Eliminating world poverty: making governance work for the poor (2)
Last week, DFID (the UK development ministry) published a White Paper entitled
"Making Governance Work for the Poor", which includes a section entitled
"Creating an International System Fit for the 21st Century". Sadly, despite a
very strong collective line from UK NGOs during the "consultation" process, the
text falls a very long way short from what is required in the way of reforming
the IMF and the World Bank ? and fails even to mention the WTO!
Attached is a response from Jubilee Research @ nef (the new economics
foundation) to this, which will soon also appear on the Jubilee Research
web-site at http://www.jubileeresearch.org. The White Paper itself can be found
Hot Air and Cold Comfort:
The DFID White Paper on the International System
David Woodward, Jubilee Research @ nef (the new economics foundation)
The Section of DFID?s White Paper entitled Creating an International System Fit
for the 21st Century starts very promisingly. The very title embodies a
recognition that we do not have such a system at present. This is echoed in the
Much of today?s multilateral system including the UN, World Bank, IMF, and the
EU was created after the terrible destruction of the Second World War. These
institutions have served the world well, but the challenges we face in the 21st
century are very different to those of 60 years ago.
Of course, this does rather imply that the international system was fit for the
second half of the 20th century a view which might be questioned by the
victims of the debt crisis, the financial crises, structural adjustment
enforced liberalisation and privatisation, commercial globalisation,
environmental destruction, escalating conflict, etc, etc. But let that pass.
After all, actually recognising the system?s failings in the 20th century would
raise the question of why they had been steadfastly ignored for decades until
And the White paper is hard-hitting in its criticisms. Some parts of the
international system, it says have become either too complicated and
inefficient or simply do not work at all. They must change. We will use our
resources and influence to encourage reform. At last! Some of us have been
telling the government that for years, if not decades.
In particular, The UN?s role in development needs to be radically reformed. It
should, it seems limit itself to two roles: conflict prevention, resolution and
humanitarian assistance; and developing international agreements and standards.
And If the UN is to do these tasks effectively, reform is needed. UN agencies
and programmes must be rationalised, and merged where necessary. No holding
back here whole organisations will be abolished, offices sold off, and staff
made redundant or transported half-way round the world. But then, as the global
environment is wrecked by our relentless pursuit of a perversely mistaken
economic paradigm, humanitarian assistance alone will keep an ever-growing
number of international civil servants in jobs: As a result of climate change,
[the humanitarian system] will need to respond to increasingly frequent
disasters. And sadly, the White Paper?s recommendations on economic policy
(more of the same) aren?t going to do a lot to change that....
If that?s the fate of institutions which are merely inefficient and all too
often ineffectual, what lies in store for the IMF and the World Bank, which
have been responsible for this ideologically- and commercially-driven model
which have failed to solve the debt crisis for a quarter of a century, imposed
structural adjustment policies, privatisation and trade liberalisation, thereby
creating the lost decade for development in the 1980s, and then cutting the
rate of poverty reduction by a further three-quarters in the 1990s? What of the
institutions which initiated policies which saw poor people losing their
livelihoods and being priced out of education and health care, in the name of
neoliberal ideology and debt-servicing?
They, it seems, for all their lack of meekness, are to inherit the Earth or at
least the Southern five-sixths of it. As the UN scales back to its two
remaining functions, the IMF, the World Bank and the regional development
banks, it appears, are to take over responsibility for development entirely.
But surely they?ll be made fit for the 21st century? Well, the regional
development banks will: the Asian and the African Development Banks, in
particular, need significant organisational change to serve their members
better. And the IMF and World Bank? Well, they must do more to support
developing country priorities and not impose economic policy conditions in
areas like privatisation and trade liberalisation.
