Desmond Lachman participated in a symposium in Latin America Advisor to discuss the future of the World Bank. He and others addressed the following question: To some observers, the controversy surrounding World Bank President Paul Wolfowitz reflects wider divisions over the Bank's governance and its approach to development issues. What is the future of the Bank? What changes do you see taking place, if any? How would Latin America be affected?
The World Bank's future does not appear to be bright unless it is prepared to embrace radical reform to the way it operates. The increased globalization of capital markets over the last decade has rendered the Bank largely irrelevant to the middle income countries, including most Latin American countries. These countries, which presently receive over 70 percent of the World Bank's loans, can more than meet their external borrowing needs from the market. At the same time, many studies show that the World Bank has very little to show by the way of poverty alleviation among its client countries for the tens of billions of dollars that it has loaned over the past 60 years. If the World Bank is to become a more relevant institution, it will need to reorient its lending program away from the middle-income countries that do not need its resources to those poorer countries, especially in Africa, that are still starved of international capital. In addition, it will need to narrow its focus away from grandiose and multiple objectives to those objectives that are truly relevant to alleviating poverty in the emerging markets. Judging by the resistance to Mr. Wolfowitz's modest efforts at reducing corruption both at the Bank and in its client countries, and mindful of the Bank's entrenched and cosseted bureaucracy, I am not holding my breath to see real change at the World Bank in the years ahead.
Desmond Lachman is a resident fellow at AEI.