For Richer or Poorer: Assessing the Criticisms Directed at the Multilateral Development Banks

Abstract

This article enumerates and evaluates key criticisms that are directed at the multilateral development banks ("MDBs") - that is, the World Bank and the four regional development banks. Some of the criticisms are substantive in character, claiming that the MDBs impose inappropriate policies and projects on countries and contribute to environmental degradation and human rights violations; some criticisms are procedural and institutional in character, denouncing the lack of transparency, access, consistency, and competence of the MDBs; and some criticisms are constitutional in character, arguing that these institutions perceive their roles either too narrowly or too broadly, or that they suffer from basic structural flaws because they provide entirely the wrong kinds of assistance and are controlled by the wrong countries. Much of this cacophony of criticism stems from the fact that the MDBs have gradually taken on attributes of global regulatory bodies with vastly greater influence now than in earlier years. While this evolution has prompted some calls for dismantling the MDBs, the author dismisses this approach and asserts instead that legal steps should be taken to direct the evolution of MDBs into a "fourth generation" of such institutions. Specifically, the author recommends that the MDBs' governing bodies make certain fundamental changes, both by adopting new policies and by amending their charters, in order to address those criticisms that are persuasive and important. The author suggests (i) requiring the institutions to give ever more attention to environmental and social concerns by adopting a broader view of "economic development" and by linking MDB membership to the acceptance of key treaty provisions relating to environmental protection and human rights; (ii) taking further steps to permit and facilitate public participation in MDB decision-making; (iii) adopting mechanisms to offset the asymmetry that results from the MDB's weighted voting systems and from their use of loan conditionalities; (iv) acting to ensure that the MDB staffs are adequate in their size, their competence, and their access to outside resources to carry out the responsibilities given to them; and (v) providing for external judicial review of MDB operational decisions and charter interpretation through a new tribunal for MDBs. The article urges that the United States play a lead role in bringing about these changes, recognizing thereby the merits of using multilateral solutions to meet global economic challenges.

Keywords: international economic law, world bank, international development, globalization

JEL Classification: K33, K32