Bretton Woods Project submission on the DFID White Paper
Briefing||11 May 2009|
The Bretton Woods Project is an independent NGO established by a network of UK-based NGOs in 1995 to take forward their work of monitoring and advocating for change at the World Bank and International Monetary Fund (IMF). See www.brettonwoodsproject.org/about for more details.
We believe that significant change is needed at the World Bank and IMF to bring them into line both with international norms and with UK policy, in order to improve their contribution to sustainable development. In this submission we outline changes needed in:
(1) IFI governance: The World Bank and IMF need comprehensive reforms to their governance to improve their effectiveness, legitimacy and accountability. These reforms must encompass not only voting rights, but also voice, representation at the board, leadership selection, transparency, and accountability.
(2) IFI conditionality policies: The World Bank and IMF continue to need reforms to their conditionality policies, as they still impose damaging economic policy conditionality on their borrowers. While reform processes are underway, the UK needs to do more and work with other partners to move the multilateral institutions in line with the UK’s excellent policy on conditionality.
(3) IFI policies related to aid effectiveness: The World Bank and IMF have significant impacts on aid effectiveness and aid utilisation. The World Bank needs to allocate aid in accordance with need, especially for IDA countries, rather than using an ideologically driven allocation system. The IMF needs to do more to ensure that its work does not impinge on aid utilisation and should be monitoring its own compliance with the Paris declaration.
(4) IFI policy on climate change: The World Bank’s investments are a key driver of infrastructure spending in developing countries, including the IFC-supported investments in the private sector. Yet there is little coherence between these investments and environmental sustainability and mitigating and adapting to climate change. The World Bank needs to both make sure its investments do not exacerbate climate change, and that its climate change financing does not undermine UN processes and systems for adaptation and mitigation funding.
(5) Private sector finance: There are serious concerns that publicly-backed private sector finance does not meet the standards of other multilateral finance, including in relation to impact assessment, monitoring, evaluation, transparency, and adherence to human rights standards. The UK should ensure that private-sector finance, including the IFC as well as other national and regional development banks, meets the same standards as other finance.
(6) Financial sector and development: The financial crisis has highlighted the impacts of the financial sector on the real economy in all countries. Financial regulation and supervision fundamentally affect development issues, including exchange rates. Thus regulatory reform in the UK and Europe should be coherent with government development policies. There is a need for global financial regulation and reforms to the international monetary system to create an international currency, international clearing union, and system of globally managed exchange rates.
1. World Bank and IMF governance
The World Bank and IMF need comprehensive reforms to their governance to improve their effectiveness, legitimacy and accountability. These reforms must encompass not only voting rights, but also voice, representation at the board, leadership selection, transparency, and accountability. This section relates to white paper sections 5.1 and 5.4.
World Bank governance
The World Bank has a mandate to combat poverty and a focus on developing countries, where it often wields enormous power. Yet developing countries have little say in how it is run. It is time for fundamental reform to redress the democratic deficit at the World Bank, and give real power to the developing countries the Bank is supposed to support. We support developing country government calls for the introduction of parity of voice between developed, and developing and transition countries, within an agreed timeframe. This should allow for voting shares to much better reflect population size and recognise that the real impact of World Bank activities is felt in the developing world. . It is crucially important that reforms to World Bank governance should also include the IFC.
The World Bank makes decisions which deeply affect the lives of people across the world. Citizens have a right to accurate, timely, and accessible information about the activities of the Bank and the positions their governments are taking within the Bank's governing structures. We support the Global Transparency Initiative's demand that the Bank move towards a presumption of disclosure for all information, with a strictly limited regime of exceptions. Transparency is a fundamental prerequisite for introducing greater accountability at the World Bank. While the establishment of the Inspection Panel and Compliance Advisor Ombudsman were good starts, the Bank needs independent bodies with greater authority to force the Bank to live up to both its own standards and internationally agreed standards on human rights and the environment.
Finally there must be changes made to leadership selection processes at the World Bank. The anachronistic system whereby the Bank is always headed by a citizen of the United States must end. Leaders should be selected through a transparent, open and merit-based process, without respect to nationality.
The changes to IMF governance that were agreed in April 2008 are too small to overcome the perceived lack of legitimacy. Less than 3 per cent of the IMF’s votes will be shifted from rich countries to low- and middle-income countries. Belgium, with a population of 10 million, will still have more votes than G20 members Brazil (200 million people), Mexico (111 million people) or South Korea (48 million). In addition, the changes did not address the composition of the IMF executive board or the lack of transparency and accountability at all levels of the institution. Adequate reforms must be put in place as soon as possible.
