The IMF Matters, but We Should Also Pay Attention to the World Bank
Chu, Ben, The Independent (London, England)
Not many people noticed it, but last weekend's International Monetary Fund meeting in Washington DC was jointly hosted by the World Bank. The views of the IMF and its new managing director, Christine Lagarde, were widely reported. The IMF's warning of a sharp slowdown in global growth made headlines around the world, as did the alarm it sounded about the health of European banks. But the research of the World Bank flew pretty much under the global media radar. The words of the World Bank head, Robert Zoellick, were of wider interest only to the extent that they related to the economic crisis in the developed world. When it comes to these two children of the 1944 Bretton Woods conference, there is no doubt as to which is the more high-profile sibling.
There is a clear division of labour between the institutions these days. The IMF's job is to handle financial emergencies, providing assistance to governments that find themselves shut out by the global capital markets. The responsibility of the World Bank, on the other hand, is to plant the seeds that will flower into long- term growth, primarily in the poorer states of the world. One is the world economy's fire brigade, the other is more like a structural engineer. One rushes in, does the job and gets out. The other is supposedly there for the long haul.
Firefighting dominates the news at the moment, with the IMF's mission in Greece grabbing everyone's attention. A vigorous debate is raging over whether the savage austerity being imposed on Athens is curing or killing the Greek economy. Yet it is long-term development that drives the fundamentals of the global growth. Emerging and developing countries will provide the bulk of the 4 per cent global growth the that the IMF's latest World Economic Outlook forecasts for 2012.
While the advanced economies are expected to grow by just 1.9 per cent, on average, the developing nations are forecast to expand by around 6.1 per cent. India's forecast is 7.5 per cent, China's 9 per cent. Brazil and Mexico are expected to put on 3.6 per cent each. Middle and lower income countries are the planet's economic motor. If more poor nations, with their vast potential for expansion, could be plugged into the global economy, in the manner of China and India, the outlook for the world would be considerably less gloomy. More growth from developing nations could even help pull Europe and America out of their present stagnation.
And that is where the World Bank comes in: unlocking the potential of poor, dysfunctional, states. So how is it doing? Not particularly well is the answer. The organisation's prescriptions are often sound. The World Bank released a report at the meeting last week pushing for the legal empowerment of women across the developing world. It argued that equal access to resources for female farmers could increase agricultural output in developing countries by up to 4 per cent and that eliminating the barriers to women in the workplace could have a similarly dramatic effect in output. It is difficult to find fault with any of that.
Yet it is when it comes to the effectiveness of the Bank's lending programmes on the ground that its performance is often disappointing. In 2005, 78 donor countries met in Paris and pledged to make aid more effective. This was dubbed the Paris Declaration. But a report by the Organisation for Economic Co-operation and Development last month found that donors have only met one out of 15 targets set in Paris: hardly satisfactory progress after six years. …