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Development organizations Part 1 – The World Bank The International Bank for Reconstruction and Development organizations Part 1 – The World Bank The International Bank for Reconstruction and Development (IBRD) International Development Association (IDA) Multilateral Investment Guarantee Agency (MIGA) International Finance Corporation (IFC) Hurd, Ian. 2010. International Organizations: Politics, Law, Practice. New York: Cambridge University Press. CHAPTER 4 Lipscy, Phillip. 2017. Renegotiating World Order. New York: Cambridge University Press. 1

Plan • Movie review • World Bank vs. IMF • Governance • World Bank Plan • Movie review • World Bank vs. IMF • Governance • World Bank structure 2

Movies 3 Movies 3

Coming Soon: 4 Coming Soon: 4

On to the World Bank… 5 On to the World Bank… 5

Key differences between the IMF and the World Bank • IMF: – – Exchange Key differences between the IMF and the World Bank • IMF: – – Exchange rate stability & Monetary policy Mission creep development Large loans for macro-targets ($100 s millions billions) Staff: around 2000 people – mostly in DC • World Bank – – Development Smaller loans ($10 s millions $100 millions) Specific projects (dam, schools, oil pipeline) Multiple projects in one country • big countries may have several project loans, e. g. , India >10 – Staff ~ 10, 000 people – also mostly in DC but 100 offices worldwide 6

The World Bank • The primary DEVELOPMENT international institution • Projects of various scopes The World Bank • The primary DEVELOPMENT international institution • Projects of various scopes in both emerging market & poor countries • 2006: – $23. 6 billion (loans & grants) 279 projects • 2011 – $46. 9 billion (loans & grants) 303 projects http: //web. worldbank. org/WBSITE/EXTERNAL/EXTABOUTUS/0, , content. MDK: 20103853~menu. PK: 1697035~page. PK: 51123644~pi. PK: 329829~the. Site. PK: 29708, 00. html • 2012 – $52. 6 billion (loans & grants) http: //web. worldbank. org/WBSITE/EXTERNAL/EXTABOUTUS/0, , content. MDK: 20103853~menu. PK: 1697035~page. PK: 51123644~pi. PK: 329829~the. Site. PK: 29708, 00. html • Critics (e. g. Easterly 2005): – World Bank has fallen short of its goals of improving living standards and reducing poverty • Why? – Misguided policy conditions through the development projects • Intervening in the market? (not enough market? ) • Austerity conditions (not enough state? ) • International politics? Policy conditions ignored? 7

Some reasons the IMF & the World Bank are confused • Both use conditionality Some reasons the IMF & the World Bank are confused • Both use conditionality • The World Bank has been known to require an IMF program be in good standing – So the conditionality may run through the IMF • Both institutions founded in 1944 @ BW, NH • Both are in DC (right next to each other) • Both do their Annual Meetings simultaneously • Head of the IMF (“Managing Director”) always a European; Head of the World Bank (“President”) always American • Both have a similar governance structure 8

World Bank Executive Board of Directors • http: //siteresources. worldbank. org/BODINT/Resources/278027 -1215524804501/IBRDEDs. Voting. Table. World Bank Executive Board of Directors • http: //siteresources. worldbank. org/BODINT/Resources/278027 -1215524804501/IBRDEDs. Voting. Table. pdf • http: //web. worldbank. org/WBSITE/EXTERNAL/EXTABOUTUS/ORGANIZATION/BODEXT/0, , page. PK: 64020055~t he. Site. PK: 278036, 00. html • http: //web. worldbank. org/external/default/main? menu. PK=395550&page. PK=64099288&pi. PK=64099409&the. Site. P K=395544 Photo taken at the Board Room, June 2009 9

http: //www. worldbank. org/en/ab out/leadership/directors 10 http: //www. worldbank. org/en/ab out/leadership/directors 10

WB Appointed & Elected Directors • Appointed: – US, Japan, Germany, France, UK • WB Appointed & Elected Directors • Appointed: – US, Japan, Germany, France, UK • Elected: – China, Saudi Arabia, Russia • Regionally elected (ad-hoc) – Australia • South Pacific, New Zealand, Korea (5 years ago) • South Pacific, New Zealand, Korea, Cambodia, Mongolia – Brazil • Latin American/Caribbean countries – Africa: • French group • English group • *NEW* South Africa / Nigeria / Angola group! – Iran • Afghanistan, Algeria, Ghana, Morocco, Pakistan, Tunisia 11