We believe the following actions are needed to improve IMF governance to make it a legitimate and effective institution:
2. Conditionality reform still needed at multilateral institutions
The World Bank and IMF continue to need reforms to their conditionality policies, as they still impose damaging economic policy conditionality on their borrowers. While reform processes are underway, the UK needs to do more and work with other partners to move the multilateral institutions in line with the UK’s excellent policy on conditionality. This section relates to white paper sections 2.1, 5.1, 5.4 and 5.5.
World Bank conditionality
The World Bank’s 2006 review of its implementation of new ‘good practice principles’ for the use of conditionality does not represent a sufficient departure from the status quo. The review's findings that the principles have been "fully integrated" across the Bank's work contrasts sharply with the findings of NGO shadow reports:
The Bank concluded that it uses conditionality "in such a way that it does not interfere with internal consensus-building processes." ActionAid finds that Bank staff continue to work with an "extremely narrow definition of country ownership", which in Pakistan has "led to a large dam-building programme being driven forward in the face of public opposition"1.
According to the Bank review, sensitive policy reforms, such as privatisation and trade liberalisation, "respect government preferences and take into account government constraints". Research conducted in 2006 by Brussels-based network Eurodad found that in Mozambique, Uganda, Zambia and Benin, World Bank loans were conditional on privatisation of certain public services - "even though these privatisations were not called for in the government's national development strategies"2. Eurodad research from 2007 found that more than two thirds of loans and grants from the Bank’s International Development Association (IDA) still had sensitive policy reforms attached. The majority of these were privatisation-related conditions.
The Bank says that programmes give "clear indications of the actions considered critical by the Bank". The principle of criticality, counters ActionAid, "is regularly being flouted". So-called 'non-binding' conditions are being used to push policies which are not high priorities on governments' agendas. A study by Debt and Development Coalition Ireland of 13 Poverty Reduction Support Credits (Bank support for national development strategies) found that in Mozambique, Benin, and Burkina Faso, the Bank was concerned about dwindling commitment to privatisation, so included benchmark conditions to keep up the pressure3. The November 2007 Eurodad research raised concerns that the Bank is now 'bundling' conditions together under a single heading, including critical and non-critical conditions.
The UK should ensure that the World Bank commits to strengthening the good practice principles on conditionality by:
The IMF continues to impose both structural conditionality and quantitative conditionality on borrower countries. While its new facility, the Flexible Credit Line does not have conditionality, a handful of countries are eligible for loans under this facility. Most others must rely on existing IMF facilities which impose heavy conditionality.
The economic stimulus response of the developed countries to the financial crisis, which earned the IMF’s enthusiastic endorsement, stands in stark contrast to the programmes the IMF has implemented in the loans it has agreed to since the crisis unfolded. Overviews of the Fund’s Stand-by Arrangements and Exogenous Shocks Facility programmes since October 20084 demonstrate that while there may be an incremental loosening of some conditionality, most programmes continue to require contractionary economic policies such as hiking interest, freezing wages, cutting deficits, and slashing public spending. Such demands are consistent with the IMF’s long record of structural adjustment programmes.
The UK government, and DFID in particular, should be paying careful attention to programme requirements in developing countries as the IMF exercises its renewed mandate. DFID should demand that developing countries be allowed, indeed encouraged, to adopt counter-cyclical policies that will revive employment, ensure an increased level of social services to safeguard those made vulnerable by the crisis, and provide an economic stimulus to counteract the declining investment and export revenues that will challenge most developing countries.
An early March IMF staff review of conditionality admitted that the Fund had made mistakes: "In the past, IMF loans often had too many conditions that were insufficiently focused on core objectives." However in the context of the financial crisis, there is again questioning of the core objectives. While many countries, both rich and poor, pursue counter-cyclical economic policies, the IMF is pushing pro-cyclical conditions on many of its borrowers rather than providing time for adjustment. Particularly in Eastern Europe, the IMF is repeating the mistakes it made during the Asian financial crisis.
