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World Bank Needs Flexibility to Succeed in the Future

IN the midst of celebrations for the 50th anniversary of the Bretton Woods institutions in August, a transformer failure in the World Bank's headquarters in Washington abruptly halted activity. The buildings reopened and work resumed the following day, but the crisis points to the larger difficulties confronting the bank. The ability to transform itself has been the World Bank's greatest asset in its first 50 years. The question now is: Can the World Bank change to meet the needs of an evolving world or has the transformer failed?

The International Bank for Reconstruction and Development, the official title of the World Bank, was conceived primarily to meet the reconstruction needs of a war-torn Europe. When the Marshall Plan pushed it out of the reconstruction business, the bank refocused its attention and resources on development in the third world, primarily in financing power-generation and transportation projects. The inclusion of former colonial African countries in the 1960s and the addition of the International Development Association increased the bank's membership and lending practices to address the needs of the poorest countries. These two developments foreshadowed unprecedented expansion in the bank's scope and size under Robert McNamara in the 1970s. With a dramatic shift in the development paradigm in the 1980s away from projects and toward policy reform, the bank began lending for structural adjustment. Today, the bank emphasizes relieving poverty and protecting the environment. These are laudable objectives, but the bank can be criticized for taking 50 years to make them a priority.

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With regard to the environment, only in recent years - and in the face of attacks by vocal environmental groups - has the bank addressed this vital topic. Environmental groups are united in an active campaign, entitled ``50 Years is Enough,'' to pressure the bank to reform. In response, the bank is conducting a public-relations campaign to improve its image. This campaign disregards the important contribution that outside observers make in prodding a sometimes-reluctant institution to take on new challenges. It also goes against the wisdom of John Maynard Keynes, who, in his closing remarks at the Bretton Woods conference in 1944, proclaimed: ``I am greatly encouraged, I confess, by the critical, skeptical, and even carping spirit in which our proceedings have been watched and welcomed in the outside world... . We perhaps are too near to our own work to see its outlines clearly.''

Critics, however, must not ignore the constraints under which the World Bank operates. Like all multinational organizations, the bank is the sum of its members, each of which has its own interests, biases, and objectives. To its credit, the bank has largely managed to find common ground. It should not be surprising (however discomfiting to some) when this common ground is constrained in scope, size, and, at times, effectiveness. The challenge today is even greater with the addition of 21 new member states from Central and Eastern Europe, bringing the total to 178 members. For the first time in its history, the bank has the opportunity to be a truly ``world bank.''

Somehow the bank will have to balance the needs and concerns of individual members with those of regional and global organizations. Increasingly, global concerns such as health, unemployment, labor migration, refugees, and ethnic conflicts, as well as the allocation of scarce resources, will demand to be addressed in an international setting.

Even if the bank is willing to confront these issues, it will need a quality that is difficult to achieve in a large multinational bureaucracy: flexibility. By striving for increased local participation in its projects, the bank can ensure that the right kinds of services reach targeted groups. It must work in tandem with nongovernmental organizations in borrowing countries - in effect, expanding its membership and flexibility through ``participatory development'' to bridge the gap between policy objectives and actual benefits.

The bank has displayed a considerable capacity for flexibility in its first 50 years, but it must go further if it is to rise to the many challenges that await it, and the world, in the next 50 years. The Opinion/Essay Page welcomes manuscripts. Authors of articles we accept will be notified by telephone. Authors of articles not accepted will be notified by postcard. Send manuscripts by mail to Opinions/Essays, One Norway Street, Boston, MA 02115, by fax to 617 -450-2317, or by Internet E-mail to OPED@RACHEL.CSPS.COM.