February 12, 2013
This is a joint post with Michele de Nevers.The World Bank is conducting a far-reaching study of its role in the provision of global public goods. This is not the first and surely not the last. Still, there could be an opening this time around for a much-needed fresh approach. Given the increased urgency of cross-border problems and the bank’s potential for being a powerful force for good, this is trend worth watching.Many obstacles to development transcend national borders and therefore cannot be adequately addressed within a single country. These include issues such as drug resistance and other cross-border health risks, financial crises contagion, money laundering, water scarcity, fisheries collapse and, of course, climate change. Economists call efforts to address these problems Global Public Goods (GPGs). Like other public goods, funding for GPGs is chronically in short supply: of $125 billion in annual official development assistance (ODA ) only about $3 billion goes to GPGs.Many casual observers imagine that that the World Bank, as the world’s foremost development institution and with near global membership, is well placed to take the lead on GPGs. But since the bank was founded more than 60 years ago, most of its resources and decision-making have been locked up in single-country programs designed in discussions with government officials and coordinated by ministries of finance.As a result, the bank lacks the mandate, products and incentives to address these global, cross-border challenges in a meaningful way in its core programs. A 2007 World Bank staff report for the Development Committee, the ministerial level group that oversees the bank and the IMF, described the bank’s contributions to GPGs primarily within the context of what could be done within its country-focused activities. This remains true today.The bank’s main financing instrument, the market-based IBRD loan, requires a sovereign guarantee, limiting the ease of developing cross-country or global programs. Donor funding for low-income countries channeled through the soft-lending arm, IDA, provides only very limited allocations for cross-border programs. Although the World Bank manages several moderately sized multi-donor trust funds established to address some GPGs, these are ancillary to its core programs.CGD president Nancy Birdsall has been prominent among those urging the bank to do better. She has argued (see here, here, here and most recently, on climate change, here) that the bank has a strong comparative advantage in providing GPGs but it can only become effective in doing so if the its president seeks a mandate from the member countries and then creates new instruments—for example, new ways of mobilizing finance and loans that do not require sovereign guarantees—to pursue these goals.Does the appointment of Jim Yong Kim, still in his first year at the helm of the institution, provide a fresh opening for such ideas? There are some encouraging signs. With his background in global health, especially HIV/AIDS, Kim is well aware of the cross-border dimensions of development problems. And he has been outspoken on the need for action to address climate change, commissioning a landmark report, Turn Down the Heat (see also this video of Kim discussing it) about far-reaching development impacts of runaway climate change.This is the institutional environment in which Rachel Kyte, the bank’s vice president for sustainable development, has brought together a small team of experts for a new study, “Collective Solutions 2025.” The idea is to develop long-term scenarios and explore pathways to transform the bank so it can support “inclusive green growth” in a way that balances immediate, local development priorities with longer term regional and global public goods.
At the World Bank’s request, Michele organized a round table on the draft report last month. Kyte and the bank team introduced the study and a group of seasoned development practitioners responded with questions and suggestions. Among the questions:
Nancy Birdsall, Rachel Kyte, and Michele de Nevers at a CGD round table event
- What kind of institution is needed to deliver global public goods?
- Is it possible to reform the governance and mandate of the World Bank or is a new institution needed?
- Can ODA and climate finance—now seen as separate resource streams even though the programs they support are often identical—be managed in a comprehensive fashion without undermining funding to the poorest countries?
- In approaching GPGs, should the bank continue to focus on developing countries or widen the scope of its efforts to include all nations?
- What policy, institutional, organizational and incentive barriers need to be overcome?
- Should there be a new arm of the World Bank for climate change and other public goods?
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.