Really ad-hoc elected WB Directors: • Italy – Greece, Malta, Portugal, San Marino, Albania, Really ad-hoc elected WB Directors: • Italy – Greece, Malta, Portugal, San Marino, Albania, & Timor. Leste • Belgium – Austria, Luxembourg, Belarus, Czech Republic, Hungary, Kosovo, Slovak Republic, Slovenia, & Turkey • Netherlands – Armenia, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Georgia, Israel, Macedonia, Moldova, Montenegro, Romania, & Ukraine • Switzerland – Azerbaijan, Kazakhstan, Kyrgyz Republic, Poland, Serbia, Tajikistan, Turkmenistan, & Uzbekistan 12

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How do they do it? • Foreign aid? • http: //www. google. com/search? aq=f&gcx=c&sourceid=chrome&ie=UTF-8&q=preis+der+macht#pq=preis+der+macht+vreeland+borat&hl=en&sugexp=pfwc&cp=21&gs_id=k&xhr=t&q=preis+der+macht+borat&qe=c. How do they do it? • Foreign aid? • http: //www. google. com/search? aq=f&gcx=c&sourceid=chrome&ie=UTF-8&q=preis+der+macht#pq=preis+der+macht+vreeland+borat&hl=en&sugexp=pfwc&cp=21&gs_id=k&xhr=t&q=preis+der+macht+borat&qe=c. HJla. XMg. ZGVy. IG 1 h. Y 2 h 0 IGJvcm. F 0&qesig=w. Ju. Y 3 Dud. Drz. GZKMo 47 Tm. A&pkc=AFg. Z 2 tl. F 23 YTxn. M 8 pdeq. AOvnwqx. Yy. Onb. Qim. Vm 0 bbgv. SNm. Gqw. Zhn. GRGGE 9 ldzs 3 Od 5 KNAjt. Lu. Xtn. Bgkla. N 5 Konxtd 0 j. ACw. Bx. Nz. Q&pf=p&sclient=psyab&source=hp&pbx=1&oq=preis+der+macht+borat&aq=f&aqi=&aql=&gs_sm=&gs_upl=&bav=on. 2, or. r_gc. r_pw. r_cp. &fp=8281380 e 0 ebeaaac&biw=1440&bih=763 • http: //www. handelszeitung. ch/konjunktur/europa/iwf-preis-der-macht 14

Amount of Swiss aid going to poor countries (GDP/capita<$2200, 1993 -2008) Millions of constant Amount of Swiss aid going to poor countries (GDP/capita<$2200, 1993 -2008) Millions of constant US$ (2000) 15 $12. 04 million 12 9 $7. 71 million 6 3 0 Non-Swiss-bloc n=1, 321 n=72 Std dev=9. 41 Std dev=19. 99 t=3. 50 p<0. 00 15

IMF vs WB on voting power • WB Executive Board – IBRD – http: IMF vs WB on voting power • WB Executive Board – IBRD – http: //siteresources. worldbank. org/BODINT/Resources/278027 -1215524804501/IBRDEDs. Voting. Table. pdf – IDA – http: //siteresources. worldbank. org/BODINT/Resources/278027 -1215524804501/IDAEDs. Voting. Table. pdf • IMF Executive Board – https: //www. imf. org/external/np/sec/memdir/eds. aspx 16

Why, historically, has the WB reformed votes more than the IMF? • WB faces Why, historically, has the WB reformed votes more than the IMF? • WB faces more competition – a wide range of multilateral and unilateral institutions in promoting economic development – Only one real balance of payments crisis lender (IMF) • WB members can credibly threaten to exit 17

International politics: Does political power at the World Bank matter? • Do political considerations International politics: Does political power at the World Bank matter? • Do political considerations play a part in who the Bank lends to? • http: //web. worldbank. org/WBSITE/EXTERNAL/EXTSITETOOLS/0, , content. MDK: 20264002~menu. PK: 534379~page. PK: 98400~pi. PK: 98424~the. Site. PK: 95474, 00. html#6 • “It is true that during the Cold War years aid was politically motivated. Now, however, aid is being delivered to countries most in need and to those who show they are determined to use it well. ” • We’ll return to this question February 15! 18

Domestic politics in recipient countries? • Officially, how does the World Bank interfere with Domestic politics in recipient countries? • Officially, how does the World Bank interfere with the political affairs of its members/clients? – (Answer: Officially, it doesn’t) • How does this influence its lending decisions? – (Answer: Again, officially, it doesn’t) • “Governance” – Even officially, however, the World Bank does try to improve “governance” – This is a euphemism for “democracy. ” – Many members (e. g. , China) would object if “democracy” were used 19

