Losing the Global Development War: A Contemporary Critique of the Imf, the World Bank and the Wto

369 Pages·2008·2.3 MB·English

by  John W. Head

Losing the Global
Development War
A Contemporary Critique of the
IMF, the World Bank, and the WTO
John W. Head
Library of Congress Cataloging-in-Publication Data
Head, John W. (John Warren), 1953–
Losing the global development war : a contemporary critique
of the IMF, the World Bank, and the WTO / John W. Head.
p. cm.
Includes bibliographical references and index.
ISBN 978-90-04-16188-7
1. Development banks—Evaluation. 2. Economic assistance.
3. International Monetary Fund—Evaluation. 4. World Bank—
Evaluation. 5. World Trade Organization—Evaluation. I. Title.
HG1975.H43 2008
332.1'53—dc22
2008001637
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Contents
Foreword and Synopsis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix
List of Abbreviations and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxi
Notes on Spellings, Usages, and Other Conventions . . . . . . . . . . . . . . . . . . xxiii
Chapter One: The Fourth World War. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
I. Antecedents to the Global Development War . . . . . . . . . . . . . . . 2
A. World War I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1. Self-Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Presumptions Upended . . . . . . . . . . . . . . . . . . . . . . . . . . 3
B. World War II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1. Global Economic Issues Break the
Political Surface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. Human Rights Rumblings . . . . . . . . . . . . . . . . . . . . . . . . 5
3. International Law and International
Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
C. The Cold War. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1. A Bold Experiment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2. Economic Assistance and Ideological Influence. . . . . . . 9
3. A Giant with Nightmares . . . . . . . . . . . . . . . . . . . . . . . . 10
II. The Nature of the Global Development War . . . . . . . . . . . . . . . 12
A. Conflicting Development Ideologies . . . . . . . . . . . . . . . . . . 13
1. Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2. Human Development. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3. Liberal or Orthodox? . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4. Intelligent or Ill-Conceived?. . . . . . . . . . . . . . . . . . . . . . 23
5. Participatory or Authoritarian? . . . . . . . . . . . . . . . . . . . 25
6. Multilateral, Bilateral, or Regional?. . . . . . . . . . . . . . . . 26
7. Sustainable or Improvident? . . . . . . . . . . . . . . . . . . . . . 27
8. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
B. Why the War Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
1. Despair, Danger, and Development. . . . . . . . . . . . . . . . 29
2. Terrorism: Predictable Consequence or
Parallel Conflict?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
C. The Machinery and Theaters of War . . . . . . . . . . . . . . . . . . 44
1. The Political and Institutional Topography . . . . . . . . . 44
2. The Global Economic Organizations . . . . . . . . . . . . . . 46
Chapter Two: A Cacophony of Criticisms—Attacking the Global
Economic Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
I. A World of Problems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
iii
iv • Losing the Global Development War
A. Growing Economic Distress. . . . . . . . . . . . . . . . . . . . . . . . . . 50
B. Globalization as Culprit?. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
II. Cataloguing the Criticisms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
A. Criticisms by Types of GEOs . . . . . . . . . . . . . . . . . . . . . . . . . 54
1. The Logic of Disaggregation . . . . . . . . . . . . . . . . . . . . . 54
2. The Twenty-Three Criticisms. . . . . . . . . . . . . . . . . . . . . 54
B. The Eight Clusters of Complaints. . . . . . . . . . . . . . . . . . . . . 58
Appendix to Chapter Two: Representative Survey of Literature
Criticizing the GEOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Chapter Three: What Are the Global Economic Organizations?. . . . . . . 91
I. Historical Survey. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
A. Highlights in the GEO Timeline. . . . . . . . . . . . . . . . . . . . . . 93
B. The Inter-War Period and Bretton Woods. . . . . . . . . . . . . . 96
1. Before 1944 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
2. Three Proposed Solutions . . . . . . . . . . . . . . . . . . . . . . . 98
C. The First Twenty-Five Years: From 1945 to 1970 . . . . . . . . 100
D. The Second Twenty-Five Years: From 1970 to the
mid-1990s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
1. Reacting to Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
2. Whither the Nation-State? . . . . . . . . . . . . . . . . . . . . . . 102
E. The Contemporary World of the GEOs. . . . . . . . . . . . . . . 104
II. The IMF in a Nutshell. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
A. The Grand Design and Its Collapse . . . . . . . . . . . . . . . . . . 105
1. Establishment of the IMF and the Par
Value System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
2. Collapse of the Par Value System and a
Redirected IMF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
B. IMF Financing and Resources. . . . . . . . . . . . . . . . . . . . . . . 107
1. IMF Financing Facilities. . . . . . . . . . . . . . . . . . . . . . . . 107
2. IMF Conditionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