The recent elimination of structural performance criteria does not mean an end to the practice of forcing structural reform. Instead "the IMF will rely more on pre-set qualification criteria (ex-ante conditionality) where appropriate rather than on traditional (ex-post) conditionality." That will likely mean an increase in the use of 'prior actions', conditions that must be fulfilled prior to getting a loan rather than those required during the course of the loan. Structural benchmarks, which are not legally binding, but still force policy change, will continue to be used.
Policy interventions in the context of loans or grants should be restrained; donors, including the IMF, should not make demands beyond basic fiduciary measures to ensure that recipient countries have good public financial management, full transparency, and accountability for the funds they receive. This is already UK government policy for bilateral assistance. However multilateral assistance from the IMF, which is financed out of the UK's quota contributions to the IMF and from UK contributions to IMF trust funds for concessional assistance to low-income countries, continues to impose conditionality that would be a violation of UK government policy.
Multilateral institutions and aid effectiveness
The World Bank and IMF have significant impacts on aid effectiveness and aid utilisation. The World Bank needs to allocate aid in accordance with need, especially for IDA countries, rather than using an ideologically driven allocation system. The IMF needs to do more to ensure that its work does not impinge on aid utilisation and should be monitoring its own compliance with the Paris declaration. This section relates to white paper sections 2.4, 5.1, 5.4 and 5.5.
World Bank's IDA allocation and policies
The Bank's aid from its IDA arm is selectively allocated based on the use of the Country Policy and Institutional Assessment (CPIA) score. The CPIA is derived from judgments of Bank staff on country performance on a set of macroeconomic, structural, social and governance criteria. Better performing countries receive on average five times as much as the worst performers.
The CPIA ignores need in making aid allocations and assumes that governments have full control over policy outcomes to the neglect of external and structural issues. Further, the CPIA embodies a set of well-known neo-liberal economic norms. By basing IDA allocation on these norms, the Bank is forcing economic policy change. It is a kind of conditionality with no consultation, not based on the PRSP and without any public or recipient government ownership. Academics have argued that "selective allocation of aid based on the CPIA risks locking in an extensive policy agenda with ambiguous, if not adverse, repercussions for growth."5
Rather than allocating IDA funds based on the implementation of policies favoured by the Bank, increased emphasis should be placed on the level of financing needed to reach national development goals, and the use of indicators which measure progress towards development outcomes. The European Commission has piloted a new outcomes-based approach in its development assistance. Need should be immediately incorporated into IDA allocation decisions, and outcome (not policy) based measures should studied at the Bank for use in IDA allocation.
Additionally, country-led poverty and social impact assessment (PSIA) should be used in all IDA-supported financing with a major distributional impact. The World Bank's evaluation unit is examining the Bank's PSIA work. The UK should pay careful attention to the findings of this report to improve PSIA.
The IMF and aid effectiveness6
The IMF is a signatory to the Paris Declaration. However the OECD Development Assistance Committee (DAC), which is the main official monitoring mechanism for donor compliance with Paris Declaration principles, does not monitor the IMF. The IMF releases no information on its own compliance with the Paris principles.
IMF operations do not conform well to Paris Declaration principles. On predictability, IMF disbursements are subject to IMF board review before each disbursement. Bureaucratic delays in scheduling board discussion of programme reviews can delay disbursements. IMF programmes also contribute to undermining ownership by reducing the ability of recipient countries to manage aid inflows. With the IMF and country authorities setting the budget in advance, the IMF has been inflexible in accommodating increases in aid. Technical assistance (TA) is also a type of aid, and should be treated the same as other kinds of aid for the purposes of aid effectiveness. However IMF technical assistance priorities are not set a national development strategy, generally do not flow through coordinated programmes with other donors, and certainly does not flow through country procurement systems.
Another problematic area of intersection between the IMF and aid effectiveness is in the IMF's signalling role. Donors use the existence and status of an IMF programme as a tool to judge whether they should continue aid disbursements. This puts aid-dependent low-income countries in the position of needing the IMF's stamp of approval on their macroeconomic policies. This aid architecture prevents full ownership of economic programmes and poverty reduction strategies, as the government must, by definition, negotiate their economic policies (incl. budgets, borrowing levels, and structural policies) with the IMF.
The IMF is not suited to being a donor agency, as it does not have the expertise, the monitoring systems, or lending practices to allow compliance with the Paris principles. The IMF should not be the signalling agency that determines when more aid would be effective, as it does not have expertise in this area. Donors should de-link their aid from the existence of IMF programmes. Donors that have already done so, such as the UK, should work to convince other donors and multilateral agencies to adopt the same practice. All technical assistance, including IMF TA, should conform to the same principles and practices as aid as outlined in the Paris Declaration. Funding to pay for TA should be routed through country procurement systems.
