Depending on who you listen to, the World Bank has either just launched an unprecedented reach into the domestic political affairs of sovereign nations, or it has gutted the rules that have helped define its essential character as a global norm-setter. Both can’t be right, and most likely, neither is. But only time will tell if the bank’s newly adopted “safeguards” regime (the set of rules and procedures that seek to ensure social and environmental standards are upheld in bank-funded projects) will do what the institution’s management actually want it to do. To better understand the objectives of this new regime, and why I’m somewhat encouraged by its approach, it’s worth looking more closely at the arguments of critics on both sides.
Throughout the multi-year process of revising the safeguards, many developing country governments strenuously resisted the expansion of the bank’s rules to include human rights protections, and particularly the protection of sexual minorities. They sought to defeat this expansion using the cudgel of the “non-political” mandate contained in the World Bank’s founding articles of agreement. Yet, in taking some steps toward embracing things like labor rights and non-discrimination as a “norm” in its development work, the institution is hardly moving in a radical direction. For years, the World Bank has promoted a gender-oriented component to its agenda. To try to understand this agenda in the absence of human rights is nonsensical. The same could be said of treatment of the LGBTQ community.
Facing this reality is particularly important for the bank at this moment, when its financing role in the developing world is far less prominent than it once was. If the World Bank is to deliver something essential to developing countries, something those countries can’t find elsewhere, it won’t be cheap financing alone. While often overlooked, many developing countries actually value the norm-setting role the bank has played, even as they might resist it in certain particulars and in the cumbersome manner in which it is sometimes applied (more on that in a minute). How else to explain the sustained borrowing of large emerging market countries? When China borrows $150 million from the World Bank for a rural road project in western Guizhou Province, it does so in part to ensure that environmental standards and standards for engaging with communities will be met at the local level.
So if the expansion of the safeguards regime marks a positive step forward, why would the very advocates for expansion be so skeptical of the reforms overall? Concerns expressed by safeguards advocates in the environmental and human rights communities relate to the bank’s effort to shift the regime from one bounded by strict regulatory compliance in the bank’s preparation of projects to one defined more by risk-based approaches and flexibility. Stated that way, it should arouse some suspicion. After all, what good are new safeguards if they don’t have any teeth to them?
Fortunately, I think these suspicions, while not without some merit, are overly cynical. More importantly, I think they miss the larger good of what the bank is trying to do. The broader aim is to take a step forward on the institution’s role as a norm-setter, and this unavoidably entails moving beyond regulatory compliance on a project-by-project basis. Instead, the new safeguards regime will try to make good on long-standing rhetoric about working with developing countries as partners, relying on their own regulatory regimes when they are strong and working to build them up when they are not. This cannot be achieved by ring-fencing World Bank projects within countries. Instead, the bank needs new approaches that try harder to improve standards outside of the safety of a bank-funded project. In fact, this is what the bank’s “Program for Results” is all about, and early evidence on the effectiveness of this approach is positive.
The challenge is that the new regime depends to some degree on a “just trust us” approach, and safeguards advocates will rightly point to cases where the bank has failed to meet its own standards even when the rules were clear. But for too long, the broader approach and culture at the bank has been guided by the small number of failures, and in the process, has lost touch with larger aims of improving standards in developing countries themselves. That approach is no longer tenable.
Nor is it tenable for the World Bank to continue to look the other way when developing countries themselves operate with indifference to global norms, often in violation of commitments they have made to uphold these norms in their countries.
From both perspectives, the new safeguards regime carries new risks for the World Bank. But it cannot be a viable operating principle to reduce institutional risks to an absolute minimum in the face of compelling need around the world. Such an approach would mark an institution in decline, not one with real ambition to step up to today’s global challenges.