3. IMF Resources for Lending . . . . . . . . . . . . . . . . . . . . . 111
C. Other IMF Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
1. Surveillance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
2. Technical Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
3. Special Policy Endorsement. . . . . . . . . . . . . . . . . . . . . 113
D. Governance and Other Institutional Matters. . . . . . . . . . . 113
1. IMF Structure and the Weighted Voting System. . . . . 113
2. Membership; Obligations; Privileges and
Immunities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
3. Funding the IMF’s Operational Expenses. . . . . . . . . . 115
4. Debt Relief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
III. The World Bank and the Regional MDBs in a Nutshell . . . . . 117
A. MDB Lending Operations. . . . . . . . . . . . . . . . . . . . . . . . . . 118
Contents • v
1. Project Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
2. Policy-Based Lending . . . . . . . . . . . . . . . . . . . . . . . . . . 119
3. Lending Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
4. Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
B. Technical Assistance and Other Operations . . . . . . . . . . . 121
C. Resources and Other Financial Matters. . . . . . . . . . . . . . . 123
1. More on the Distinction Between Hard Loans
and Soft Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
2. MDB Capitalization, Borrowings, and
Replenishments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
D. Membership and Institutional Matters. . . . . . . . . . . . . . . . 127
1. Membership in the MDBs. . . . . . . . . . . . . . . . . . . . . . . 127
2. Structure of and Decision Making in the MDBs. . . . . 129
E. Other Aspects of MDBs and Their Operations . . . . . . . . . 131
1. Policies and Initiatives. . . . . . . . . . . . . . . . . . . . . . . . . . 131
2. The Generational Character of the MDBs . . . . . . . . . 131
3. Debt Relief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
IV. The WTO in a Nutshell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
A. The GATT 1947 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
1. Aims and Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
2. Exceptions to GATT Principles . . . . . . . . . . . . . . . . . . 138
B. Negotiating Rounds and Other Developments. . . . . . . . . 141
1. Tokyo, Uruguay, and Doha. . . . . . . . . . . . . . . . . . . . . . 141
2. The Uruguay Round Agreements . . . . . . . . . . . . . . . . 142
C. Institutional and Structural Matters. . . . . . . . . . . . . . . . . . 144
1. The Nature of the WTO and the WTO Charter. . . . . 144
2. WTO Membership and Structure . . . . . . . . . . . . . . . . 145
3. Decision Making and Dispute Settlement. . . . . . . . . . 146
Appendix to Chapter Three: Voting Power of IMF Member
Countries and Constituencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
Chapter Four: Battles over the GEOs’ Policies and Operations. . . . . . 167
I. Bad Policies, Projects, and Performance. . . . . . . . . . . . . . . . . . 168
A. The Ideology of Trade Liberalization. . . . . . . . . . . . . . . . . 168
B. The “Washington Consensus”, Moral Hazard,
the IMF, and the MDBs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
1. The Criticisms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
2. Improvement or Deterioration?. . . . . . . . . . . . . . . . . . 177
3. Causation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
4. Moral Hazard?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
5. Changed Prescriptions . . . . . . . . . . . . . . . . . . . . . . . . . 180
6. Summing up on IMF Policy Prescriptions. . . . . . . . . . 182
C. Bad Projects, Priorities, and Performance
by the MDBs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
vi • Losing the Global Development War
1. Bad MDB Policies and Projects?. . . . . . . . . . . . . . . . . . 184
2. Wrong Form of Assistance?. . . . . . . . . . . . . . . . . . . . . . 188
3. MDB Management and Staffing. . . . . . . . . . . . . . . . . . 190
II. Distributional and Social Injustice. . . . . . . . . . . . . . . . . . . . . . . 193
A. Winners and Losers from WTO-Led Free Trade. . . . . . . . 193
1. Focusing on the National Level. . . . . . . . . . . . . . . . . . 194
2. Focusing on the Global Level. . . . . . . . . . . . . . . . . . . . 196
B. Austerity Measures, the IMF, and Social Ruin. . . . . . . . . . 200
C. Human Rights and the MDBs. . . . . . . . . . . . . . . . . . . . . . . 203
III. Environmental Degradation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
A. The MDBs and the Environment . . . . . . . . . . . . . . . . . . . . 206
B. Racing to the Bottom. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
IV. Encroachments on Sovereignty. . . . . . . . . . . . . . . . . . . . . . . . . 213
A. WTO Prohibitions on Social Protectionism. . . . . . . . . . . . 213
B. IMF and MDB Conditionality . . . . . . . . . . . . . . . . . . . . . . . 218
V. Summary: Evaluating the Criticisms of GEO Policies
and Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221
Chapter Five: Battles over the GEOs’ Character, Control,
and Reach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
I. Secrecy and Opaqueness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
A. The Illumination of the IMF. . . . . . . . . . . . . . . . . . . . . . . . 228
B. The MDBs and the Momentum Toward Openness. . . . . . 230
C. The WTO—A Different Momentum Toward
Openness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
II. The Democracy Deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232
A. The IMF: Voting, Structure, Authority, and
Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233