The World Bank and climate change
The World Bank’s investments are a key driver of infrastructure spending in developing countries, including the IFC-supported investments in the private sector. Yet these investments do not demonstrate coherence with environmental sustainability and mitigating and adapting to climate change. The World Bank needs to both make sure its investments do not exacerbate climate change, and that its climate change financing does not undermine UN processes and systems for adaptation and mitigation funding. This section relates to white paper sections 2.3, 3.2, 3.4, 3.5, 5.1 and 5.2.
Conservative estimates say doing nothing about climate change will cost the world economy at least 5 per cent of gross domestic product each year, and potentially more than 20 per cent.7 As acknowledged by DFID, this will most impact the world’s poor and will now be felt in conjunction with negative impacts from the financial crisis. However, as global leaders confront the financial crisis, there is a critical window of opportunity to address the dire need for low-carbon economies and development models.
To date, DFID's approach to climate change and energy has been inconsistent. In the previous white paper Eliminating world poverty: making governance work for the poor, the UK asserted that it would consider its environmental impacts and address “…reducing our contribution to harmful climate change, pollution and resource-depletion”. In addition, it asserted it would consider ways of improving developing countries’ access to clean and sustainable energy sources in light of growing acknowledgement of climate change.8 However, the UK Government continues to support oil and gas extraction projects around the world through the World Bank and other IFIs as well as through the Bank’s climate initiatives. By funding these projects the UK government risks undermining efforts both to reduce greenhouse gas emissions through domestic regulation and tackle climate change through international negotiations and mitigation financing. Rather than endorse the use of UK aid money for extractive industry projects, DFID should lead the way towards low carbon development, and push for the World Bank to transform its current energy lending, adopt a new energy and climate change strategy and revisit the recommendations of the Extractive Industries Review (EIR). In addition, the UK government must rethink the vehicle, structure and content of climate funds it supports to ensure that these are not contradictory to its climate change and development goals.
World Bank’s fossil fuel investments
A recent study from the Bank Information Center9 shows that World Bank fossil fuel lending is on the rise, especially for coal. During its 2008 fiscal year, the World Bank and International Finance Corporation (IFC) increased funding for fossil fuels by 102 per cent compared with only 11 per cent for new renewable energy (solar, wind, biomass, geothermal and small hydropower). In considering the Bank's three-year average increase for renewable energy and energy efficiency of 73 per cent, it is important to highlight that these projects started from a very low baseline compared with fossil fuel projects.
Bank fossil fuel projects have a clear impact on global CO2 emissions. When the fossil fuels involved in World Bank and IFC lending projects for the 2008 fiscal year are combusted, the project lifetime CO2 emissions from this one-year of financing will equate to approximately 7 per cent of the world's total annual CO2emissions from the energy sector, or more than twice all of Africa's annual energy sector emissions.
Continued Bank lending to fossil fuels, especially coal and oil, will make a low-carbon transition very difficult. Each fiscal that year the Bank supports a coal, oil, or gas project in a developing country represents a commitment to carbon-intensive energy sources for the next 20 to 50 years. Moreover, many of the World Bank's largest oil and gas extraction and pipeline projects continue to be aimed at exporting to rich countries, feeding their appetite for fossil fuels.
Unfortunately the World Bank does not attempt to calculate the climate change impact of its projects and programmes, a major omission for an institution attempting to position itself at the forefront of the climate change debate.
Climate Investment Funds (CIFs)
Furthermore, coal and unsustainable technology is proposed to be funded through the funds specifically established by the World Bank to combat climate change. The US Congress has recently voted against funding the World Bank's Clean Technology Fund (CTF), largely due to concerns about the inclusion of coal in funding criteria, channeling funds instead to renewable energy technology and the UN's Least Developed Countries Fund. However, DFID remains a strong supporter, with the first £100m of the UK's £800 million for the climate investment funds to be deposited this financial year, of which £60 million will be directed towards the CTF.
