GEI Newsletter No. 6

Global Economic Institutions (GEI) Research Programme

GEI Newsletter Issue No. 6

Reforming the World Bank

by Brett House and David Vines

Also in this issue:
Editorial
The World Bank's Struggle to Integrate the Environment

Reforming the World Bank

by Brett House and David Vines

A conference on `The Future of the World Bank' was held in London at the Foreign and Commonwealth Office on 24 June 1997. Organised jointly with the Oxford Policy Institute and the CEPR, this meeting brought together a diverse range of scholars, policy-makers, leaders from the NGO community, and World Bank officials, both past and present. Participants analysed the Bank's overall objectives and its role as an opinion leader, discussed the strategies and instruments; by which the Bank attempts to fulfill its mandate, and began to articulate a vision for the Bank in a rapidly changing development landscape. A number of proposals were made to guide the Bank as it adapts to the challenges it faces. All were united by an underlying sense that the Bank remains a relevant and necessary institution for the pursuit of global economic development.

On 13 March 1997 the Executive Board of the World Bank approved President James D. Wolfensohn's `Strategic Compact' for the World Bank. Wolfensohn produced a vision for how the Bank should reform and re-invent its product mix, delivery systems, and institutional structure in the face of rapidly increasing private trade and financial flows to developing countries, and in the face of the resulting change in the demand for the World Bank's services. It is appropriate that the Bank's clients and shareholders – stakeholders in the process of economic development – discuss the future of this pre-eminent institution in the wake of Wolfenson's vision. This article details some of the main ideas and debates which arose in a day of discussion on the World Bank.

There was broad agreement in our discussions that the World Bank, as an institution, is not performing up to its potential. There was also broad agreement that the `Strategic Compact' – whilst in many ways necessary – is not a sufficient initiative towards achieving these goals. The day's discussions ranged over two interrelated, but, in principle separate, questions: what the World Bank does, and should do; and the institution-design of the Bank itself i.e. how the bank does, and should do, what it does. Our report on the day's proceedings considers these topics in that order.

1 Conditionality: The Linchpin of Reform?

There seemed to be a broad agreement about the necessary conditions which need to be in place in client countries in order for the Bank to realise a greater degree of success in its operations. Most participants felt that a positive policy environment is the key to effective development project implementation, poverty alleviation and growth. Exactly what is meant by a `positive policy environment' was never fully unpacked, but one could surmise that most participants included in their conception of such positive policies: a strong legal system and property rights, low levels of corruption, consistent, market-oriented government policies, free trade and unfettered capital markets. Such a view sits well with the Bank's emphasis on the importance of `institutional capacity' articulated in the 1997 World Development Report.

Given this consensus, the key issue for the World Bank is one of determining how it can best ensure there is a positive policy environment to support its work in client countries. Christopher Gilbert (Queen Mary and Westfield College, London, and CEPR) and Andrew Powell (Central Bank of Argentina), presenting a paper written jointly with Raul Hopkins (Queen Mary and Westfield College, London and CEPR) and Amlan Roy (Queen Mary and Westfield College, London) emphasised that conditionality lies at the heart of the Bank's operations and its comparative advantage in development assistance. He argued that the Bank's distinctiveness and strength derives from the way it `bundles' together three functions: lending, development research and development assistance. By lending for approved development projects, it is able to enable governments to benefit from its development experience. That experience ensures an overall higher success rate on loans than might otherwise be attained. The success pays for the research, which underpins the assistance. The whole package is glued together by conditionality, which allows the Bank to insist that borrowers follow its advice with respect to policy reforms, as well as in project design and implementation. Such conditionality not only makes default more expensive, produces superior debt servicing and produces higher returns to lending, but also generates a positive externality to private sector banks who also benefit from higher debt servicing. Thus it is capable of enhancing client country growth.

