  What is significant about this is that none of this was by design, but rather over time the World Bank has become more expansive in the breadth and variety of issues in which they are involved in, and this is something that causes resentment in a lot of people.

Siblings perhaps, but not twins.

Like the World Bank, the IMF, or the Fund as it’s often referred to has become more involved in countries than it’s original intention.   Martha Finemore in her book Rules of the World, on a chapter on the IMF, describes the Fund as having, “…become intimately involved in members’ domestic economies in ways specifically rejected by its founders.”, describing the Fund’s involvement in monetary, fiscal, income, labor, industrial, etc areas.   She describes conditionality (which the Fund has reformed by the way), and interestingly the Fund is charecterized as being sympathetic.  As she describes it, conditionality eventually developed as necessary corrective actions as economists at the Fund tried to narrow in on their expertise.  Conditionality was reformed by developing institutions in states with the intention of giving them the capacity to develop with conditionalities.  She doesn’t use the word ‘mission creep’ but like the Bank you can see that they are involved in a depth of issues,  and this is also controversial.

So how does this highlight the differences between the Bank and the Fund? Well the Bank is larger, and has a more diverse staff in terms of specialists.  The IMF is mostly economists, maybe some focus on fiscal issues, maybe others focus on the banking sector, but they’re generally macroeconomists by training.  I’d say while the Bank is eager and welcoming of an expanded mandate, the Fund appears to be doing so reluctantly, it’s almost like they’re a victim of their own expertise (Finemore talks about ‘information asymmetries and how Fund staff complain about their disadvantages of expertise).   The Fund’s expansion is driven by reinforcing their existing expertise, i.e. developing institutions, holding workshops, giving guidance on how to manage sectors of the economy, etc.  The World Bank’s mission creep, which has increased it’s breadth, and which is expansive is what I’d charecterize as a horizontal mission creep, where as for the Fund, which for which it’s expanded involvement in countries can be charecterized by depth I’d charecterize as a vertical mission creep.   So paradoxically, expanding and specializing have both resulted in mission creep for these two institutions.  Is this an inherent dilemna in large bureacracies? That mission creep–whether it’s ‘vertical mission creep’ or ‘horizontal mission creep’ is inevitable?

This is a very basic overview and I haven’t gone in depth as I can, but it would be interesting to examine this more.  Maybe mission creep isn’t inevitable, and it only happens when international institutions are relatively powerful and autonomous.   Would be interesting to look at the WTO, which is another powerful institution and see if the same dynamic holds.  Or in a smaller institution like the International Telecommunications Union (ITU) which has essentially been coopted by private sector interests, and where arguably the opposite of mission creep (shall we call it ‘mission atrophy’?) has occurred.  Again–I can go very deep into this but I’m just touching the surface here….