IFI governance


World Bank governance reforms benefit rich countries

26 June 2013

A June academic paper argued that rich countries manipulated the last World Bank governance reform process in 2010 (see Update 71, 70) and proposed a new, fairer way to distribute voting rights at the Bank.

In the June edition of the journal World Development, Jakob Vestergaard of the Danish Institute for International Studies and Robert Wade of the London School of Economics argued that “the World Bank and representatives of western states manipulated the process to make voting power changes appear substantial” when in fact the reforms fell “far short of what is necessary to fortify the organisation’s legitimacy”. Subsequently, “the modest voting power increases achieved for developing countries have virtually vanished.”

Explaining the dilution of the 2010 reforms, the authors described the system for reallocation of unsubscribed voting shares: “A number of high-income countries reversed the voluntary forbearance they agreed to in the 2010 [governance] reform. By subscribing to unallocated shares, Japan, Germany, United Kingdom, France, and Canada have together increased their share of total votes. If post-2010 developments are factored in, the picture turns upside-down.”

Arguing that while “resistance to more substantial voting power realignments may be in the short-term interest of some developed countries, it is not in their collective medium to long-term interests.” On the next round of reforms scheduled for 2015, Vestergaard and Wade proposed doing away with the existing system and allocating voting shares with three mechanisms: basic votes, “regional basic votes”, and regional GDP shares.