Nevertheless, Gilbert and Powell conceded that the extent of reform in most African World Bank client countries has been disappointing. Paul Collier (Centre for the Study of African Economies, Oxford and CEPR, a presenting paper written jointly with Patrick Guillamont (CERDI, Universit― d'Auvergene) Sylviane Guillamont (CERDI, Universit― d'Auvergene) and Jan Willem Gunning (Vrije Universiteit Amsterdam) discussed why this should have been so. He stressed that up until now the World Bank's conditionality has been formulated on an ex ante basis, whereby client governments make promises of policy reform in return for assistance. He argued that such conditionality is not taken seriously in many developing countries, particularly because there is no cost to defaulting on promises of policy reform. Collier cited a number of studies which show that official development assistance has had, on average, no effect on either growth rates or the composition of budgets in those developing countries which receive it. There appear to be a number of reasons for this. Some of these relate to poor project design or insufficient attention to implementation. Also there is the problem that aid dollars appear to be very fungible: money given for one purpose enables the recipient to withdraw its own money from supporting that purpose to pursue its own objectives. The failure of conditionality to provide an adequate incentive for improvements in the policy environment has surely been contributed to the failures of development assistance.

These studies further show that the effect of aid is sensitive to the policy environment. In a typically good policy environment, aid does significantly raise the growth rate; however in typically bad policy environment aid actually reduces the growth rate by a significant amount.

Consequently, the Bank has increasingly tended to design aid contracts which include shorter horizons and more detailed conditions. The disbursement of aid has also been broken into multiple tranches in some cases, where the release of each tranche is contingent on the fulfillment of policy reforms. Collier identified a number of problems with this approach: it creates a credibility and ownership problem with a client government which reduces the likelihood of reform; it may lead a client government to maximise the cost of each piece of reform to increase the assistance it receives from the World Bank; client governments may create the appearance of reform to attract aid, which creates problems for genuine reformers who want to signal their commitment to adjustment to international investors, and increasing democracy in many developing regions may create a policy cycle whereby reforms are implemented in a disjointed fashion that may induce macroeconomic instability.

Collier argued that this essentially paternalistic ex ante conditionality should be replaced by a comprehensive system of ex post conditionality . Such an approach would use a set of indicators in order to be selective in the allocation of aid: it would provide development assistance only to countries which have followed sound policy agendas, as measured by these indicators. Clearly, such indicators would have to be carefully designed so that they reflect the results of conscious policy decisions by a client government. Collier suggested that Bank selectivity should be based on two or three aspects of a country's policy environment which a government can conceivably guarantee, rather than a welter of disparate and possibly contradictory indicators.

Such a system would shift the focus of conditionality from non-credible promises to assessments of a client government's current achievements in its attempts to create a sound policy environment. For conditionality to be seen as a credible restraint on government policy, there would have to be clear consequences for failing to maintain reform-minded policies. Collier argued that any punishment for relaxing reforms must be seen as morally legitimate, but that a punishment which reduced aid flows if already implemented reforms slipped backwards would pass this test. He added that it is not only client governments, but also donor governments which have a credibility problem with conditionality.

Collier went on to suggest that such conditionality should hinge on client governments making entirely voluntary commitments to fulfill certain reforms or, perhaps more importantly, not to do certain things. The World Bank would then base the selectivity of its assistance on ex post analyses of performance. This approach would create the possibility for like-minded governments to work together along regional lines to pursue reform. David Vines (Balliol College, Oxford, GEI Programme and CEPR) and Brian van Arkadie (CDP Consultants, Utrecht) noted that governmental self-confidence is essential to such a voluntary arrangement and regional alliances might bolster this.

Collier noted that voluntary conditionality would also reduce domestic credibility problems for a reforming client government while allowing it to send a clear signal to foreign investors of its genuine reform credentials. It might also lead to a relatively quick reduction in financial risk ratings for strong reformers.

Collier emphasised that the adoption of such selectivity should not imply the abandonment of countries, often the world's poorest, which pursue consistently bad policy choices. That said, he argued that aid should no longer be directed to the worst national policy environments. There is no evidence that this buys policy change or increases growth, but there is clear evidence that it sours the prospects for genuine policy reformers. Collier proposed that real poverty alleviation will not be achieved in regions such as Africa through quasi-imperialistic ex ante style conditionality, but through voluntary reforms. He noted that these can begin to snowball when there is a critical mass of economic success stories in the region which other countries can emulate.

