The World Bank Is Still Failing the Poor

There are two facts that should loom above all others in thinking about the World Bank as it wraps up its almost ritualized annual meetings in Washington this weekend.

The first is that its incoming president, Ajay Banga—the 63-year-old Indian-born American and longtime executive chairman of Mastercard—was the only “candidate” for the job. Following the bank’s tradition, the United States nominated Banga, and the use of quotation marks here is meant to emphasize that there was no public debate whatsoever about who would be best suited to lead the multinational development lender, nor any open debate about priorities for the bank or leadership strategy. Banga’s experience in the credit card business is formidable, but how this prepares him for his very different new job is less than completely obvious.

This leads to the second big thing to consider about the World Bank. There is a deafening dissonance between this Western-dominated institution’s undemocratic procedures and the West’s own pronounced traditional bias in favor of democratic governance in its engagements with what was long known as the Third World. It is, of course, true that the best one can say about the West’s historic advocacy of democracy in the global south is that it has been highly inconsistent. The rub with the lack of democracy in the World Bank’s governance is about much more than this awkward hypocrisy, though.

Banga has been parachuted into his new five-year term as the bank’s leader with a ready-made agenda, which has also not been the focus of any open debate or public discussion. Led by the United States, the West has decided that climate change should be the World Bank’s overriding priority. This represents a dramatic shift that has not considered the priorities of most of its clients, who are overwhelmingly concentrated in what is euphemistically called the developing world—and which really means the scores of countries whose populations are trapped in poverty or, at best, the lower end of middle-income status. Such a dramatic shift in the bank’s agenda represents another kind of anti-democratic behavior by the institution—one that dictates that the priorities of the rich countries that fund it not only must always prevail, but are also beyond review or debate.

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The point of this criticism is not to deny the menace of climate change, especially for the world’s poorest and most vulnerable populations. Take, for example, the 600-mile coastal stretch between Lagos, Nigeria, and Abidjan, Ivory Coast, that I have written about elsewhere. It will experience the most dramatic growth in urban population in the world by far over the course of the rest of this century, and yet as tens of millions of people converge on mushrooming legacy cities and newly born ones with each coming decade, the region will be highly vulnerable to rising seas, changing rain and flooding patterns, and other perilous effects of global warming.

The problem with the World Bank’s governance culture is that its undemocratic nature allows the bank and its Western-created relatives, such as the International Monetary Fund, to zig and zag like this every decade or two—not only failing to seriously weigh the views of its clients, but also never facing any accountability about its own work and impact around the world. A glaring example should help convey the real-world implications of this for the many poor countries that rely on lending from the bank—and not handouts or aid, as Western publics wrongly believe—to finance their development agendas.

For a couple of decades prior to Banga’s appointment, the bank’s avowed priority was poverty alleviation. This was highly welcomed in Africa and other regions of the world with large concentrations of poor or low-income inhabitants. But one must say “avowed” because the bank’s actual focus on reducing poverty has been highly inconsistent—and because, like TV pundits who make claims and spout predictions by the day, knowing they will never be called to account before their viewers, the World Bank expends scant effort in promoting a transparent and rigorous public review of its performance.

Indeed, previous approaches of the Bretton Woods institutions—the international financial institutions, or IFIs, as the World Bank and the International Monetary Fund are sometimes called—are now widely believed to have had a catastrophic impact on many of the world’s poorest countries. Most notorious in this regard was the so-called Washington Consensus, the policy era centered on the 1980s and 1990s, when the IFIs pushed strategies of fiscal austerity, drastically shrinking the state, and eliminating barriers to financial and trade penetration from the rich world on the theory that this model of capitalism would help those who were disciplined enough to take off.

It bears saying that this was a consensus only among rich Western nations. If they wanted access to capital, the poorest countries had little choice but to submit. Logically enough, in many places, the result was a steep decline in public services, from health care to infrastructure building to education, among others.

The West’s unwillingness to finance infrastructure projects commensurate with poor countries’ needs is what gave China the enormous opening it pursued when it began large-scale lending to Africa in the 1990s and to other regions afterwards. Now think about reducing the availability of education in Africa for a moment. Since the Washington Consensus era, there has been a steadily strengthening view among economists and other development experts that boosting education is one of the most powerful things that a poor country can do to improve its prospects. The effects are thought to be especially profound where access to free or affordable education for girls is concerned.

Educational access for girls in many parts of Africa is far below that of boys. The longer girls stay in school, though, the more income they will generate over their lifetimes, helping develop their countries. There is also a direct correlation between length of school attendance and female fertility. In plain words, this means that the more years of schooling women complete, including university and beyond, the fewer children they will have. This is of profound importance for moderating Africa’s extraordinary ongoing population growth and—hey, by the way—almost certainly limiting climate change.

For a sense of what alternative approaches to crafting a strategy for the World Bank might look like, ones that take into account the thoughts and needs of the poor, this ONE Campaign-led open letter and its many signatories provide a sample.

Focusing on African urbanization is another way to provide a big boost to poverty alleviation, economic development, and regional integration in Africa and elsewhere, while also combating climate change. Payoffs toward this latter goal would come on two fronts. Fast or newly urbanizing areas could integrate energy efficiency into their planning from an early phase, as opposed to doing so as an expensive afterthought or remediation. By the same token, cities in the developing world can be made much more climate resilient, which, likewise, is far preferable to an endless cycle of humanly and economically costly disaster relief.

Bringing this about will require tremendous vision, but even that won’t be enough. Poverty alleviation in the economically weakest parts of the world will require giving the poor a real seat at the table, which the World Bank has never done.

What the World Bank’s new climate-first orientation must not do is fail to promote energy access for the world’s poorest out of the mistaken belief that it is they, as opposed to the big legacy polluting nations of the rich world, who are killing the planet. By 2050, Nigeria—already Africa’s most populous country—is projected to have more people than the United States, yet it generates less than 1 percent of the electrical capacity that the United States generates. Getting reliable electricity to the poor is, along with urbanization and education, one of the most powerful things one can do to provide economic uplift.

If the World Bank thinks it can relegate this to a lower priority level in the name of limiting greenhouse emissions or global warming, it will be making a grave mistake—and not just because it is unfair to the masses of people in the developing world who have barely contributed to climate change, but also because it won’t work. The billions of people crowding into new cities will need power to light their homes and read to their children. If the rich world cannot summon the wherewithal to provide financing for adequate renewable sources of energy, the poor will pay them no heed and turn to coal and other fossil fuels instead.