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What is the What is the "World Bank“ as opposed to the "World Bank Group"? • International Bank for Reconstruction and Development • IBRD (often called “the World Bank”) • International Development Association • IDA – created in 1960 – concessional financing • “WORLD BANK” • IBRD & IDA are tightly connected – work as a single unit (though the terms of their loans are quite different) • International Finance Corporation • IFC – lends to private companies for private sector projects. Has its own building, own executive vice pres. & staff (more “entrepreneurial”) • Multilateral Investment Guarantee Agency • MIGA – provides insurance to private companies against political risk • ICSID – International Center for the Settlement of Investment Disputes 21

Membership • IBRD: 189 countries • IDA: 173* countries • MIGA: 181* countries • Membership • IBRD: 189 countries • IDA: 173* countries • MIGA: 181* countries • IFC: 184* 22

 • Where does the IBRD get most of its funding to lend to • Where does the IBRD get most of its funding to lend to developing countries? – Private markets • Where does IDA get most of its funding? – Returns (interest) from IBRD loans, donor contributions 23

 • When was the International Finance Corporation (IFC) started and WHY? • 1956: • When was the International Finance Corporation (IFC) started and WHY? • 1956: Bank was unable to lend directly to private companies, buy equity in them or help manage them. • Yet the fundamental idea was that the World Bank should play a catalytic role vis a vis the private sector. • IFC became the mechanism to support private investment • Does IFC serve a role for which there is no market? • It looks for high conflict areas and high risk – inherently risky investment – companies would not invest there without IFC’s advice to do so. 24

 • When was the Multilateral Investment Guarantee Agency (MIGA) started and WHY? • • When was the Multilateral Investment Guarantee Agency (MIGA) started and WHY? • 1988. Designed to insure private investors against political risk and provide technical assistance and dispute mediation involving governments and private investors. • Does it serve a role for which there is no market? 25

What are the different types of countries that the WB currently works with? 26 What are the different types of countries that the WB currently works with? 26

6 types of countries 1. Countries that borrow only from IBRD 2. Countries that 6 types of countries 1. Countries that borrow only from IBRD 2. Countries that borrow only from IDA (not IBRD) 3. IDA/IBRD “blend” countries 4. Problem countries 5. Special cases 6. Too rich to borrow from the World Bank 27

1) Creditworthy borrowers from the IBRD • Middle-income countries. • Per capita incomes in 1) Creditworthy borrowers from the IBRD • Middle-income countries. • Per capita incomes in this group are below the IBRD graduation threshold (~$6000 per cap) • But too high for the countries to be eligible for credits or grants from the IDA (~$1000 per cap) • Some of these countries elect not to borrow from IBRD but the Bank often provides analysis and advice (South Africa, Gulf States) 28

2) Countries that borrow only from IDA, not from the IBRD • Eligible for 2) Countries that borrow only from IDA, not from the IBRD • Eligible for IDA credits – not considered creditworthy for IBRD loans. • Almost all African countries. • Loans at concessional rates 29

3) IDA/IBRD “blend” countries: • Eligble for both IDA (by per capita income) and 3) IDA/IBRD “blend” countries: • Eligble for both IDA (by per capita income) and IBRD lending (creditworthiness standards) and elect to borrow from both. E. g. : India and Nigeria. 30

 • 4) Member countries that are not eligible for either IBRD or IDA • 4) Member countries that are not eligible for either IBRD or IDA lending because of armed conflict, economic mismanagement, or failure to service World Bank debts. • E. g. , Myanmar/Burma (2009). • WB performs low level of operational work “watching brief” 31

 • 5) Special cases, especially countries in post-conflict and post crisis situations • • 5) Special cases, especially countries in post-conflict and post crisis situations • Some are ineligible for IDA or IBRD financing nonetheless participate in multidonor program financed by special funds, often administered in trust by the World Bank • E. g. : Liberia, Timor Leste (prior to independence), the Occupied Palestinian Territories, Iraq 32

 • 6) Countries considered too rich to borrow from the World Bank • • 6) Countries considered too rich to borrow from the World Bank • Above per capita of $6, 000 (IBRD threshold). • Some are “graduates” (I hate this term) • De-graduation possible: countries that had ended their lending relationship ran into difficulties and sought renewed World Bank support. 33

