Ask an Economist: Reforming the IMF and World Bank

Ilene Grabel

Triple Crisis Blog has invited readers’ questions in advance of the April 24-25 IMF/World Bank meetings in Washingon. See all of the questions and answers here. A reader asked:

Q: Absolute poverty and increasing inequality remain serious issues in spite of WB/IMF development loans, even in countries with high economic growth.  What reforms would you suggest to ensure that aid actually reaches the people who are suffering? How can these organizations take steps to move away from the ideology of neo-liberalism towards developing scientifically-based economic policies that are pro-poor? How can the Bretton Woods Institutions best measure implementation of pro-poor government policies?

Grabel: This question raises a number of very important issues. Tim Wise’s contribution to the Triple Crisis in connection with aid to Haiti, I believe, has broader implications for those seeking to rethink foreign aid, particularly in terms of how it can reach the most vulnerable groups.

In regards to the issue of how the IMF/WB can take steps to broaden their thinking (as far as moving away from neo-liberalism and becoming more pro-poor), well that requires that the institutions open up their hiring practices so that they hire staff that possess more practical experience with the developing world, engage with civil society groups, and that they hire economists and other social scientists that hold a diversity of views.

Of course who leads these institutions in the future matters a lot. In that connection breaking both the monopoly of the US and Europe on the top leadership spots could make a real difference, though certainly it is critically important that whomever is appointed to lead these institutions be open to and encourage debates about development policies. Indeed, many analysts attribute the signs of greater intellectual openness at the Fund today in regards to some matters (e.g., capital controls, inflation targeting, and now some types of taxes on financial firms) to the current Managing Director’s greater degree of intellectual openness (at least compared to his predecessors).

However, even here we know that there may be all sorts of instances wherein the process of changing ideas can be characterized by “two steps forward, one step back.”  We would expect that long-held ideas (especially those that have hardened to the level of ideologies, as fellow triple crisis blogger, Kevin Gallagher notes in a recent Financial Times blog post) have long half lives, and that the process of changing these ideas/ideologies will be met by push back and qualifications of all sorts.

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