There were some important concerns about this approach. Tony Killick (Overseas Development Institute) responded that the external nature of conditionality was part of its strength as it separated reform from the control of domestic political interests. Voluntary conditionality might lose this distance and become useless as a means of boosting foreign investor confidence. He also argued that it would be very difficult to find appropriate indicators for the selectivity which ex post conditionality would require. Killick suggested that emulation of successful reformers is not always very likely, nor is it easy to evaluate `fresh start' reformers in countries that have recently experienced revolutions, coups, or other fundamental changes in their governance systems. Finally, he noted that an objective set of conditionality criteria might work better than a patchwork of voluntary conditionality systems.

Furthermore, Vines noted that conditionality remains a slippery concept. As both Gilbert and Powell, and Collier pointed out, the Bank's shift to programme lending in the 1980s meant that the status of conditionality was shifted from a means of ensuring project success to that of the project itself. Under these circumstances, it is not entirely clear what we would mean by an ex post form of conditionality. Robert Cassen (Queen Elizabeth House, and St. Antony's College, Oxford) also suggested that any review of conditionality should not be guided by a simple analysis of how countries which fulfilled their conditional agreements fared when compared with countries which did not. Instead, any reform process should look at the ex ante performance promises bound-up with adjustment policies, and evaluate how countries fared when measured against this yardstick. Only then can we really know what kind of conditionality might be the most successful.

Kate Jenkins (Kate Jenkins Associates) also sounded a number of notes of caution which should guide any further consideration of World Bank conditionality. She noted that we must be ever-mindful of the very different perspective which client countries would bring to this discussion. They have found conditionality incredibly difficult, and do not see clear lines of accountability between the Bank and themselves. Any attempts to refine the World Bank's practice of conditionality must take these concerns into account.

Nevertheless, despite the radical departure from existing Bank policy which Collier's ideas represent, there was broad support for them among participants. Huw Evans (Bank of England) noted that the long list of failures associated with conditionality makes it surprising that multilateral donors have not insisted on alternatives to the present system sooner.

2 The `Sector Investment Plan': An Enclave Approach to Conditionality

In view of the multi-faceted challenges which macro-level conditionality presents, many donor agencies, the World Bank among them, are attempting to implement sectoral approaches to aid. Stephen Jones (Oxford Policy Institute and Oxford Policy Management) explained that an increasingly sectoral approach to assistance has been driven by many of the same issues Collier invoked in his call to reform conditionality: the assistance agenda is perceived to be donor driven; much aid goes to support activities other than those intended by donors; there is weak public expenditure management in client countries, particularly in budgeting for recurrent costs; the lack of a comprehensive sectoral approach has arguably led to a fragmentation of client government resources; and, fundamentally, because there can be little success at the level of individual projects if they take place within sectors of the economy which are disorganised or failing. Scepticism about the effectiveness of aid and donor budget cuts have also intensified the need for a new approach which addresses these concerns.

Sector Investment Programmes (SIPs) are the World Bank's response. Jones argued that the basic principles of these are not new, but that the adoption of SIPs on the scale envisaged by the Bank would represent a genuine revolution in development practice. A SIP is an integrated programme comprising: a strategy for the sector; a government expenditure programme; a management framework providing for common implementation procedures and funding commitments from donors and recipients. The defining features of a SIP include: sector-wide scope of application; a basis in a clear sectoral strategy; a process driven by local stakeholders; the participation of all major donors; common implementation arrangements and the use of local capacity rather than technical assistance. The distinctive hallmark of the SIPs approach is that it emphasises agreement between the donor and recipient on sectoral strategy, and the coordination of donor activities under the management of the recipient government.

Jones' review of existing African SIPs found that while macroeconomic preconditions were broadly met, institutional capacity remained weak in relation to what was required to achieve donor acceptance of common implementation arrangements. In terms of the six defining features of a SIP, progress was most limited in moving to common financial arrangements among donors, although important progress had been made in establishing common review and reporting procedures. An important factor in the most successful cases was a high level of commitment from a small group providing leadership within the lead sectoral ministry, supported by a group of key donors. A potential impediment to the development of such leadership, however, arises from the concern among donors that SIPs may lead to their marginalisation from policy debates and excessive strengthening of the World Bank's role in assistance.

