The World Bank

New Agendas in a Changing World

Michelle Miller-Adams

• Publisher: Taylor & Francis
• Year: 1999
• eBook ISBN: 9781134650897
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This book considers the nature of change at the World Bank, exploring both the external impetous for change, and the impact of the Bank's internal organization and culture. The author's findings are supported by detailed case studies of three of the Bank's most important new agendas: * private sector development * participation * governance

1 Introduction

There is almost nothing…about the World Bank that cannot be changed, dropped, or expanded if the will is there. It is much more flexible than it looks, and its methods and practices have never been reduced to any formal code.

James Morris, The Road to Huddersfield, 1963, p. 226

That the Bank…has survived more than half a century of dramatic global economic and political changes is due largely to its ability to redefine itself. Among the personas it has adopted are those of a capitalist tool, a friend of big government, an international mediator, a force for industrialization, a voice for social justice, a hard-nosed financial institution, a coordinator of the global economy, a social services agency, and an advocate of private entrepreneurship.

Catherine Caufield, Masters of Illusion, 1996, p. 2

The World Bank is the key institution through which rich nations channel resources to poor nations in support of their economic development. Established over fifty years ago in a radically different international environment, the Bank has reinvented itself continually in response to demands from its member states, the predilections of its staff, changes in the developing world, and shifts in the broader understanding of economic development.

The Bank’s evolution in the last decades of the twentieth century has been driven in part by sudden and sweeping changes in the developing countries that are the recipients of World Bank loans. In the 1980s and 1990s, the political and economic systems of the developing world were transformed. Democratic regimes emerged in Latin America; one-party rule ended in Eastern Europe, the former Soviet Union, and much of Africa; and pressure for greater openness created a new political climate in Southeast Asia. On the economic front, state-centered development models were rejected in Latin America, communist economic systems dismantled in Eastern Europe and the former Soviet Union, and market-oriented economic reform embraced throughout the developing world.

The evolution of the World Bank has also been stimulated by more gradual shifts in beliefs about economic development. In the 1950s and 1960s, the development community—in which the World Bank plays a central role—stressed the importance of providing poor countries with the infrastructure necessary for industrialization. By the early 1980s, development experts had begun to focus on the economic policy reforms needed to secure growth and the benefits of a vibrant private sector. Over the past decade, there has been a greater recognition of the negative environmental consequences of past development approaches, renewed attention to the plight of the poor, and growing awareness of the political impediments to growth.

As a result of these trends, a series of new agendas emerged at the Bank in the late 1980s and 1990s regarding the environment, poverty reduction, the private sector, the participation of local communities in Bank programs, the role of women in development, and the nature of governance in developing countries. These new agendas represent both the Bank’s response to the dramatic international transformations of the late twentieth century and a pragmatic effort to adjust its policies in light of new evidence about how it might best help its borrowers.

Three of these agendas—private sector development, participation, and governance—are the focus of this book. In all three cases the Bank’s new approach signified an important departure from business as usual. For most of the Bank’s history, its policies were marked by reliance on the state as the chief engine of growth. In contrast, the private sector development agenda recognizes explicitly the role of private actors in economic development. In the past, the Bank’s staff made little effort to include groups or individuals within developing countries in decisions that would affect them. Today, the participation agenda solicits the participation of beneficiaries in at least some of the Bank’s policies and programs. Finally, the recent emphasis on governance constitutes an admission that the World Bank had paid insufficient attention to whether borrowing-country governments truly supported the policies called for in its programs. Those responsible for setting policy at the Bank have come to recognize that a strong private sector, the participation of civil society, and capable and committed governments are essential if the World Bank is to help bring about renewed economic growth and the reduction of poverty in the developing world. Whether and how the Bank can play an active role in fostering private sector development, participation, or governance is, however, less clear.

The three agendas discussed in this book have met with very different fates since their introduction at the Bank. Private sector development has been defined broadly, embraced enthusiastically by management, and given substantial new resources and a prominent bureaucratic location. The Bank’s private sector initiative has been supported by the hiring of new personnel, a trend all the more notable at a time of staff downsizing. Reports designed to evaluate the condition of the private sector in major borrowing countries are being prepared, and the private sector is among the issues that must be considered when the Bank sets its strategy toward a given country. The Bank has stepped up the use of its guarantee authority to promote private investment in the developing world. And a high-level effort is under way to coordinate the private-sector-related activities of the three institutions that make up the World Bank Group.¹

The Bank’s participation agenda is more circumscribed. Participatory development, which involves greater collaboration by the Bank with the nongovernmental organizations (NGOs) and individuals that make up civil society, is based on the premise that groups affected by Bank projects should have some say in their development and implementation. The importance of participation has been highlighted by the Bank’s management as a central part of the organization’s mission. It has received some new resources in the form of personnel, training activities, and publications, but it has not been given a high profile bureaucratically. Projects involving the participation of beneficiaries are developed mainly by staff members who are personally committed to such approaches. Significant participatory components are found only in a small subset of targeted anti-poverty programs, rather than being integrated into the mainstream of Bank operations.

