Bretton Woods should practice good governance, says G-24 report
WASHINGTON, D.C. Mar --The International Monetary Fund and the World Bank, which have set standards of good governance for their borrowing members need to apply the standards themselves through the reform of constitution rules, and decision-making procedures and practices.
In reaching this conclusion, a research paper (Governance in International Organizations: The Case for Reform in the Bretton Woods Institutions) for the Group of 24 argues that, more specifically, in order to enhance their own accountability, transparency and members participation, they should consider redrawing quotas, revitalizing basic votes, and ensuring operation decisions are made in an open and recorded way - and not by the practice of consensus on the Board.
Even though consensus is seen by some as a way to open up discussions, this is not its only effect, says Ms. Ngaire Woods, author of the paper, due to be published soon by UNCTAD in its series on International Monetary and Financial Issues.
We found in the experiences of other organizations, such as the UN Security Council and the GATT/WTO, that consensus decision-making can reduce transparency and accountability within an organization. This is equally true in both the Fund and the Bank, where some argue consensus simply masks US dominance. To counter such criticism, the Fund and the Bank have an interest in making their procedures transparent and accountable, and in examining where and how consensus adds to or detracts from these standards.
Ms. Woods is a Fellow in the Department of Politics of University College, Oxford, UK. A summary of the views expressed in her paper has been circulated via the Internet by non-governmental groups in their briefing papers on the BWIs.
While the Woods paper, written in December 1997, does not specifically address the Fund/Bank policies and conditionalities in relation to their being made available to Asian countries in the current crisis, a number of mainstream economists and other critics have brought out that these policies have been formulated by the Fund to suit the interests of the US, and, in fact, have been shaped and changed by the US Treasury.
Also, the staff within each organization need to represent better the range of views of the membership, since participation requires not just better explanation but the full involvement of the membership in the definition of problems and solutions that the institutions need to address.
An analysis of the staffing of the two institutions, she notes, shows an enormous homogeneity in the intellectual background of the staff. Some 90% of the IMF professionals with a Ph. D. have received the degrees from universities in the US or Canada.
Similarly, a study of the high-level staff in the World Bank in the Policy, Research and External Affairs Departments showed that some 80% had been trained in economics and finance at institutions in the US and the UK.
At present, Ms. Woods adds, the institutions are vulnerable to the critique that, rather than offering a genuinely universal approach to problems and solutions of economic policy, they reflect a narrow, predominately Anglo-Saxon view.
At the same time, increased participation places a heavier burden on groups such as developing countries to come up with the goods by concentrating and deploying research and lobbying resources more efficiently in order to make a case for policies within the institutions.
And while the institutions are pressing for these standards to be applied within member governments, members of the IMF and World Bank are pushing for the same standards to be applied within the institutions themselves.
While good governance within international organizations is often described as balancing the requirements of effectiveness and legitimacy, the two are seldom separable.
Overall, the effectiveness of an institution depends to a large degree on its members perceptions as to how representative, inclusive and procedurally fair the institution is.
Analysing the voting structures and decision-making in regional development banks (the Inter-American Development Bank, the African Development Bank and the Asian Development Bank), often presented as more decentralised and democratic, the Woods paper notes that despite the Latin-American ownership of the IDB and their voting power, the US enjoys enormous dominance due to the formal and informal decision-making processes. The US has a veto on constitutional decisions requiring either a three-fourths or two-thirds majority of regional members and until recently even the Boards quorum required the presence of the US Executive Director at the meeting. And though its contribution to the funding of the concessional window has dropped to 8.22 percent, the US retains a veto. And even in the ordinary capital account of the IDB, where the US does not have a blocking minority vote, it has negotiated a procedure to retain a power to delay loans that it disapproves. The US also enjoys a more diffuse influence from the IDB being based in Washington, with one quarter of its top management coming from the US.
And despite its determination to preserve its African character, the AfDB has not translated into an African ownership, but rather very distant from its African membership. Despite a majority representation on the Board, it is not the African members that define the overall direction of the Bank. To add to these are poor relations between management and the Board.
While the US also plays an important role in the AsDB, its influence there is greatly diluted by Japans. And while developing countries do not have a controlling share of votes in the bank, the governance of the AsDB has evolved in a way which does balance out concerns over regional representation and effectiveness.