The implementation of early SIPs in Africa has, according to Jones, yielded a range of lessons: all donors in a SIP must be engaged in a common forum to ensure implementation strategies are consistently applied; a great deal of confidence building is required in order for donors to have the confidence that is required for common implementation agreements; work is necessary with client governments to ensure that they follow-through on their elements of programme implementation; the pressure on the Bank to disburse funds directly conflicts with attempts to enhance local ownership and strengthen conditionality; there must be a minimum of process and administration in the design phase to prevent the SIP from becoming encumbered in a complex consultative process; there has also been persistent over-optimism in the Bank with respect to local institutional capacity in the design of SIPs; and better data on sectoral performance is needed to adequately assess the effectiveness of SIPs.

Jones's central argument is that for the sector approach to achieve its aims (especially that of reducing fungibility) requires a framework of macroeconomic conditionality (specifically a minimum expenditure commitments to the sector), that is sometimes lost in the rhetoric of `partnership'. There have been problems in practice (eg in Zambia) that there hasn't been consistency between the sector level and macroeconomic conditionality, but these in principle should be resolvable. If this is recognised, then the macroeconomic effect of a sector programme cannot be to enable government to divert resources from this sector to the pursuit of bad policies in other areas. (This point proved contentious in discussion.)

Jones also noted that as the Bank takes on the role of a lender of last resort in sectoral projects, it must develop the capacity to be flexible and direct funds in any SIP toward low profile issues which might not receive sufficient local support. Moreover, Jones concluded that the success of a lender of last resort should be measured by sectoral performance rather than disbursements. Low disbursements could then be considered a mark of success.

Jones suggested that under such a system the Bank could shift to recovering its consultative costs through a management fee rather than through direct returns from the project in order to overcome the ownership problems which disbursement-driven incentives imply.

Dennis Anderson (Imperial College, London and the Centre for the Study of the African Economies, Oxford) noted that both Jones and Collier focused on conditionality, at micro- and macro-levels, as a medium for creating an enabling policy environment for development. Anderson emphasised, however, that development, be it poverty alleviation or growth, cannot be achieved by limiting the Bank's work to the creation of an enabling policy environment. Well-designed projects, he suggested, should work in even the worst areas, and are especially essential in sectors and regions where the private sector may fear to tread. Moreover, it is clear that a positive policy environment while necessary, is not a sufficient pre-condition for the development of infrastructure. There is still a need for the Bank to get its hands dirty.

In a related vein, Robert Ainscow contended that the sectoral approach has been tried many times before and has eventually crumbled due to poor planning on each occasion. He also noted that its aims are essentially medium-term, and that longer term development objectives, such as those proposed by the Bank for 2015, can only be achieved through a more macro-oriented approach. Brian van Arkadie also noted that a sectoral approach could lead to serious macro- and microeconomic imbalances in the client country.

Jones recognised that there is a deep problem with SIPs in that, because issues of performance, incentives and accountability within civil services have not been fully resolved government-wide, donors use ad hoc systems of rewards and incentives for key sector staff that may be necessary in the short term, but do not resolve fundamental institutional problems. This has tended to create an atmosphere where donors forsake macro-level planning to jump over client governments and achieve sectoral successes. That suggests two needs: first, efforts must be made to create appropriate management environments in client government civil services, and secondly, clear parameters need to be identified to determine the extent to which any sector must bear the costs of adjustment. Otherwise, talk of partnerships in SIPs will remain unrealised.

In conclusion, Jones summarised his fundamental worries about the sector approach as applied by the Bank. It is not, he said, that it is logically flawed, but rather that it is seen as being something more than just good public expenditure management practice. This is what leads to the SIP preparation process often becoming excessively complicated and donor led.

3 The World Bank as a High-Tier Adaptive Institution

Mark Casson (University of Reading) took the discussion on from what the World Bank does to how it does it, raising questions about the institutional design of the Bank itself. He attempted to develop a positive institutional theory of the World Bank's behaviour, in order to help guide future reforms of the institution itself. Casson characterised the Bank as a `high-tier adaptive' institution which deals with complex situations and synthesises responses to new developments through a network of experts. High-tier adaptive institutions specialise in the re-invention of paradigms to deal with an evolving policy landscape. This modality distinguishes it from a `low-tier' institution which specialises in routine operations and cannot respond to fundamental shocks in the sphere in which it operates. As a high-tier institution, the World Bank selects like-minded low-tier institutions to enact its policies in client countries.

