We Won't Get Good 'Nannies' Just by Saying They're Bossy and They Don't Know Best

By McRae, Hamish | The Independent on Sunday (London, England), September 17, 2006 | Go to article overview
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We Won't Get Good 'Nannies' Just by Saying They're Bossy and They Don't Know Best

McRae, Hamish, The Independent on Sunday (London, England)

It is annual meeting time for the International Monetary Fund and the World Bank, and this year these conferences are in Singapore. That in itself is contentious: Singapore maybe one of the most successful examples of economic development in the world, but it has a tough-minded approach to civic order - which is why it is none too keen on foreign protesters.

In recent years these organisations have started to try and disrupt the meetings - something that the Singapore authorities would not permit. As a result, there has already been a protest by more than such 80 groups to the effect that they haven't been allowed to protest.

But concern about the IMF and World Bank, founded after the Bretton Woods conference of 1944 to create the conditions for an orderly and successful post-war economy, does not just come from outside government. In the past few days two UK ministers, Hilary Benn and Ed Balls, have criticised aspects of their performance

Mr Benn has withheld part of the UK contribution to World Bank affiliate the International Development Association, which gives interest-free loans and grants to the poorest nations - on the grounds that the UK does not approve of some of the conditions applied to this help. Actually, holding back IDA payments has a long history and usually it is the US in the dock, with some in Congress deciding they don't like aspects of World Bank policy. I recall going to meetings and listening to UK officials fuming at US politicians for their pettiness. Doubtless, some people will be cross the UK has adopted an American technique.

Mr Balls has directed his fire more cerebrally. His basic contention is that the IMF pays too much attention to lending money and ordering developing countries about, and not enough to trying to influence the economic policy of the developed ones.

The World Bank and the IMF are large bureaucracies and, like all such bodies, they have their weaknesses. Besides, they are 60 years old and the world has changed. So, in a way, it is helpful to have an open debate, even if it is one that always proves hard to carry out constructively.

It is hard for a number of reasons. One is that they have a complex governance structure: the IMF has 188 member countries, which is like herding cats. Another is that all large organisations are hard to alter, for bureaucrats are geniuses at defending their turf.

Still another is that many of their critics see them as symbols of something bigger - globalisation, capitalism, whatever - and it is hard to adapt an institution to meet a challenge when it is not really the institution which is under attack.

So what can sensibly be said? The starting point is that conditions just after the war were very different from today. There was the chaos of conflict and the memory of the protectionism of the 1930s that had destroyed the world economy and arguably led to the rise of Hitler. With Bretton Woods establishing a fixed-exchange- rate system, the IMF was designed to lend money to countries that were in bal-ance-of-payments difficulties, to stop them having to devalue their currency' competitive devaluation had been one of the most destructive policies of the 1930s. The World Bank was designed to lend money for rebuilding a shattered Europe.

The situation changed quite quickly. The World Bank found itself involved more in development than reconstruction and shifted its focus from Europe to Asia, Latin America and eventually Africa.

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We Won't Get Good 'Nannies' Just by Saying They're Bossy and They Don't Know Best


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