Contradictions @ World Bank • Is there any irony in the World Bank’s “dream” Contradictions @ World Bank • Is there any irony in the World Bank’s “dream” (A world without poverty)? – It would go out of business. – Bureaucratic perspective thoughts? • Washington Consensus – World Bank has historically promoted market solutions, but its projects are non-market! 34

The debate • Planners v. Seekers • States v. Markets • Centralized v. decentralized The debate • Planners v. Seekers • States v. Markets • Centralized v. decentralized mechanisms of allocation • http: //www. youtube. com/watch? v=7 f. Wy. D 24_yj. A • http: //www. youtube. com/watch? v=pfj 7 iit 9 Pm 0 • http: //www. youtube. com/watch? v=Utpiu. Q 0 u. R 7 s&NR=1 • http: //www. youtube. com/watch? v=v. Qruuwu. Jn. KE • http: //www. colbertnation. com/the-colbert-report-videos/59916/march-02 -2006/jeffrey-sachs • http: //www. washingtonpost. com/wp-dyn/content/article/2006/02/12/AR 2006021201150. html • http: //www. spiegel. de/international/spiegel/0, 1518, druck-363663, 00. html • Contradiction? – World Bank has historically promoted “Washington Consensus”, but projects themselves are non-market solutions. 35

Who should lead the World Bank? • http: //www. thedailyshow. com/watch/wed-march-16 -2005/add-hawk • Wolfenson Who should lead the World Bank? • http: //www. thedailyshow. com/watch/wed-march-16 -2005/add-hawk • Wolfenson • Wolfowitz • Zoellick • … who’s next? A? • Another American? 36

Zoellick @ Gtown • http: //vreelander. blogspot. com/2010/09/who-should-lead-multipolar-world. html • Answer: – US Congress Zoellick @ Gtown • http: //vreelander. blogspot. com/2010/09/who-should-lead-multipolar-world. html • Answer: – US Congress • Global International Institutions – Between a rock & a hard place – Must make room for emerging markets – But need to keep advanced industrial countries on board • Regional option? – If emerging markets don’t have enough voice – Will they form their own international institutions? – How can the US keep them at the table, without alienating Europe? 37

Jim Yong Kim http: //www. worldbank. org/ Ngozi Okonjo-Iweala 38 Jim Yong Kim http: //www. worldbank. org/ Ngozi Okonjo-Iweala 38

Take aways: 39 Take aways: 39

Take aways • IMF and World Bank: similarities/differences • Voting power • World Bank Take aways • IMF and World Bank: similarities/differences • Voting power • World Bank vs. World Bank Group • World Bank contradictions 40

Thank you WE ARE GLOBAL GEORGETOWN! 41 Thank you WE ARE GLOBAL GEORGETOWN! 41

First catch up: 1. Who are we? – Humans? – Nationals? – “Regionals”? 2. First catch up: 1. Who are we? – Humans? – Nationals? – “Regionals”? 2. IMF and credible commitments 42

Discussion from last time: • Regional organizations might produce increased MORAL HAZARD • But Discussion from last time: • Regional organizations might produce increased MORAL HAZARD • But regional organizations make sense if economic ties are closest @ the regional level • The Invictus Question: – Who are we? – National identity? – Global identity? – Regional identity? – http: //vreelander. blogspot. com/2010/09/regional-games. html 43

IMF lending may follow any of 4 logics: 1. IMF imposes the wrong conditions IMF lending may follow any of 4 logics: 1. IMF imposes the wrong conditions (1997 East Asian Crisis) 2. Government uses IMF leverage to push through “reforms” that protect elites, leaving labor & the poor to pay for “adjustment” (common) 3. Government has international leverage, and conditionality is not binding (relatively common – Pakistan, Russia) 4. IMF imposes the right conditions on a government with the political will to see them through (uncommon – 1995 Mexico) 44

How does bringing in the IMF help push through economic reform? Figure 1: The How does bringing in the IMF help push through economic reform? Figure 1: The logic of bringing in the IMF Accept Payoff to veto player -1 (change policy) Veto player Without the IMF (eg, Reject Congress) 0 (maintain the status quo) Government’s Chief Executive (eg, Prez, PM, etc. ) With the IMF Accept -1 (change policy) + loan Veto player (eg, Reject Congress) -r (reject the IMF) 45

The story requires: A CREDIBLE Commitment SPOILER ALERT! 46 The story requires: A CREDIBLE Commitment SPOILER ALERT! 46