Written by the Steering Committee of the Coalition for Human Rights in Development
This article is also available in French, here.
The lack of democratic governance and accountability in the World Bank Group is a key problem in global governance and the financial architecture. Yet, it remains unaddressed. US President Joe Biden’s nomination of Ajay Banga for World Bank president – two days after the public resignation of Trump-appointee, David Malpass – has resurfaced these critiques. The Bank’s board will likely approve Banga’s appointment without heeding calls for a democratic, transparent and merit-based process.
The selection process for the Bank’s president is one cause and symptom of the institution’s malaise (see Background, What’s the gentleman’s agreement’?), but it is far from the only one. Wealthy governments from the Global North have significantly more decision-making power (see Inside the Institutions, IMF and World Bank decision-making and governance). Civil society is not a part of the Bank’s governance. The Bank also maintains that it does not need to uphold international human rights obligations and therefore cannot be held accountable in national courts.
The Bank recently released its “evolution roadmap” – opening the door to change its vision, mission and ways of working – while many are questioning if the international financial architecture is equipped to deal with the current polycrisis of inequality, ecological breakdown, climate change, pandemics, etc. The appointment process of the new president comes at this crucial moment and could signal the political will for the Bank to engage in real reforms.
The World Bank acts like a shadow government in the global governance system
The Bank says it is an apolitical economic development agency, but in practice it is a key geopolitical actor, setting global standards and shaping law, policy, and fiscal and civic space at the national level, particularly in middle- and low-income countries. The Bank advances a top-down, neoliberal model of development that is not politically neutral. Without the participation of affected communities and civil society groups, Bank-supported activities are fueling human rights abuses and increasing inequality.
The Bank has long focused on advancing privatisation. The use of debt-based financing and policy conditionality – pushing for deregulation in the name of creating an enabling environment for the private sector (see Observer Winter 2021) – have further eroded state capacity. The Bank has even been accused of having supported private clients to evade taxes in countries hosting projects by depositing funds in tax havens.
The Bank is also contributing – directly and indirectly – to exacerbating civic space restrictions and reprisals against people speaking out against activities it supports. Many economic and governing elites are using Bank-supported projects to further advance authoritarianism and corporate capture, maintain the democratic deficit and power imbalances in their own countries, and silence dissent using smear tactics, threats and violence.
Unless there is a profound transformation, the Bank’s new roadmap will lead nowhere for communities in the Global South. An open, merit-based and transparent selection process for the next president could be a small, but important, step towards this larger transformation. Unfortunately, the nomination of Ajay Banga – former MasterCard CEO and investment banker, without demonstrable development or human rights expertise – signals more of the same: Redirecting public resources to generate private profit without transparency, accountability or participation.
More money will not directly result in better development outcomes
One thing is clear: Merely giving the World Bank more funds won’t fix any global crisis. The types of interventions the Bank adopts will determine if they help people and the planet, and support states to meet their international human rights obligations.
The Bank has a potentially important role in mobilising crucial resources that communities in the Global South could use to respond to the current polycrisis. But these crises are not just resource issues, they are ethical and distributional issues rooted in questions of justice, equity and planetary stewardship. How these crises are framed, as well as what responses are chosen, will determine the quantity and type of resource gaps states must bridge to meet their international human rights obligations and respond to the needs of their citizens and the planet.
Democratic governance and accountability are crucial for the Bank to remain relevant
Many are questioning if the World Bank, with its democratic deficit, is the appropriate institution to identify and fill the gap. The Bridgetown Initiative, which calls for reform of the Bank and the International Monetary Fund – spearheaded by Prime Minister of Barbados, Mia Mottley – is receiving increasing support.
The Bank’s evolution roadmap provides an opportunity to undertake reforms that go beyond a slightly better resourced but largely unchanged institution. It must include steps to increase democratic governance and accountability, and reshape the Bank’s mission, vision and model to advance human rights-based and community-led development. The fact that it recognises the need for more grant-based mechanisms over debt is welcome. However, we need to work towards a transformational approach with greater participation of directly affected people in the Bank’s governance and its operations.
The Bank must use 2023 – the 75th anniversary of the Universal Declaration of Human Rights – to develop a human rights policy in consultation with grassroots communities and their allies. The policy should include a plan to adopt development indicators for human rights-based and community-led development, human rights due diligence for all project investments and policy interventions, and an effective remedy framework for when communities are harmed.
The Bank’s shareholders should revise its governance system to be more equitable, looking at existing models and adapting them to be better fit for purpose. For example, the United Nations General Assembly follows the system of one country, one vote. Additionally, the Green Climate Fund, a funding partner of the Bank, includes non-voting civil society observers on its board. The Bank should work consultatively with grassroots communities and their allies to explore similar and more representative structures that factor in carbon emissions (see Observer Winter 2022), the level of climate related risks, historic wealth transfers due to colonisation, population levels, etc. This would enable people most affected by the Bank’s activities to have a say in its governance, and equip the Bank to address the challenges outlined in the roadmap.
The United States, which is currently the Bank’s largest shareholder, should lead by example in sharing and devolving decision-making power. It should take the first step by walking away from the gentleman’s agreement that has shaped the leadership of the Bank and IMF since their inception. This would signal the US government’s seriousness about tackling climate change in a just and sustainable way through the evolution roadmap process, and beyond.
This article is also available in French, here.