B. The MDBs: More of the Same, But Worse. . . . . . . . . . . . . 242
C. The WTO and Partial Unaccountability. . . . . . . . . . . . . . . 248
1. Democracy in the WTO? . . . . . . . . . . . . . . . . . . . . . . . 248
2. The WTO’s Allegiance to Its Members . . . . . . . . . . . . 249
3. Genuine Unaccountability Problems. . . . . . . . . . . . . . 250
4. Strengthening Weak National Governments. . . . . . . . 252
III. Mission Creep of the MDBs and the IMF . . . . . . . . . . . . . . . . . 255
A. Mission Creep and the Three Generations of MDBs . . . . 256
1. Old Dogs and New Tricks. . . . . . . . . . . . . . . . . . . . . . . 256
2. Legality and Ideology . . . . . . . . . . . . . . . . . . . . . . . . . . 258
B. IMF Mission Creep?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263
IV. Asymmetry in Obligations (IMF and the MDBs) . . . . . . . . . . . 265
A. Asymmetry in IMF Obligations. . . . . . . . . . . . . . . . . . . . . . 266
B. Asymmetry in MDB Obligations. . . . . . . . . . . . . . . . . . . . . 269
V. Summary: Evaluating the Criticisms of GEO Character,
Control, and Reach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270
Contents • vii
Chapter Six: The Current Front in the Global Development War—
How (and Whether) to Reform the GEOs? . . . . . . . . . . . . . . . . . . . . . . 275
I. Reforming the MDBs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276
A. Transparency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277
B. Participation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278
C. Legality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279
D. Competence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280
E. Accountability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282
1. Accountability of Member Countries. . . . . . . . . . . . . . 282
2. Accountability of the MDBs . . . . . . . . . . . . . . . . . . . . . 283
F. Substantive Norms and Standards . . . . . . . . . . . . . . . . . . . 285
G. Charter Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287
II. Reforming the IMF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288
A. Structural and Operational Changes in the IMF. . . . . . . . 290
B. Enhancing Competence in National Governance. . . . . . . 295
III. Reforming the WTO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301
A. Distributional Justice and Distributional Generosity. . . . . 302
B. Environmental and Human Rights Protections. . . . . . . . . 307
C. Transparency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310
D. Accountability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310
E. Development Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . 312
IV. Concluding Observations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313
A. Collective Assessment of the GEOs. . . . . . . . . . . . . . . . . . . 313
B. The Perils of Bilateralism . . . . . . . . . . . . . . . . . . . . . . . . . . 315
1. Chinese Bilateral Development Financing . . . . . . . . . 315
2. US Bilateral Trade Negotiations. . . . . . . . . . . . . . . . . . 318
C. The Role of the USA and the Future of the GEOs. . . . . . 320
Appendix to Chapter Six—Draft Protocol to the
AsDB Charter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323
About the Author. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329
Selected Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331
Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339

List of Tables and Boxes
Tables in Main Text
Table 1.1: Bilateral Development Assistance Versus
Multilateral Development Assistance . . . . . . . . . . . . . . . . . . . 27
Table 1.2: Standard-of-Living Information for Ten
Selected Countries in the Same General Region
as Azbadistan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Table 1.3: Standard-of-Living Information for Ten
Selected Countries in the Mid-Section of Africa . . . . . . . . . . 34
Table 1.4: Standard-of-Living Information for
Ten Selected Rich Countries. . . . . . . . . . . . . . . . . . . . . . . . . . 35
Table 2.1: Human Development Indicators,
by Various Groupings and Regions. . . . . . . . . . . . . . . . . . . . . 52
Table 3.1: Growth in Foreign Direct Investment in
Less Developed Countries, 1970–2005. . . . . . . . . . . . . . . . . 104
Table 3.2: Membership in the Regional MDBs. . . . . . . . . . . . . . . . . . . 128
Tables in Appendix to Chapter Three
Table A: IMF Quotas and Voting Rights . . . . . . . . . . . . . . . . . . . . . . . 149
Table B: IMF Constituencies and Voting Powers . . . . . . . . . . . . . . . . 157
Boxes in Main Text
Box 1.1: Increases in World Population . . . . . . . . . . . . . . . . . . . . . . . . 39
Box 1.2: Selected NGOs Involved in International
Development Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Box 3.1: The Global Economic Organizations (GEOs). . . . . . . . . . . . 92
Box 3.2: A Glimpse at Tariffs and Tariff Hikes. . . . . . . . . . . . . . . . . . . 97
Box 3.3: A Glimpse at the Effects of Currency Devaluations. . . . . . . . 98
Box 3.4: A Glimpse at National Balance of Payments . . . . . . . . . . . . 107
Box 3.5: How the IMF Lends: Details of Financial Facilities. . . . . . . 109
Box 3.6: A Glimpse at SDRs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Box 3.7: MDB Resources: Getting Funds, and Lending
Them, for Hard Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Box 3.8: MDB Resources: Getting Funds, and Lending Them
for Soft Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Box 4.1: Free Trade from Individual Perspectives . . . . . . . . . . . . . . . 174
Box 5.1: Views Toward the Role(s) of MDBs. . . . . . . . . . . . . . . . . . . . 261
ix