Changing Times Call for Desperate Measures

Though the long-term impact of the popular uprisings in the Middle East is largely unpredictable, we can be sure that every aspect of society-from economy to education, from health to government and the way in which western institutions engage with them-will be feeling the effects for years to come. Already we are seeing high fiscal and external pressures, rising inflation, surging debt, severe reduction of the tourism sectors and volatility in stock prices. Like the period after 9/11, this changed economic, political and social environment will form the backdrop for all subsequent analysis set in the Middle East, such as the major policy shift announced by World Bank (WB) President Robert Zoellick at the beginning of April.

The absence of Washington protests suggests that the World Bank and the IMF have become irrelevant

Zoellick’s address at the Patterson Institute for International Economics, entitled “The Middle East and North Africa: A New Social Contract for Development,” laid out the organization’s plan for aid spending reform. He acknowledged the failure of WB initiatives to alleviate poverty in the Arab world, and instead emphasized the need to redirect programs on long-term good governance and citizen participation rather than solely on infrastructure projects and food aid. “In one way or the other, a modernized multilateralism needs to recognize that investments in civil society and social accountability will be as important to development in the Middle East and beyond as investments in infrastructure, firms, factories, or farms,” Zoellick told his audience.

He made a list of promises, including that the World Bank would “work with governments in the region and around the world to help strengthen their effectiveness and their accountability.”

This announcement also comes at a time when the World Bank and other western-dominated financial organizations like the International Monetary Fund (IMF) appear to becoming more or less irrelevant to world affairs today—a trend that mirrors the gradual balancing of western power with that of growing powers elsewhere. Realizing the need to adapt to these shifts, in March, the bank invited youth groups, women’s groups and change agents to a forum on development in light of the Middle East’s ongoing unrest. And following Zoellick’s speech at the Paterson Institute the bank released a world development report on 11 April, which “looks across disciplines and experiences drawn from around the world to offer some ideas and practical recommendations on how to move beyond conflict and fragility and secure development.”

The report makes the following three assertions: Institutional legitimacy is the key to stability; investing in citizen security, justice, and jobs is essential to reducing violence; confronting this challenge effectively means that institutions need to change. In other words, the prevention of conflict rather than its alleviation will be the World Bank’s primary focus moving forward.

Yet another more curious sign of this waning relevance is the absence of vocal opposition to WB and IMF policies. This week, the two organizations are holding their annual Spring Meeting. Over the past few years, it has become customary for young protesters to descend on Washington every spring to protest what had become these two organizations’ staple recipe to developing countries: They promised needy world governments loans, grants and development programs only if these governments implemented reform. Reform, however, was narrowly defined as swallowing the bitter pill of the “Washington Consensus.” Namely, disband workers unions, scrap governmental social safety nets, downsize bureaucracies and open markets for free trade. At the same time, the IMF and World Bank have failed to see the connection between funding reform and actually propping up corrupt governments unaccountable to the people, who, incidentally, have until now seen little to none of the development aid originally intended for them. This spring, however, no serious protests seem to be in the offing.

The disconnect between the WB and the IMF, on one hand, and the public, on the other, runs long and deep. Throughout the 1990s, one country after another, such as Turkey and Argentina, implemented the WB and IMF “reforms” and saw hyperinflation hit their currencies and other ills befalling their economies. The WB and the IMF never apologized for the wreck that they caused to these and other countries and continued with suggesting one-size-fit-all reform schemes tied to loans and grants that world governments were in desperate need for.

In 2008, however, “reform” models failed their designers as the world watched Washington—along with its so-called consensus—sink into deep recession. A credit crunch and a real estate bubble burst in America and Europe saw nations, such as Greece and Ireland, beg the more prosperous ones, like the US and Germany, to come to their rescue. Reform, as prescribed by the WB and the IMF, lost its appeal as the world turned its eyes East.

Writing in The Washington Post, Moises Naim argues, “Since 2000, the economies of developing countries have grown by an average of 6.1 percent every year; in contrast, the advanced economies have grown by a meager 1.8 percent on average.” He added: “As a result, while in 2000 developing nations accounted for one-fifth of the global economy, today their share has grown to more than a third of the world’s total output.”

Needless to say, the WB and IMF are not throwing their towels in just yet. Zoellick, at least, seems to understand that revamping the World Bank’s image will not be enough—as is evident in the world development report. A perusal of this report is reassuring. Its author, Sarah Cliffe, addresses many of the familiar criticisms of the bank’s long-standing development policies, including the necessity to use markers other than growth and poverty rates to determine need; the formulation of programs that tackle severe income inequality; the need to weigh the short and long-term social impact of recommended policies; the creation of stricter mechanisms with which to measure success of WB programs; and the need for a new incentive structure within the organization that does not judge professional success on the amount of aid given and the achievement of quick results, but rather on quality programs that are capable of achieving long-lasting results.

The challenge now is to implement these reforms without collapsing from within, however, reform may also not be enough. Changing times force long-standing institutions to adapt, yet many are simply unable to do so, and instead, become more entrenched in a bureaucratic system that does not allow for the forging of new paths. This scenario could very well be on the cards for the World Bank, which certainly faces a tough road ahead during which time we may still see in the coming springs protesters returning to voice disagreement at its doorsteps.

Hussain Abdul-Hussain – Contributing editor.

Jacqueline Shoen – Editor.