This is helpful as far as it goes. But what are areas like privatisation and
trade liberalisation? Presumably this leaves the whole arena of macroeconomic
policy up for grabs. And how about health policy, education policy, investment
policy, agricultural policy and labour policy? Are they like privatisation and
trade liberalisation? In any case, how much policy space will there really be
for developing countries on trade liberalisation, as the WTO juggernaut roles
on? Or, for that matter, privatisation, as its tentacles extend into an ever
wider area with an ever more tenuous connection with international trade in any
meaningful sense? And even without policy conditionality as such, IMF and World
Bank advice in areas like privatisation and trade policy can be, shall we say,
Otherwise, the IMF must continue to change in order to better meet the needs of
poor countries. Continue to change? Not a lot of radicalism here. No mention
even of the possibility that the Fund like to try and change a little faster
than it has over the last 60 years, to make up for having fallen decades behind
the real world. The IMF should focus more on macro-economic policy advice, and
less on structural issues like privatisation and trade liberalisation where its
track record has been mixed (a charitable view, one has to say). And it should
provide advice to fragile states that is tailored to the challenges they face.
Now there?s a novel idea providing advice to countries that is tailored to the
challenges they face. Why ever didn?t they think of that before? OK, so this
only applies to fragile states but with the Fund and Bank given free rein to
run development, that will soon include practically all of the South anyway.
The World Bank should play a leading role in providing more long-term,
predictable funding for developing countries, find new ways to work with middle
income countries, help tackle the global challenges facing developing countries
focusing urgently on a financing framework for clean energy and adaptation to
climate change (only right, given its contribution to creating the problem in
the first place, that it should help to limit the damage .), and use its
position and expertise to forge a new international framework to help
developing countries tackle corruption and improve their governance.
Indeed! After all, doesn?t the World Bank itself have the perfect model of
governance for developing countries to follow ? A model where votes are
weighted according to income, so that a small rich minority have a permanent
majority of the votes; where the richest member not only has a veto on all
major decisions, but always gets to appoint the President unilaterally, with no
need for consultation or scrutiny, even in the face of bitter public opposition
from both experts and civil society; and where the President so appointed can,
as one of his first acts as President, unilaterally decide to sack the person
responsible for allegations of corruption, and replace him with someone who has
herself been implicated in a major corruption scandal, as part of a hand-picked
cabal of dubious cronies in key positions at the most senior level?
It sounds so perfect.... What better model could there be for the governance of
developing countries, and what greater expertise on good governance than the
institution that operates it? And what other institution but the Bank could
provide that expertise? Apart from the IMF, of course, which is surely the only
other institution in the world to share this extraordinary system.
But, as the White Paper also says, If [the IMF and World Bank] are to remain
relevant in a changing world, we believe they must reform. Indeed they must!
Even the White Paper, for all its criticisms of the UN, recognises that The
UN?s legitimacy is unparalleled. This comes from its universal membership and
unique responsibilities for peace and security, sustainable development, human
rights and international law. Unparallelled it is particularly by the IMF and
World Bank. But the White paper?s authors seem less inclined to comment on why
they don?t reach a similar level of legitimacy, despite membership which
is almost as universal. Surely it can?t have anything to do with their
exemplary governance structures..
So how should the Fund and Bank be reformed? Developing countries need more
influence in the World Bank and IMF. They are weakly represented on both
Boards, where voting rights are decided by financial contributions. This
balance must change. No mention of the fact that financial contributions are
not voluntary, but the result of a negotiated stitch-up among the major
shareholders the developed country governments. After all, for all the highly
sophisticated formulae that go into the calculation of IMF quotas, it isn?t
just a coincidence that the UK and France just so happen to come out with
exactly 107,635 votes each.
Nonetheless, if their members demand it, both institutions should be ready to
change how members are represented, and how decisions are made for example
through greater voting rights for poor countries. But only, it seems greater
voting rights (not necessarily very much greater rights, let alone equal
treatment), and only if their members demand it. The UN is to be downsized and
rationalised, and to have its functions curtailed regardless of its members
wishes. But the Fund and Bank need take one small step towards basic democratic
principles only if their members demand it. And, in assessing the strength of
these demands, no doubt their wishes, like their votes, are to be weighted by
The White Paper does say robustly that the practice of picking the heads of
both institutions based on nationality should end. This is, I suppose, a step
in the right direction. No longer would an Australian hand-picked for the World
Bank Presidency by the US President have to suffer the indignity of having take
US citizenship as James Wolfensohn did when he was appointed by Bill Clinton.
