A modest proposal to reform the World Bank

I am not one of those who believe the World Bank should be shut down.  Indeed, if anything, I would prefer to see the multiplicity of bilateral aid agencies and NGOs shut down, and all the money put through a single world institution instead.    The World Bank is far from perfect; but it is an absolutely vital part of the fight against global poverty.

One problem with the World Bank is that decisions continue to be made on the basis of "one dollar one vote", reflecting the continuing pretense that it is nothing more than a lending insitution owned by its shareholders, rather than the strategic international institution that it is.

Over on the Center for Global Development blog (CGD is my employer), Ngaire Woods makes a very interesting proposal for the reform of the governance of the World Bank.

… for about 174 members of the Bank, there is little incentive to engage in decisions being made by the Board. Eight Directors can marshal a majority among themselves with little if any consultation with others.

This does not have to be the case. If Directors had to marshal not just 50% of votes (which might be just 8 members), but also 50% of members (92 countries) to make decisions, there would be a clear incentive for to consult and bring on board Directors who represent a large number of countries but wield few votes (such as the two Directors who represent over twenty African countries each yet each wield less than 3.5% of voting power).

This is not a difficult reform. The Bank’s Articles already provide for double-majority voting (Article VIII) for any amendment to the Articles. This could be extended to other decisions. Along with transparency of the Board’s process such as publication of the full minutes of any Board meeting so that countries can read exactly what their Director has said in Board meetings, would be first steps towards a more effective Board.

This seems to me a splendid proposal.  We also need to stop the board from micromanaging every decision taken by the World Bank, focusing instead on strategic direction – perhaps a change like that would help to force the Board to move more "upstream" in its deliberations? 

NB: I’ve disallowed comments on this post here: if you agree (or not), visit the CGD blog and comment there.