July 20, 2004
International financial institutions need internal workforce reform, say economists
For Immediate Release: July 20, 2004
Contact: Debi Kar, 202-387-5080
The World Bank and International Monetary Fund should tie its internal staff promotion system to the success of policy recommendations for developing countries, concludes a new report by the Center for Economic and Policy Research (CEPR). Mark Weisbrot and Dean Baker, the authors of the report, entitled “Applying Economics to Economists: Good Governance at the International Financial Institutions”, argue that the international financial institutions’ (IFI) lending programs typically do not have well defined and quantified goals that allow for their success or failure to be clearly evaluated. They also argue that the economists responsible for the design of specific programs should be clearly identified (along with their supervisors) to ensure that they can be held accountable for the quality of their performance. This report comes out as the Bretton Woods institutions mark the sixtieth anniversary of their founding conference in Bretton Woods, New Hampshire on July 22, 1944.
The report by CEPR argues that IFI recommendations would be more useful to the governments and the public in developing countries if they were accompanied by clear statements of the expected costs and benefits they implied. In many cases, for example the promotion of social security privatization, the IFIs did not provide a clear statement of the anticipated benefits of the policies advocated. Without reasonably well-defined projections of benefits, governments are not in a position to determine whether potential gains outweigh short-run economic and political costs. Furthermore, ambiguity about the expected goals and the extent to which countries are following recommendations makes it difficult to assess whether poor results are due to bad policy, or to the failure of governments to adequately adhere to IFI recommendations.
As a corrective to these governance problems, Baker and Weisbrot propose that the international financial institutions should set out clear targets, with frequent assessments as to whether countries are on course to reach these targets. Insofar as countries are falling behind policy goals, the interim assessments should clearly indicate the reason for the failure. The reports should also include an open chain of authority that establishes responsibility for every program. Program documents would specify the economists responsible for making the projections, and their supervisors. In this manner, national policymakers would be able to gravitate towards IFI economists and supervisors with high program success rates, and these staff could receive promotions and benefits based on the quality of their work. The authors note that these recommendations are similar to those made by the IFIs themselves to European and developing countries, in their advocacy of more flexible labor markets.