Casson further defined the Bank as a global institution which is specialised in its functional mandate – ie lending money – with a diverse range of operations dedicated to fulfilling this function. He suggested that this specialised mandate gives it cohesiveness. Yet, at the same time he suggested that the Bank should experiment with greater ideological, theoretical and practical diversity in fulfilling this mandate, in an attempt to identify best practices from around the world.

Casson posited that a global institution like the World Bank is uniquely placed to diffuse both better values to improve government behaviour, and more accurate beliefs to improve international policy coordination. Its strength, then, lies not only in its capacity as a research institution, but also in its ability to disseminate the results of both its formal research and experience in development. For the any global institution to realise this potential, however, Casson argued that strong leadership is required. Furthermore, he argued the World Bank will actually need to take economic theories of institutional design more seriously as it advises client governments in reform, as it re-invents its own internal structures, and as it attempts to diffuse best practice and values to developing countries.

Robert Cassen argued that the World Bank needs a greater sense of its own position in the development process if it is to be an effective opinion leader. While it is not the world's largest donor, it is by far the world's most influential and must act accordingly.

Robert Wade (Brown University) noted that there seem to be particular impediments to cross-departmental collaboration and learning in the Bank. He felt that the incentive structure of the Bank, which rewards employees more if they can claim sole responsibility for a project, prevents the kind of interdisciplinary work and learning from past mistakes which would really allow the Bank to make the most of its internal complementarities. Additionally, Wade argued that the Bank's research is not generally as innovative as it could be, largely because most of its high level staff have been educated in a handful of Anglo-American graduate schools. Consequently there is little diversity in the training they bring to the Bank's work. Alex Wilks (The Bretton Woods Project) concurred, arguing that the Bank has only paid lip-service to consultation with NGOs and other private sector agents in the development process.

In contrast, Martin Wolf (The Financial Times) argued that the Bank has actually been overly-experimental, particular from the 1970s onward. It has lent to countries following an incredibly broad range of economic models while concurrently taking on almost every concern which has been presented to it. Christine Wallich (The World Bank) added that greater diversity in approach, ideology and participation in the World Bank's affairs also inevitably implies lower levels of cohesiveness and increased management difficulties.

Tim Lankester (School of Oriental and African Studies, London) emphasised that too much power currently rests with middle-level management at the Bank. In his view, any attempt to change the direction of the Bank and increase its effectiveness requires stronger central leadership from the top ranks of the organization. This will clearly only be possible if a concerted effort is made to shift power within the institution from the middle to the top. Huw Evans agreed, but noted that the quality of World Bank leadership has been poor, to a large degree because one country has had a monopoly on the Presidency for so long. It should be emphasised, however, as Casson suggested, that ideas about leadership wax and wane, and centralised leadership is currently out of fashion. It will take a rehabilitation of the concept of leadership, he proposed, before the Bank actually gets the direction it needs.

4 Structuring the Bank

Gilbert and Powell probed the practical design of the Bank, with particular attention to the way that the World Bank Group's various functions and sub-organizations fit together in complementary ways. Their conceptualisation of the Bank, which posits conditionality as the glue which binds together its banking, development assistance and research functions, has already been noted, and the difficulties with this view have already been discussed.

In this conceptualisation of the World Bank Group, there is also a linear relationship between the Bank's various arms. The world's poorest countries benefit from concessional loans from the International Development Agency (IDA) before graduating to loans and guarantees from the International Bank for Reconstruction and Development and finally private sector assistance from the International Finance Corporation (IFC). At this point, the next step for developing countries is a complete graduation from development assistance, which should be seen as the goal for every World Bank client government.

According to Gilbert and Powell, the complementarities between the Bank's functions and the evolving environment in which it operates suggest some clear directions for restructuring the World Bank. Gilbert and Powell dismissed arguments in support of the privatisation of the World Bank. If the Bank's shares were to be held by members of the public rather than governments, it would be forced to adopt the same profit-maximising objectives as private banks and could be expected to evolve towards the same mix of activities. The development agency and development research functions would not fit in this structure, and the Bank's comparative advantage in enforcement would be lost. The world would be left with less diversity in the financial system and the Bank's unique development functions would go unfulfilled.