DFID officials have asserted that they expect that only a small proportion of the CTF funds will go to coal projects because of cost constraints put on coal technology allowed under the CTF. However, concrete and proactive action is needed to ensure that public money is not channeled into funding coal and other fossil fuel projects, rather than relying on price constraints as a default for spurring alternative energy investment. The argument that the Bank is unable to advocate for more renewable energy due to developing country demand for fossil fuel powered energy is clearly mistaken. Recently a special Envoy to the Prime Minister of India stated that the country does not in fact want CCS coal. It is important to remember that World Bank funding is, and always will be a very small component of overall investment in energy in the developing world, particularly in emerging economies. It would therefore make most sense for these limited public funds to support emerging clean technology sectors in those countries to help them development new renewable energy sources and to leapfrog the dirty development path of industrialised countries.
With economic concerns being at the forefront of addressing climate change, there is further concern about the climate investment funds and effectiveness for developing countries as the Bank currently proposes both grants and loans for “clean” energy technologies. At the very least, climate funds should provide grants equal to any difference in price between conventional technologies and truly clean technologies that will help put countries on a clean development path. A policy such as this could do much to “level the playing field” for truly clean renewable technologies.
The CTF and other climate investment funds risk diverting funding that should come through a global agreement based on the model of common but differentiated responsibilities. The UNFCCC Adaptation Fund that was established at the Conference of Parties in Bali in 2007 has already held its first meeting is scheduled to become operational this year. However, this and other funds established under the UN will require additional funding. Additional funds that might have gone to this Adaptation Fund could now be diverted into the World Bank.
The World Bank as an institution is burdened by fundamental issues of trust with the very constituencies that it aims to serve. To be considered legitimate and a contribution to global efforts, the UK should support climate funds under the UNFCCC and hold true to a limited time frame for the Bank's climate investment funds and involvement in climate financing. In the meantime, as these pilots are developed, the UK must advocate for changes in climate financing which take into account issues of governance and equity such as whether Indigenous Peoples and civil society organisations will also be given a voice in the board of climate funds currently under development. Furthermore, the UK must take into consideration who the beneficiaries will be of funds in early development, such as the Forest Investment Program, and whether it will benefit Indigenous Peoples and affected communities or whether it will be channelled to corporations and large scale forest plantations.
Taking these various points into consideration, DFID should demonstrate its commitment to addressing climate change in a sustainable and equitable manner by:
The IFC and publicly-guaranteed private sector finance
There are serious concerns that publicly-backed private sector finance does not meet the standards of other multilateral finance, including in relation to impact assessment, monitoring, evaluation, transparency, and adherence to human rights standards. The UK should ensure that private-sector finance, including the IFC as well as other national and regional development banks, meets the same standards as other finance. This section relates to white paper sections 2.1, 2.2, 2.3, 2.4, 5.2, 5.4 and 5.5.
The investment commitments from the International Finance Corporation (IC), the private sector arm of the World Bank Group, have skyrocketed from under $4 billion in 2000 to nearly $8 billion in 2007 and over $11 billion in 2008. Further rapid growth is anticipated especially as the IFC has been tasked with financial crisis response, including bank recapitalisation and greater infrastructure investment. Accurate assessment of the development impact of these flows is critical to ensure that they deliver sustainable pro-poor development.10
As a starting point more transparency is required in disclosing the terms (of, at the very least, past deals) and how grants used for co-financing are managed. The IFC must demonstrate that it is adding value above what normal private sector finance can deliver. That means looking more closely as measures of value-added, including by incorporating measures of human development and environmental sustainability.
Increasingly the IFC is investing through financial intermediaries (FI), including private equity funds, however there is no robust method of supervision in place. The IFC's rating of the environmental and social effects of its financing to FIs amounts to a box-ticking exercise. The IFC does not visit most FI projects, even though the cumulative environmental and social impacts of FI sub-projects are likely significant.
There is concern about how the IFC is defining ‘frontier’ investments, an area targeted for growth. Evidence suggests a major expansion into public services – health and education. This can undermine the Bank's own work in health and education through IDA and IBRD.
The longest-standing concern of civil society groups which monitor the work of the IFC has been over environmental and social sustainability. While we welcome the introduction of the IFC's Development Outcome Tracking System, we do not accept that this information can only be released in aggregate form. If private-sector finance is to meet broadly agreed standards, then transparency and evaluation must become more integrated. Assessing the development contribution of development finance must do more than just counting up the number of jobs added, but must look more holistically at human development, including equity and distributional issues.
