The World Bank employs many of the best and brightest development professionals. The International Monetary Fund attracts some of the ablest brains in the financial sector. Established at Bretton Woods in 1944, both have generally been blessed with exceptional chief executives. But now, wrestling with a legacy of changing priorities and strategies, and a resulting long-term erosion of trust, the World Bank, at least, is adjusting its image and its approach.

The ferocity of the attacks on these two organizations as the pre-eminent symbols of globalization run amok is hard to understand and harder still to defend. Yet by failing to come to terms with the emotional undercurrents of the opposition, both bodies risk inviting continued attacks. The street protests in Seattle last year represented above all a rebellion against a perceived loss of control — both of individuals over their personal lives and of nations over their political and economic affairs. It was a gut reaction to the sense of helplessness against forces too large to control and too remote to connect with. It took decades for this feeling to develop. But realization of the loss coincided with the hype over globalization, which then became the focus of all grievances.

The absence of chief executives from developing countries heightens those countries’ sense of remoteness from the major financial institutions. (The World Bank is always headed by an American and the IMF by a European.) Many people in developing countries ask how, if the chief executives’ understanding of poverty is theoretical, can the institutions’ proposed remedies reflect the real world of operational choices?

Globalization is not rooted in IMF or World Bank prescriptions. There is a real gap between the bank’s efforts to facilitate adjustment to the pressures and costs of globalization and the strongly held perception that both the World Bank and the IMF have tried to foist globalization on unwilling but weak (because poor) countries. Some analysts believe that the problem lies not with the institutions’ policies, but in their insensitivity to legitimate fears and concerns about the loss of policy autonomy, the risks to infant domestic industries from giant multinational enterprises, and the political fallout of harsh economic medicines for governments that are under pressure to simultaneously tighten budgets, eliminate subsidies, eschew populism and yet democratize.

The 1960s were full of such glorious phrases as “takeoff,” “steady growth,” “alliance for progress” and “critical minimum effort.” Foreign aid, channeled into poverty-reducing programs under the active direction of the World Bank, would be used to short-circuit the century or so it had taken Western countries to change from subsistence agrarian economies to highly industrialized ones. The experience and expertise of the West, it was believed a generation ago, could be readily transferred to the rest through financial and technical aid.

In time, donor countries grew disenchanted because of perceptions of aid simply disappearing into a development black hole. Recipient countries, too, were disillusioned by efforts on the part of former colonizers to perpetuate economic, political and cultural ties through directed aid. Sometimes the solution to a surplus-disposal problem — for example, food that could neither be consumed at home nor sold in international markets — was described as aid.

The World Bank and the IMF, caught in the cross fire, saw their prescriptions attacked for:

* the application of identical remedies regardless of each country’s particular circumstances;

* the support of programs that were theoretically elegant but impractical;

* the doctrinaire application of a market-oriented, free-enterprise philosophy;

* harming the poor and the vulnerable by the imposition of austerity measures;

* ignoring the views of developing countries’ governments while being unable to influence the views of rich governments;

* and promoting environmentally damaging investment programs.

Following the end of the Cold War and the fall from grace of the command economy model, the World Bank’s prominent role in the effort to end world poverty gave way to high-profile efforts by the IMF to manage the transition in formerly Soviet republics according to the free-market ideology. A decade later, there has been at least a partial reaction. Many have concluded, reluctantly, that the market is not entirely efficient, does not necessarily lead to equitable outcomes and cannot replace some sort of compact between shareholders, workers, consumers, citizens and nature. We may produce, sell and buy in the economy; we live in society.

Each crisis has produced calls for major reform of the architecture of international financial management. The two Bretton Woods institutions have proven to be as resistant to serious structural reform as the United Nations. Confusion abounds over demarcation between the mandates and agendas of the World Bank, the IMF and the U.N., not to mention regional development banks. Instead of coordination and efficiency, there is competition and duplication.

Hence the calls for the two institutions to return to their core competencies, namely, poverty alleviation for the World Bank and financial-crisis management for the IMF. They could also promote the expression of contrary views in internal policy debates as a way of challenging the prevailing orthodoxy, also known as the Washington consensus. And they should promote some individuals from developing countries as the visible public personas of senior management. This would help give a human face, in client states, to ongoing adjustments in the central planks of policy.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.