But the real point is not the nationality of the appointee, but the nature of
the appointment process . Until there is a democratic and transparent process
in which all the members of the Fund and Bank have an equal say, the
fundamental problem will remain.
The White Paper also recognises that there also needs to be greater
transparency in the way that the World Bank and IMF operate. But apparently
this means only that more World Bank analysis should be disclosed. Thanks, but
I?m not sure the quantity of World Bank analysis is the real problem with
transparency. Personally, I think we see quite enough World Bank analysis
already. Now, an improvement in the objectivity of the Bank analysis which is
made publicly available that would be different.
But the real issue of transparency is that we are not permitted to know what
has been said in the Executive Boards of the IMF and the World Bank not even
what our Director has said in our name, or how he has voted on our behalf (or,
more accurately how he has said he would have voted if there had hypothetically
been a vote. After all, if the Board actually voted, even the IMF and World
Bank might find it slightly embarrassing to keep the vote secret!) Even our
efforts to access this information under the Freedom of Information Act have
been blocked. Nothing about that in the White Paper. But then, that?s something
the UK government coula actually do something about if it wanted....
And finally, how about the WTO? What does the White Paper have to say about the
organisation which sets the terms of international trade central to
development in the current economic paradigm through Agreements forced through
by developed country governments through political and economic pressure ,
which operate exclusively by limiting the freedom of action of governments,
which cover an ever-greater area, far beyond trade policies, and which once
signed are backed by sanctions, apply in perpetuity and are virtually
impossible to amend?
What indeed! The WTO is not mentioned once. It isn?t even listed among the
One might have a little more faith in the White Paper if it showed some
recognition of the reasons for the failings of international organisations.
Why, after all, have UN organisations become so ineffectual? Could it have
something to do with their largest and richest financial contributor
deliberately falling years behind with its subscriptions to almost every
organisation in the system, then using the resulting financial leverage (and
its political clout) to cancel part of the arrears it has accumulated? And with
the resulting under-funding of the institutions, their dependence on
discretionary financing from vested interests (including, yes, the US
government) which threaten to withdraw funding the moment they step out of
line, and the need to allocate staff to fund-raising at the expense of core
Or could it perhaps be the (increasing) regularity with which developed
countries particularly, but not exclusively, the US throw their weight around
to secure the appointment of often inappropriate, unqualified and/or
incompetent individuals, occasionally corrupt or with clear conflicts of
interest, to head these institutions, while blocking those with support from
developing country governments and civil society? Or their proclivity for
intervening with the heads they have appointed to get respected staff members
sacked for saying anything which conflicts with their commercial interests, as
recently happened to the WHO representative in Thailand?
How about the duplication in the system? Who was it who insisted that UNAIDS be
created as a separate institution from the World Health Organisation? And that
the Global Fund to Fight AIDS, Tuberculosis and Malaria should be established
as a separate institution from both? That wasn?t the UN.
And how did the IMF and World Bank get into the business of micro-managing
developing country economies through policy conditionality in the first place?
Why did the IMF stray away from its mandate into structural issues where its
track record has been mixed? Why has the Fund?s (and, one might add, the
Bank?s) policy advice to developing country governments not been tailored to
meet the challenges they face? All this can be laid fairly and squarely at the
door of the developed country governments which run both the Fund and the Bank,
through their weighted votes and their appointment of the institutions? heads.
And why have such archaic neo-colonial governance structures persisted, turning
them into an instrument by which rich governments run poor countries? Because
the instutionalised power of the developed country governments has allowed them
to make damned sure it stays that way. And the White Paper seems a fairly clear
indication that the current UK government isn?t going to be the first to break
So what should the White Paper have said about all this, if the UK was really
strongly committed to working through the international system to reduce
poverty in developing countries and was really determined to use [its]
resources and influence to strengthen the international system for this
For a start, it should have recognised the (continuing) responsibility of the
developed country governments for the mess that the international system has
become. It should have called for immediate reform of the IMF and World Bank
governance systems on the basis of democratic principles generally accepted at
the national level not just for some unspecified increase in the voice of
developing countries from its current pitiful level, and only if the members
demand it, but real democracy, where votes are based on people not wealth.