The Bank’s governance agenda is the most tentative of the three cases examined here. After an initial surge of attention to political issues writ large, the scope of the Bank’s concerns in this area narrowed. Although the Bank has begun to pay greater attention to questions of institutional capacity and political management in its borrowing countries, most recently through the anti-corruption initiative of the late 1990s, these efforts have been tailored to fit comfortably with the Bank’s technical and apolitical orientation. Governance has met with an ambivalent reception by management and staff and has not been given a central bureaucratic home within the Bank nor allocated additional staff resources. Confusion remains as to how the Bank defines governance and how it should be pursued operationally. In the meantime, governance concerns remain marginal to the Bank’s work on the ground, in spite of their prominence in its rhetoric.

Why have these three agendas unfolded in such different ways? Each has been deemed critical to the Bank’s ability to accomplish its stated goals and each marks a major departure from past practice. What is it about these issues—or about the Bank—that has led to their variable treatment? In answering this question, I draw on two bodies of theory that take very different approaches to explaining how and why institutions evolve.

Traditional international relations theory, based in the discipline of political science, locates the sources of institutional change in the power and preferences of the states that make up the international system. In this view, the agendas of multilateral organizations like the World Bank evolve in response to pressure from actors outside the Bank, particularly the member states that own the institution, but also other well-organized groups, such as NGO coalitions or members of the financial community from which the Bank raises the funds it lends. To most international relations scholars, institutional change is a fairly efficient process: as the configuration of the international system changes, or as the preferences of its key actors evolve, international organizations like the World Bank will change as well.

International relations theorists would find no mystery in why private sector development has been more deeply incorporated into the World Bank’s activities than governance or participation. The World Bank is formally owned and run by its member countries. Of these, the United States is the largest and most powerful member, and has been since the Bank’s inception. US pressure on the Bank to pay greater attention to the private sector intensified in the 1980s. The United States had the leverage to carry out its preferences, and eventually exercised that leverage to bring about an explicit change of policy on the part of the Bank. The other two agendas under consideration were pushed by less powerful actors, such as smaller member states or NGOs; as result, they met with a more muted institutional response.

This argument, while plausible on the surface, has serious shortcomings which are revealed by attention to the timing and details of Bank action. Although the Bank adopted a stronger private sector focus in the 1990s, it did not do so in direct response to the US campaign. Moreover, the changes that were enacted unfolded along the lines of the Bank’s own preferences, not those of the United States. Innovations in the area of participation, while less widespread than those related to the private sector, were none the less significant. NGOs and some member countries played a part in bringing them about, but the efforts of individuals within the Bank were crucial to their success. Even more important in furthering the participation agenda was the interaction between external and internal advocates, a dynamic not easily captured by international-relations-based theories that look to entities outside an organization as the main sources of institutional change. For its part, the governance agenda seems to have been stimulated more by the Bank’s own learning processes and broad international changes than by the pressure of any particular actor. In short, while external actors have clearly played a role in bringing new issues to the attention of the World Bank, theories that focus on their influence alone tell an incomplete story about how new agendas emerge and what happens once they surface. How are new issues defined and made operational within the Bank? What level of resources do they receive? How deeply are they incorporated into the fabric of the organization? Ultimately, it is these factors that determine the impact an organization will have in a given area.

To answer these questions, I have turned to organization theory, a body of work that is attuned to the internal dynamics of institutions. Based in the discipline of sociology, the many variants of organization theory direct attention to the rules, both formal and informal, that guide the operation of an organization, and to the norms, values, and beliefs of its management and staff. An organization’s culture, the pattern of norms and attitudes that cuts across the entire social unit, is an embodiment of these rules, norms, and beliefs. Despite the continual evolution of its mission over half a century, the World Bank’s organizational culture remains clearly defined.

The World Bank is a government-oriented institution. In part, this is because its founding charter, called the Articles of Agreement, requires it to lend only to governments. But the focus on the public sector goes beyond this formal rule to everyday practice in which Bank staff members interact primarily with government officials and have minimal contact with civil society.

At the same time, the World Bank adheres strongly to the notion that its work is apolitical, a provision that is also expressed in its founding charter. The Bank’s identity as an institution “above politics” helps preserve its legitimacy with its 180 member countries and forges a degree of unity among its multinational staff. Most important, the apolitical provision has allowed the Bank throughout its history to work with and lend to a wide range of political regimes. The idea that development, at least as practiced by the Bank, is an apolitical process forms a linchpin of the Bank’s organizational culture.

The World Bank is a mover of money. Since the 1970s, the Bank’s member countries and managers have judged its success in terms of the number and size of the loans it makes. Only by steadily increasing its lending volume could the Bank make claims on its member countries for capital increases. And, in the development field where the criteria for success are so long-term and uncertain, lending volume was one of the few ways in which the Bank could be judged as having had an impact. As a result, the Bank’s organizational culture puts a premium on concluding loans, especially large loans, and staff members have been evaluated and promoted on their success in doing so. The Bank’s current management has downplayed the importance of lending volume and tried to establish criteria to evaluate staff members by the quality of the loans they make, not their size, but this is a difficult and long-term process. Most staff members believe the “approval culture” is still in place, that their success at the Bank is tied to their ability to move projects quickly from the development phase to approval by the Bank’s board.