That said, Gilbert and Powell posited that the state of global financial markets suggests a deep need for structural reform of the Bank and a substantial change in its product mix. Private capital flows to developing countries currently stand at over ten times the value of official flows. At the same time, in 1996 IBRD lending stood at only 55% of its statutory lending limit, which indicates that it is clearly not offering the right products to client countries. This problem is most acute in middle income countries where alternative finance is available and where capital markets are reasonably well-developed so that governments do not have to rely on World Bank loans and their attendant conditionalities as their only source of finance. The correct role of the World Bank in such environments is unclear.

Gilbert and Powell proposed that the Bank might be able to increase the appeal of its product mix by placing greater emphasis on the provision of guarantees rather than loans. Currently, a number of factors mitigate against this change. The Bank currently requires that guarantees have 100% backing, guarantees seem to be over-priced, and their complexity discourages staff from undertaking their arrangement as they are often seen to generate less acclaim for the World Bank than loans. The Bank's capacity to provide guarantees could be expanded by reducing the backing requirement on guarantees, making the pricing system more sophisticated, and by providing partial guarantees in conjunction with private finance. According to Gilbert and Powell, this last proposal in particular might provide the World Bank with a means for `crowding-in' private sector finance, rather than crowding it out as loans tend to do. It might also allow the Bank to more closely match its products to the specific needs of its client countries and become more of a facilitator rather than a provider of development services.

Recognising that the products of the IFC and MIGA are in great demand, while their capital bases are nearly exhausted (particularly in the case of MIGA), Gilbert and Powell went on to suggest that the capital relationship between the IBRD, the IFC and MIGA needs to be fundamentally rethought. MIGA's looming capital problems could be easily addressed by a transfer to it of surplus IBRD capital. Re-financing the IFC appears much more complex and difficult. It is unlikely that the scale of required IFC re-financing can be met through the transfer of surplus IBRD resources, because IBRB capital is only partly subscribed whereas that of the IFC is fully paid-up.

Instead, Gilbert and Powell proposed that the IFC-IBRD relationship be fundamentally reconsidered. Currently, the IFC and IBRD have separate operations but common boards. This split could be reversed, so that operations are made common but board separation is imposed. This would allow the IFC to be refinanced by placing some minority portion of its equity in private hands through private placements, with a number of potentially positive effects. The requirement to pay dividends might increase the financial discipline of the IFC, while dividends paid to governments could in theory be made available for IDA loans.

Furthermore, partial privatisation would bring private sector directors onto the IFC board, enhancing its understanding of the need for market-based rather than politically-oriented development policies. Finally, the integration of the IFC and IBRD at an operational level would ensure that its development priorities are safe-guarded against purely commercial concerns.

Catherine Gwin (Overseas Development Council, Washington, D.C.) felt that Gilbert's and Powell's analysis placed too much emphasis on the banking and policy advisory roles of the Bank, and not enough importance on the accumulation and dissemination of knowledge on the best practice in development policy and the Bank's role as a fiduciary agent in the administration of development finance.

Gwin went on to argue that Gilbert's and Powell's approach also placed far too much emphasis on guarantees, rather than on the extent to which the World Bank can help bring down the high cost for private sector firms of doing business in developing countries. Furthermore, she thought it a mistake to see the relationship between the World Bank Group's units as a linear system of graduation for developing countries from IDA concessional loans, to private sector assistance from the IFC and finally independence from developmental assistance. Gwin suggested that the IFC and private sector must be involved at each stage of development.

William Ryrie (ING Baring Holdings Company Ltd.) warned that the IFC and IBRD must be careful not to compete with the private sector. He also emphasised that the cultures of the IFC and IBRD are fundamentally different: the former is transactions driven while the latter is focused on process. He felt that the IFC should remain dedicated to building up the private sector and should not become embroiled in social issues and other prerogatives which greater work with the IBRD might imply. Finally, Ryrie felt that privatisation of the IFC was not viable as private investors would want private returns, which the IFC's development mandate would not provide.