Finally, the IFC must meet internationally agreed standards on human rights. A rights-based approach to develop requires this. The IFC use of the concept of “broad community support” rather then “free prior informed consent” is unacceptable. It does not provide the protections that are required under international law.
The financial sector, financial markets and development
Financial sector and development: The financial crisis has highlighted the impacts of the financial sector on the real economy in all countries. Financial regulation and supervision fundamentally affect development issues, including exchange rates. Thus regulatory reform in the UK and Europe should be coherent with government development policies. There is a need for global financial regulation and reforms to the international monetary system to create an international currency, international clearing union, and system of globally managed exchange rates. This section relates to white paper sections 2.1, 2.4, 5.2 and 5.4.
The current crisis shows the profound mismatch between the global reach and interconnectedness of financial flows, and the absence of an effective international regulatory regime that could govern them. The lack of an effective international regulatory regime is problematic not only in times of crises. The market for commodities derivatives, for example, is said to have a profound impact on the price level and volatility of underlying commodities.12 Research produced at the Bank of International Settlements has shown that price development in the commodities market is not fully determined by supply and demand but also by speculation, making it less influenced by fundamentals.13 This has a profound impact on producers as well as consumers, of which many live in countries with no or marginal influence over the regulation of these markets, leading to inefficiently low levels of regulation.
The international financial system is regulated by a set of 12 voluntary standards and principles developed by a range of private and public standard setting bodies and multilateral organisations.14 The current regulatory regime needs considerable improvement regarding content as well as governance aspects. Standards need to be more specific, in the form of concrete guidelines rather than broad principles, they need to be legally binding and enforcement at national levels must be assessed and incentivised at an international level. To ensure adequate levels of regulation, the process of standard settings need improvement in the realm of participation, accountability and transparency. All countries affected by regulation need to have a clear, institutionalised channel of participation in the development of standards, and the process needs to meet high standards of transparency and accountability to ensure the involvement of parliament, other stakeholders, and national constituencies.
Given these weaknesses in the current architecture, we believe a new vision for global financial regulation is needed to ensure sound regulation at an international level. Among the first to propose a global regulatory authority were Lord Eatwell and Lance Taylor and the idea has also been backed by economists such as Barry Eichengreen.15 Along the same lines, several UN bodies including the UN Committee for Development Planning and the Secretary-General of UNCTAD have called for a World Finance Organisation16, which could serve as an institutionalised forum for the development and assessment of regulatory guidelines.
Such an authority must aim for regulation that integrates social and environmental goals and understands that a stable financial system is a means towards these ends. The goals of any regulatory authority, including a global one, should not be only the stability of a financial system to enable the individual accumulation of wealth. There must be a wider social remit.
Exchange rates and the international monetary system17
The current international monetary system has negative effects on both developing countries and business investment globally. Volatility and the speculation that ensues only benefits traders who profit from volatility, while creating enormous costs. The system needs reform in order to make it more development-friendly and more stable. One of the key ways to do this is through the creation of an international currency, international clearing union, and system of globally managed exchange rates.
Even in times of relative global stability, volatility in exchange rates damages economic planning and investment in rich and poor countries. Developing countries and small economies are especially vulnerable to swings in their exchange rates. The flows of “hot money” into and out of countries increase the risk of financial and economic crisis. Crises of these sorts have devastating social impacts, increasing poverty, worsening human development, and reversing the gains of economic development. The current system also has direct costs for the governments of developing countries. Assets held in reserves are by definition those not used to finance productive activity, including investment in infrastructure, education, health or other activities which have long-run benefits in terms of growth, productivity, and employment
The policies of major economies, as the issuers of reserve currencies, have international spillovers onto developing countries, which those countries are not forced to think about when they decide their policies. For example, changes in interest rates of the major reserve countries are usually targeted at domestic price stability and, in the case of the US, domestic unemployment. The IMF has no way force rich countries to think about the international impacts of their domestic policies.
The current crisis has helped to revive interest in the original proposals made by John Maynard Keynes for an international currency called the ‘bancor’ and an International Clearing Union which would settle transactions in this currency. Keynes' ideas remain an excellent basis to start a new discussion, but need updating in the context of freer mobility of capital and international financial flows. The UN General Assembly president's commission of experts on financial reform, a task force of economists and policy makers from around the globe that was chaired by Nobel laureate Joseph Stiglitz, recommended the creation of an international reserve currency.18 There is a practical limit to how long the anachronistic system of a single country's currency serving as the vehicle for all global reserve holdings can be maintained. The creation of an international currency, international clearing union, and system of globally managed exchange rates should be on the agenda.