It should have called on developed country governments to stop using the
anachronistic traditions of the IMF and World Bank to appoint their heads, and,
failing this, undertaken to use its position in the EU to represent fairly and
objectively the views of developing country governments when the next Managing
Director of the IMF is appointed. And it should have called strongly for
developed country governments to stop using their political and economic muscle
to manipulate the appointment of the heads of UN agencies in their own
It should have called for more consistent, timely and secure financing of UN
organisations, and openly condemned countries which fail to pay their
subscriptions for reasons other than inability to pay. It should have called
for a block on funding from sources which could constitute a conflict of
interest, and ensured that the threat of withdrawing discretionary financing
could not be used to blackmail UN organisations, either by commercial entities
or by governments. In the longer term, it should have called for a process by
which international organisations could be financed directly by global
taxation, to ensure their financial interdependence.
It should also, of course, have addressed the issue of the WTO. It should have
called for an end to the undemocratic and non-transparent informal processes of
confessionals, green room meetings and Mini-Ministerials, to the blatant abuse
of political and economic power by (mainly) the US and the EU to blackmail
developing countries into compliance in the negotiation process, and to the
gross inequality in representation in Geneva, which prevents most developing
countries from participating effectively in negotiations.
It should have called for observance of the principle established in the
Preamble to the WTO?s founding Treaty that trade policies should be run in the
interests of increased well-being and sustainable development, for a
Secretariat that is genuinely neutral between developed and developing
countries and not ideologically wedded to trade liberalisation above all else,
as well as genuine application of the principle of special and differential
treatment for developing countries (to which it refers in Chapter 5).
At the country level, the White Paper refers to the people?s rights to have a
say in what happens in their lives..., to be safe... to earn a decent living
for themselves and their families... [and] to be treated fairly by their
government and public officials as aspirations... enshrined in the Universal
Declaration of Human Rights, and the Millennium Declaration of 2000. But when
it comes to the global level, DFID seems to have forgotten that the Universal
Declaration equally enshrines the right to an international order in which the
rights and freedoms set forth in this Declaration can be fully realised.
The UK government, it seems, thinks that the Universal Declaration only applies
to developing country governments. It is time for them to recognise that the
disproportionate power they have exercised in the IMF and World Bank for the
last 62 years brings with it a commensurate responsibility to act to bring
about the human right they seem conveniently to have forgotten to an
international system which will support other rights instead of undermining
In short, the White Paper should have called for the application at the global
level of the standards of democracy we take for granted at the country level;
and it should have called, strongly and clearly, for the developed country
governments not only to stop blocking movement towards such reform, but
actively to support them, and to stop their current abuse of the shortcomings
of the existing system in their own ideological, commercial and geopolitical
interests. Then, and only then, perhaps we could take seriously the
government?s aspiration to Make Governance Work for Poor People and to Create
an International System Fit for the 21st Century.
In discussing governance at the national level, the White Paper says that:Good
governance is about how citizens, leaders and public institutions relate to
each other in order to make change happen. Elections and democracy are an
important part of the equation, but equally important is the way government
goes about the business of governing. Good governance requires three things:
- State capability the extent to which leaders and governments are able to get
- Responsiveness whether public policies and institutions respond to the needs
of citizens and uphold their rights.
- Accountability the ability of citizens, civil society and the private sector
to scrutinise public institutions and governments and hold them to account.
This includes, ultimately, the opportunity to change leaders by democratic
Until we can insert the word international in this extract at the appropriate
points, and substitute global institutions for governments, and still read it
with a straight face even when we get to the last bullet we cannot claim to
have good global governance. And, at the global level as much as the country
level, good governance is essential to reduce poverty.