Zedillo Commission Offers G-20 a Blueprint for Fixing the World Bank (But will Zoellick be Gorbachev or Brezhnev?)

Last week, the World Bank released the long-awaited report of a high-level commission headed by former Mexican president Ernesto Zedillo. The report, which had been requested by World Bank president Robert Zoellick, offers a comprehensive blueprint for modernizing the World Bank to deal with the challenges of the 21st Century.Zoellick, a U.S. appointee, welcomed the report and said it would be “especially relevant as we undertake important institutional changes.” But he expressed doubts about recommendations for changes in the size and structure of the board, while side-stepping a recommendation that the next bank president be chosen without regard to nationality.CGD president Nancy Birdsall, an expert on global governance who has written extensively on World Bank reform, called the report “an important milestone in the ongoing debate about how to make the World Bank more effective and legitimate.” She added: “If the sherpas for the G-20 and others concerned about fixing the World Bank read only one thing about the bank this year, this should be it.”I’m guessing that the report’s recommendations reflect Zedillo’s rich first-hand experience with tough institutional transitions. The last of an uninterrupted 70-year line of Mexican presidents from the so-called Institutional Revolutionary Party or PRI, he served as a sort of Mexican Gorbachev, opening the way to a new order when the old way of doing things had ceased to work.So, is Zoellick Gorbachev or Brezhnev?The eleven-member commission—which includes very senior officials and former officials from such increasingly influential G-20 members as China, India, and Brazil—isn’t counting on visionary leadership from the current bank president, or expecting that sufficient reform could emerge from discussions within the current board. They are counting instead on the G-20. The report notes:

Only national leaders can break the gridlock on reform of the World Bank Group: meaningful reforms of multilateral agencies, at least in their broad outline, are unlikely to be decided anywhere but at the level of heads of state and government.

The report’s five recommendations are designed to make the bank more effective in organizing collective action to support poverty reduction and deliver global public goods. They go well beyond the marginal boost in developing country voting power currently on the table. The report insists that they are designed as a package, in which each element is essential to make the others work.At the core are changes in the structure and role of the board, and the relationship between the board and the president. These are needed, the report argues, to eliminate confusion in the oversight of the bank’s work and conflicts of interest that arise because the president and the board share responsibility for the bank’s financial operations.Currently a 25-member “Executive Board” meets twice a week and oversees day-to-day activities, with little scope for setting strategy. Pretty much the same people meet in a different guise, using different rules, to oversee other arms of the World Bank Group, such as the International Finance Corp. (IFC) and the Multilateral Investment Guarantee Agency (MIGA).The report urges shifting to a 20-member “World Bank Board” (e.g. non-executive) in which all members would represent multiple-country constituencies (now eight directors represent one country each, while the others represent roughly 16 countries each). The new board would comprise senior officials (ministerial rank) from the member countries, each elected by a multi-country constituency, and would set the bank’s strategic direction.A larger advisory group, with broad representation, would assist the board during a transitional period.The report makes a persuasive case for such reforms, arguing that the smaller, more legitimate board could hammer out international consensus on fair and effective collective responses to global problems that countries cannot solve on their own (think climate change, but also global epidemics, fisheries depletion, money laundering and illicit weapons, diamond and narcotics trades).As the report notes, a smaller board can only be achieved only by reducing the large number of seats currently held by the Europeans:

European countries appear to be considerably overrepresented in terms of the number of chairs they occupy in the Group’s Executive Board… Depending on rotation schemes, European countries occupy eight or nine chairs at any given time—32 or 36 percent of the chairs in the 25-chair Board.

The report points out that this is a historical legacy that has little relevance in the 21st century, notwithstanding the fact that several European countries make generous contributions to the bank’s soft loan window, the International Development Association, or IDA.As a former bank staff member who occasionally observed the board in session, I was disappointed that Zoellick appeared to express reservations about these thoughtful suggestions. In his letter to Zedillo (weirdly stuck in front of the Commission’s report in a single PDF on the bank’s website, as if to ensure that readers see the report only after reading Zoellick’s response) he writes:

You also suggest consolidation of Board Chairs. Interactions with our shareholders make me believe that while we must change voting power, the current composition of the Board, with the addition of a third African Chair, is well suited for supporting the development mandate of the World Bank Group. It provides a balanced representation of constituencies which will be further reinforced with advancement of Voice reform. We want to remain an inclusive institution, where there is incentive for solidarity with the poorest countries and for contributions to a strong IDA.

The report also includes a detailed proposal for a new system for selecting the bank president in a manner that is rules-based, competitive, inclusive of the membership, and, crucially, without regard to nationality. (A 2007 CGD survey found broad support for such an approach.)Zoellick replied:

there is considerable agreement on a selection process… that is merit-based and transparent, with nominations open to all Board members and transparent Board consideration of all candidates.

Seems positive, right? Yet he strikingly omitted the crucial words “without regard to nationality.” Unless the board itself is restructured, it’s easy to imagine that the United States would continue to dominate the process (with European support in exchange for U.S. backing for a European at the helm at the IMF.)In my view, such a scenario would be damaging to the bank’s legitimacy and effectiveness, and ultimately also to U.S. national interests, which benefit from an effective World Bank and transparent, rules-based global governance.It is perhaps too much to wish that Zoellick, who invited Zedillo to organize the Commission, would embrace the recommendations more fully. He came to be president through the current, dysfunctional system and he remains beholden, albeit in a haphazard fashion, to the current dysfunctional board.Still, Zoellick has plenty of scope to be a little more Gorbachev (or even better, a little more Zedillo) and a little less Brezhnev. He is now half-way through what will almost certainly be a single five-year term. In the time that remains, he could use the bully pulpit of his presidency to encourage a full and open debate. The governance section of The Hardest Job in the World: Five Crucial Tasks for the New President of the World Bank includes some practical, still-relevant suggestions on additional steps.Whether he does this or not, the Commission’s report will likely frame the private discussions of World Bank reform among the heads of government that comprise the G-20, and the able sherpas who support them. Strikingly, the Pittsburgh G-20 Communiqué, issued before the report, includes language similar to several of the report’s recommendations.My colleagues and I here at CGD are pleased that we can contribute to this process: on November 6 we will host a presentation of the report’s key recommendations by Zedillo himself, followed by a lively and informed discussion. If you have read this far and are in the Washington area, you deserve to be there: request an invitation now by contacting Heather Haines.