1 What progress? A shadow review of World Bank conditionality http://www.actionaid.org.uk/100234/our_research.html
2 World Bank and IMF conditionality: A development injustice http://www.eurodad.org/articles/default.aspx?id=711
3 World Bank’s PRSC: Continuity or change? http://www.debtireland.org/resources/ddci-re-PRSCReportFINAL.htm
4 See http://www.twnside.org.sg/title2/par/IMF.Crisis.Loans-Overview.TWN.March.2009.doc and http://www.brettonwoodsproject.org/art-564188
5 Van Waeyenberge, Elisa, “Lending Selectivity by the World Bank”, Development Policy Viewpoint No. 16, October 2008, Centre for Development Policy and Research, SOAS, http://www.soas.ac.uk/cdpr/publications/dv/46729.pdf.
6 For a fuller discussion of the issues of the IMF and aid effectiveness please see: “Memorandum submitted by the Bretton Woods Project to the International Development Committee: Select Committee on International Development inquiry Working Together to Make Aid More Effective”, February 2007, House of Commons, HC 520-II, http://www.parliament.the-stationery-office.com/pa/cm200708/cmselect/cmintdev/520/520we05.htm.
7 Stern Review: The economics of climate change, 2006.
8 DFID’s White Paper on International Development, Eliminating world poverty: making governance work for the poor, July 2006, P78-79, 83.
9 World Bank Energy Sector Lending: Encouraging the world’s addiction to fossil fuels. Heike Mainhardt-Gibbs, Bank Information Center, February 2009
10 For a more in-depth discussion of some of these issues, see: “The International Financial Corporation: Beyond the rhetoric”, Bretton Woods Project, Bretton Woods Update No. 58, 4 December 2007, http://www.brettonwoodsproject.org/art-558877; “IFC’s intermediaries neglect environment: evaluation”, Bretton Woods Project, Bretton Woods Update No. 61, 17 June 2008, http://www.brettonwoodsproject.org/art-561833; “Questioning the IFC’s impact ‘without embarrassment’”, Bretton Woods Project, Bretton Woods Update No. 57, 5 October 2007, http://www.brettonwoodsproject.org/art-557189.
11 For a more thorough discussion of these issues please see: “Memorandum by the Bretton Woods Project for the UK Treasury Committee: Treasury Committee inquiry into the international dimension of the banking crisis”, Bretton Woods Project, 30 April 2009, http://www.brettonwoodsproject.org/treascomev09.
14 For an overview about the standard setting bodies and which standards they develop, see: Financial Stability Board, “Who are the Standard-Setting Bodies?”, http://www.fsforum.org/cos/wssb.htm, retrieved 28 April 2009; and footnote 16.
15 John Eatwell and Lance Taylor, “Why We Need a World Financial Authority”, WiderAngle, No. 3, 1998, http://www.wider.unu.edu/publications/newsletter/en_GB/introduction-angle/_files/80458472453374328/default/angl9802.pdf; Barry Eichengreen, “The Global Credit Crisis as History”, 2009, http://www.econ.berkeley.edu/~eichengr/global_credit_crisis_history_12-3-08.pdf.
16 No author, “UN body proposes new world financial organisation”, Journal of the Group of 77, No. 3, 1998, http://www.g77.org/nc/journal/3-98/9.htm; Supachai Panitchpakdi, 2008, “Towards a World Financial Organisation”, World Economy & Development In Brief, Luxembourg, 24. November 2008, http://www.weltwirtschaft-und-entwicklung.org/cms_en/wearchiv/042ae69b600e5fd01.php.
17 For a more thorough discussion of these issues please see: “Memorandum by the Bretton Woods Project for the UK Treasury Committee: Treasury Committee inquiry into the international dimension of the banking crisis”, Bretton Woods Project, 30 April 2009, http://www.brettonwoodsproject.org/treascomev09.
18 United Nations General Assembly, “Recommendations by the Commission of Experts of the President of the General Assembly on reforms of the international monetary and financial system”, 19 March 2009, http://www.un.org/ga/president/63/letters/recommendationExperts200309.pdf.
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Published: 11 May 2009 , last edited: 14 May 2009
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