The World Bank is centralized and hierarchical. More than 85 per cent of the Bank Group’s 10,000-plus staff members are based in Washington. Of the 15 per cent of staff located in developing countries, only about half are regular staff members, as opposed to short-term consultants. Until recently, virtually all Bank decision-makers were located in Washington as well. Efforts to decentralize operations, along with managerial authority, began in the late 1990s but are still in their infancy and it is not clear how far they will progress. In addition to its centralized nature, the Bank is an extremely complex organization. Sweeping plans to revise and streamline its bureaucratic structure have become regular features of Bank life. Usually occurring when a new president assumes control, Bank reorganizations have resulted in a high degree of organizational turmoil and often a loss of staff morale, but do not seem to have achieved either greater simplification or enhanced efficiency.

Above all, the World Bank is a technocracy. Throughout its history, the Bank has relied on well-honed lending techniques that can be measured quantitatively and applied in a wide range of countries. This technical orientation has its roots in the Bank’s need early on to establish its creditworthiness in international capital markets and claim for itself a measure of competence in a field where the standards for success are highly uncertain. It has been maintained throughout the institution’s history by the selective recruitment, training, and socialization of staff members with a clearly defined set of professional norms. Economists, financial experts, and those with other specialized skills are most highly prized within the Bank’s organizational culture and help to preserve its technical bent.

The Bank’s approach to lending derives from this orientation. Michael Cernea, who for twenty years served as the chief advocate within the Bank for social development concerns, has written that “the characteristics and biases of an institution’s culture tend to put their imprint on the institution’s products” (Cernea 1996:15). From its earliest days, the Bank has taken a blueprint approach to development that compartmentalizes its different stages and is imposed or “induced” from above. Cernea identifies three conceptual biases in the Bank’s approach to development: the econocentric model that regards economic and financial variables as the only ones that matter; the technocentric model that addresses the technological variables of development apart from their contextual social fabric; and the commodocentric model that emphasizes the “thing” more than the social actors that produce it, highlighting, for example, the Bank’s tendency to focus on coffee production but not coffee growers, or water provision but not water users (Cernea 1996:15–16).

An organizational culture that is technocratic, apolitical, centralized, and biased toward large lending programs and a blueprint approach to development will provide a more receptive environment for certain kinds of activities than for others. To return to the question posed earlier, private sector development fits readily with key elements of the World Bank’s organizational culture, whereas both participation and governance pose greater challenges to it. In seeking to explain the fate of each of these agendas, an organization-theory-based approach would look at the closeness of their fit with the World Bank’s organizational culture as well as the malleability of that culture.

In weighing the two explanations presented above, political scientists might argue that international relations theory is successful at explaining most of what we need to know about the behavior of organizations, and that it is less important to understand the details of implementation than the general orientation of the World Bank’s policies. There are three problems with this argument. First, in some cases, international-relations-based explanations are insufficient to explain even broad policies. For example, the Bank’s adoption of policy-based adjustment lending around 1980—a move that had significant implications for both the Bank and the developing world—had almost nothing to do with external pressure. Second, the Bank may commit to certain policies but not carry them out in practice. For example, the Bank’s policy regarding forcible resettlement has been in place since 1980, but was not taken into account in most of the Bank’s lending until the 1990s. Third, it is essential to look at how a new agenda, once adopted, is pursued in practice. For example, it is not enough to know that the Bank now supports the participation of affected groups in the design and execution of its projects. Without examining the resources, leadership, and organizational activities through which the Bank is pursuing this agenda, it is impossible to determine whether participation has actually become a feature of Bank lending, let alone whether the new approach has had any impact. It is this insight into the implementation of Bank policies and their attendant impact that can be gained through an organizational analysis and that international relations theory cannot provide.

Conversely, organization theorists might argue that they, too, can explain recent changes at the World Bank without recourse to international-relations-based approaches. According to such an argument, the Bank’s most energetic initiatives in the 1980s and 1990s would have focused on areas where there were clear payoffs and where success was relatively easy to measure, a natural strategy under a decision-making model where actors seek to maximize their bureaucratic interests in ways that are congruent with an organization’s culture. This approach, however, underestimates the role of the Bank’s member countries in shaping its actions and neglects issues of power that determine why some parties are in a position to make their interests felt and others are not. It also fails to explain why the Bank has gone to great lengths to cast itself as an intellectual leader and activist on issues where, in reality, it can have very little impact and where the payoffs are minimal, if they exist at all.

When the timing and sequence of decisions regarding new agendas at the Bank are examined, it becomes clear that neither international relations theory nor organization theory alone can explain the Bank’s evolution. The answer to the...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Routledge Studies in Development Economics
• Figures
• Tables
• Preface
• Abbreviations
• 1: Introduction
• 2: Understanding the World Bank: A theoretical overview
• 3: Approaching Business: The Private Sector Development Agenda
• 4: Approaching Civil Society: The Participation Agenda
• 5: Approaching Politics: The Governance Agenda
• 6: Effecting Change: The Challenge of Organizational Transformation
• Notes
• Bibliography