Andrew Powell particularly underscored the need for participants to think in pro-active rather than reactive terms about increasing global flows of private sector capital. Reform of the Bank should not be swayed merely by fear that its relevance is being eroded by private sector competition, but should seek to concentrate the Bank in activities that it can do better than private capital. Gwin similarly noted that private capital is not the only force stimulating change at the Bank. A shift in the development paradigm in many client countries toward private sector involvement, decreasing strategic interest in assistance among donors, and mounting evidence of the limits of aid effectiveness without a strong policy regime have exerted as much pressure on the Bank as increasing private capital flows.

Martin Wolf further suggested that humanitarian aid should be firmly and clearly removed from the Bank's range of duties. Instead, the Bank should focus on development assistance and practice selectivity in deciding where it will direct its aid. This would remove the contradictions which often arise when the Bank is called on to provide humanitarian aid in negative policy environments.

5 Some Unresolved Questions

It is perhaps inevitable that when one looks back at a day of such wide-ranging discussion, a few loose ends remain. Sheila Page (Overseas Development Institute) concluded that while there seemed to be broad agreement on the importance of the World Bank and the necessity of a positive policy environment for the success of its work, there seemed to be little agreement on exactly what the Bank should do. She emphasised that it is incorrect to posit the Bank a priori as a given and then search for a task which will justify its existence. The very existence of the Bank as much as its structure and products must be up for discussion.

Debate over the core objectives of the World Bank lurks in the background of any discussion of how it should be reformed. For some time this debate has been split between proponents of poverty alleviation and supporters of the pursuit of economic growth. Many participants emphasised that a number of developing countries no longer see a clear division between these two goals. In fact, most now see economic growth as the most effective means of poverty alleviation. The debate between poverty alleviation and growth is increasingly a red herring: poverty alleviation is impossible without growth, but growth will not completely achieve poverty alleviation. The private sector will not necessarily take on the elements of poverty alleviation which growth does not address, and this leaves a clear role for the World Bank in development. Nevertheless, the growth versus poverty alleviation debate remained as contentious among participants in this conference as it does among other stakeholders in the development community.

Participants remained divided about the degree to which the Bank should practice selectivity in its lending and development assistance. While some concurred with Collier's call to make assistance contingent on a government's past policy performance, others thought this would inevitably lead to the world's poorest people, who on average live in the world's worst-managed economies, being cut-off from aid. Some felt that the human costs of such selectivity would more than offset the efficiency gains such selectivity implies. Wallich pointed out that the World Bank is currently left with the task of filling the holes in development assistance which the selectivity of institutions like the IFC and EBRD leaves. If the World Bank stops doing this, who will?

Some disagreement persisted as well over the future scope of the Bank's operations. Martin Wolf proposed that the Bank should focus its further attention on Africa. Andrew Graham (Balliol College, Oxford and Oxford Policy Institute) countered that the Bank's purposes are too important and diverse to think that it will be relevant to only one area. Its role as a knowledge bank and supporter of democratic transformation makes it relevant to a range of low and middle income countries.

Gilbert's and Powell's support of the Bank's recent emphasis on decentralising its management sits uneasily with the concomitant calls by participants such as Lankester for increasingly strong central leadership from the Bank's administration. Similarly, Brian van Arkadie pointed out that there is a deep contradiction between calls for greater accountability on the part of the Bank and the insistence that local client governments must have a sense of ownership over policy reforms in order for them to remain credible. Martin Wolf pointed out that increased accountability, however it is defined, might put a chill on the Bank's willingness to undertake the very kind of risky projects that the private sector typically eschews.

Some aspects of the day's debate remained remorselessly problematic. What does it mean for a government to own a policy? How can the Bank be accountable for the success of polices that others should own? Who are the Bank's constituents and who owns the World Bank? What is the relationship between ownership and leadership? The answers to these questions are perhaps hazier than they should be. Nevertheless, answers to these hard questions probably lie at the heart of the task of reforming the Bank.

Brett House is a Doctoral Student at University College, Oxford. David Vines is a Fellow and Tutor in Economics at Balliol College, Oxford; Director of the Global Economic Institutions Research Programme of the ESRC; and a Research Fellow at CEPR.

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