Weak Prescription for Improved World Bank Governance

This post was written by GAP International Reform Director Beatrice Edwards for her Daily Kos Blog.

On October 20th, the High Level Commission convened to assess governance at the World Bank transmitted its report, "Repowering the World Bank for the 21st Century," to World Bank president Robert Zoellick. The report concluded (more or less verbatim) that:

• Current mechanisms for strategy formulation are not adequate for setting priorities and guiding operations;
• Mission creep is endemic, weakening accountability and increasing the risk that resources will be misallocated;
• The decision-making process is perceived as too exclusive;
• Insufficient institutional accountability for results weakens the World Bank’s effectiveness and legitimacy;
• The Bank’s resource base is insufficient.

The 'accountability' concerns of the commission, headed by former Mexican president Ernesto Zedillo, are profound. Among other things, the commissioner's wrote, the Executive Board lacks the independence necessary for effective oversight.  The appointment of the president is "opaque and excludes most of the membership."  The conduct of the Bank president is unsupervised, executive directors are not necessarily competent or qualified, and accountability functions are a patchwork of ad hoc assignments.

Unfortunately, the commission produced only superficial recommendations to address all this.  Much of the suggested improvement consists – literally – of rearranging the chairs (on the board).  Board chairs would be switched around and reduced in number.  The president of the Bank would no longer sit in the chairman’s seat.  He would also be subject to a performance review (by the board).  A council of advisors would be established to counsel the president, but its composition "would mirror that of the Board."  The methods to be used to choose council members are unspecified.

To strengthen accountability, additional reviews will be conducted, presumably by similar High-Level Commissions confronting similarly defective arrangements.

This is not serious.  In 2007, cronyism was exposed in the office of the World Bank president: Paul Wolfowitz had installed a network of overpaid and underqualified advisors with carte blanche to intervene anywhere they pleased.  As a result, they wreaked havoc.

During his tenure, Wolfowitz established a position for his romantic partner at a ‘foundation’ putatively run by the US Department of State, paying the woman approximately $70,000 more per year than the salary earned by  the Secretary of State.  And, just as the dust settled from these adventures, his General Counsel took it upon herself to obliterate the autonomy of the Bank’s Ethics Office.

At the same time, emails surfaced suggesting that the Bank would defang its anti-corruption program after  push-back from the government of China.  Meanwhile, longstanding, widespread corruption came to light in Cambodia, the Philippines, India, Kenya and Viet Nam.

A year later, the General Services Division at the Bank was forced to disclose that its three principal IT vendors had been debarred for fraud and corruption.  One of them had bribed the Bank’s Chief Information Officer, who was also (nominally) debarred, and then compensated in the amount of $25,000 by the Bank for damage done to his reputation by the whole affair.

This year, the Bank’s Vice President for Institutional Integrity was exposed in the press for politicizing a high-level investigation in South Africa, an ethical lapse that directly affected the outcome of the recent presidential election there.

At the same time, the Independent Evaluation Group concluded that the inadequacy of internal controls regulating the Bank’s concessional lending rose to the level of a material weakness.

These problems will not be addressed by switching the seats around the table, nor will they be addressed by adopting the second of the commission’s recommendations: "Strengthening the WBG’s Reource Base," i.e. dumping more public money into the same pockets.  Greater taxpayer funding to finance the dubious actions of many of these people (and their friends, relatives, colleagues and cronies) sitting in brand new chairs is not the answer.