International Financial Institutions Working Group

The World Bank has witnessed a set of dramatic changes over the last fifteen years. The development model it had so heavily promoted, the Washington Consensus, came under an increasingly sustained attack from the mid-1990s onwards, prompting the Bank itself to make formal calls for a post-Washington Consensus and to embrace a shift towards the Comprehensive Development Framework. In addition, the financial-economic landscape in which the Bank has operated has changed dramatically. And the Bank saw the traditional activities of its public sector arms, the IBRD and the IDA, stagnate if not decline. It has faced, on the one hand, increasing difficulies in keeping middle-income countries as its clients and, on the other, increasing reluctance on the part of donors to contribute to its aid window. The activities of the IFC and MIGA, the World Bank Group’s private sector arms, in the meantime, expanded dramatically. From less than 4 percent in 1980, their combined share accounts today for 30 percent of total Bank Group activity. Further, the agenda of Private Sector Development became elevated as the core mission of the Bank, with the new configuration of the World Bank Group hailed as a particular opportunity for the further promotion of the development of the private sector. In addition, private sector development has commanded the largest thematic share of IDA-IBRD lending, accounting in 2007 for nearly 20 percent of such funds, with strong synergies promoted between the IFC and the IDA/IBRD.

These changes have been accompanied by a fervent emphasis on the role of the Bank as a Knowledge Bank, along which the Bank seeks to position itself as a unique gatherer and disseminator of knowledge-. In its latest Long Term Strategic Exercise, the World Bank has stressed how “the World Bank Group will succeed only if it retains and improves its role as the development community’s ‘knowledge bank’, especially with its purely financial value-added [role] likely to decline”. Thus, the Bank has clothed its increasing promotion of the private sector in a rhetoric of brokering both knowledge and development.

These developments raise a set of issues. What are the implications of the synergies across the different parts of the World Bank for the nature of development promoted? How does the Bank exercise its knowledge role, both in terms of its research and its more applied analytical work; and what are the implications in terms of the study of development and the conceptualisation of the policy space in developing countries? What has happened to conditionalities traditionally accompanying Bank loans, in particular against the backdrop of the alleged move away from Washington Consensus-style policies? What are the implications of the persistent focus on Private Sector Development across various sectoral policy strategies advocated by the Bank, not the least in the context of the recently rediscovered agricultural sector or the social sectors, where the IFC has been seeking to expand so aggressively?

Across the street, the Bank’s twin institution, the International Monetary Fund (IMF), has itself suffered severe crises of financing and legitimacy. The IMF’s response to the Asian financial crisis focused attention on how much of it was due to ideology as opposed to realpolitik, with development and poverty alleviation scarcely figuring. Client countries throughout Asia and Latin America took important – if often costly – steps to insure themselves against exposure to the Fund, and have initiated regional alternatives to it. And the Fund’s recipes for economic development have failed to create conditions for the majority of sub-Saharan African countries to move beyond low-value-added production.

Further, the inability of the Fund to sound the alarm in advance of the current financial tsunami, has made the question regarding the purpose of the IMF in the new financial architecture particularly poignant. Even worse, its commitment to financial sector liberalisation and de-regulation highlights the failures of the institution’s operating frameworks to understand, let alone respond, to current events. As such, with few clients remaining, except for the poorest countries – on which the Fund continues to impose pernicious policies – and given the Fund’s dramatic inactivity in the wake of what has unfolded as a major international financial crisis, urgent questions are being raised regarding its role in the current political-economic-financial environment.

Against this background, calls for a new Bretton Woods agreement have suddenly become more topical. The global economy seems threatened by a global downturn and the International Financial Institutions have dramatically failed in their role of economic governance. Regional developments continue apace: continual progress towards an increasingly sophisticated Asian Monetary Fund under the Chiang Mai Initiative; the launch of the Banco del Sur in Latin America boasting rhetoric very different from that of the World Bank; and the growing presence of regional banks, and development finance institutions dealing directly with the private sector. What will these developments imply for the half-century hegemony of the Bank and the Fund. What form could a new BW agreement take? Is such an agreement desirable? Will the institutions survive in any recognisable form?

This Working Group seeks to bring together those interested in pursuing these issues and help in shaping a new research agenda on the IFIs. In line with broader IIPPE aims we would seek to bring a critical analytical perspective to bear upon these issues and benefit from various interactions beyond the academic realm. The work of the WG would seek to situate the evolving Bretton Woods institutional organisation and practices in the context of changes in the broader political-economic-financial and intellectual environment.

The WG may engage in a number of activities: producing publications to influence discussion at this formative time for the future of the institutions; organising gatherings to bring together key actors; and supporting interventions and outreach which will bring a critical analytical perspective to others’ discussions of these important topics. In all of its outputs, the WG would seek to provide critical analytical material that can be readily accessed by a broad community of users.

Contact

To apply to join IIPPE International Financial Institutions group, email iippe@soas.ac.uk or elisa@btinternet.com.