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Accountability Gone Wrong: The World Bank, Non-governmental Organisations and the US Government in a Fight over China

2009; Taylor & Francis; Volume: 14; Issue: 1 Linguagem: Inglês

10.1080/13563460802671220

1469-9923

Robert Wade,

International Development and Aid

Click to increase image sizeClick to decrease image size Notes Robert Wade acted as consultant to the World Bank's Inspection Panel in the Qinghai investigation, writing a report on how the project was prepared inside the Bank. His field work inside the Bank lasted for some three months in the latter part of 1999, involving repeated interaction with the main participants and access to confidential files, as well as more distant involvement for several more months. It should be emphasised that the empirical part of the essay refers to the period around 1999–2000, and not necessarily to the present. The essay is drawn from a much longer unpublished account, which provided the basis of Sebastian Mallaby's account of the Qinghai debacle in The World's Banker (Yale University Press, 2004). Thanks for comments to Rob Crooks, Mark Blyth and three anonymous reviewers for this journal. Attributed to Lewis Namier. The Economist, ‘Tibetan tinderbox’, 19 June 1999. The essay assumes that the patterns seen in the case are not idiosyncratic, not likely to be overturned by the next observation, but it does not demonstrate that the case is representative of a much larger phenomenon – that would be a separate exercise. The justification for focusing on this particular case is that it illustrates interactions between major world actors, that it received world-wide attention, and that I had an insider's view as a consultant to the Inspection Panel. NGOs exclude private sector firms. In the case of the World Bank, Wall Street firms and interests have always intruded directly, not only via the US Treasury and the US Executive Director. On NGO involvement in the World Bank before 1980 see Robert Wade, ‘Greening the Bank: The struggle over the environment, 1970–1995’, in Devesh Kapur, John Lewis & Richard Webb (eds), The World Bank (The Brookings Institution, 1997), pp. 611–734. ‘Together, we are a superpower.’ Jody Williams, of International Campaign to Ban Landmines, quoted in John Clark, Worlds Apart: Civil Society and the Battle for Ethical Globalization (Kumarian Press, 2003), p. 169. See Alexander Cooley & Ron James, ‘The NGO Scramble: Organizational Insecurity and the Political Economy of Transnational Action’, International Security, Vol. 27, No. 1 (Summer 2002), pp. 5–39, at http://cedar.barnard.columbia.edu/∼polisci/faculty/cooley/ngoscram.pdf. A US poll found that only 11 per cent believed governments were doing all they can ‘to make the world a better place’, while 70 per cent thought NGOs were trying to do so. In Europe, almost a third trust NGOs to do the right thing, compared 20 per cent government, 15 per cent business and 11 per cent the media. Based on a poll of 1100 opinion leaders in the USA, Europe and Australia during 2000 by Edelman Public Relations, reported in the Financial Times, 6 December 2000, p. 10. One effective way to do this, highlighted below, is to frame a problem in terms of a specific actor causing bodily harm to a specific group of people, preferably a vulnerable minority; and to communicate a simple message about the problem, filtering out complexity. Michael Edwards, ‘NGO Rights and Responsibilities: A New Deal for Global Governance’, Foreign Policy Center, London, and Ford Foundation, New York, September 2000. The classic book on transnational advocacy NGOs, Margaret Keck & Kathryn Sikkink, Activists Beyond Borders: Advocacy Networks in International Politics (Cornell University Press, 1998), says next to nothing about the accountability issues raised here. Brown and Fox do discuss accountability within transnational coalitions, but say nothing about the incentives on northern NGOs to distort information so as to make a campaign-friendly framing – and the lack of accountability for such distortion. See David Brown & Jonathan Fox, ‘Accountability within Transnational Coalitions’, in Jonathan Fox & David Brown (eds), The Struggle for Accountability: The World Bank, NGOs, and Grassroots Movements (MIT Press, 20000). Bob talks about such incentives, but with reference how local protest groups try to become global causes. See Clifford Bob, The Marketing of Rebellion (Cambridge University Press, 2005). Ngaire Woods, The Globalizers: The IMF, the World Bank and Their Borrowers (Cornell University Press, 2006), discusses the accountability of the IMF and the Bank to their member governments. As seen in the fact that 85 per cent of the NGOs associated with the UN Department of Public Information were based in the OECD countries in 2000. An example is the northern leadership of the mid-1990s campaign to cut back or close down the IDA, the soft-loan affiliate of the World Bank, on behalf of the ‘poor’, despite less well organised opposition to their goals from some southern-based NGOs and southern governments. ‘Moral hazard’ in the narrow sense refers to a situation where an agent increases the risk experienced by a principal. In a broader (and now more common) sense, it refers to a misalignment of incentives between principal and agent which cannot be controlled directly. The classic case is the effect of a central bank's lender of last resort facility in increasing banks' carelessness in lending. In the present case, US NGOs and the US Congress require other governments, via the World Bank, to adopt policies and incur expenditure which ignore local preferences and which might not be politically acceptable even in their home base (for example, a National Environmental Action Plan). See further, Wade, ‘Greening the Bank’. Book-length critiques of the World Bank include Catherine Caufield, Masters of Illusion: The World Bank and the Poverty of Nations (Macmillan, 1997); and Michael Goldman, Imperial Nature: The World Bank and Struggles for Social Justice in the Age of Globalization (Yale University Press, 2005). ‘Social’ directives are limited to consultation, resettlement, and protection of indigenous peoples. In line with Alinsky's fourth rule for radicals: ‘Make the enemy live up to their own book of rules’. Alinsky explains: ‘You can kill them with this, for they can no more obey their own rules than the Christian church can live up to Christianity’. Saul Alinsky, Rules for Radicals (Vintage, New York, 1971), p. 128. As in the case of the forest policy, and of the World Development Report 2000, titled Attacking Poverty. See Robert H. Wade, ‘US Hegemony and the World Bank: the fight over people and ideas’, Review of International Political Economy, Vol. 9, No. 2 (2002), pp. 201–29. See, for example, the role of Senator Robert Kasten (Wisconsin), in Wade, ‘Greening the Bank’. See Woods, The Globalizers. ‘Boomerang’ is a term used by Keck & Sikkink, Activists Beyond Borders. Some academic legal scholars played an important role semi-independently from the NGOs. They included Danny Bradlow, professor of law at American University in Washington DC. The IP comprises three members, who cannot come from Bank staff and who are chosen jointly by the president and the Board for staggered, non-renewable five-year terms. (By implicit understanding one panelist comes from North America, one from Europe, and one from a developing country.) When a complaint is received the IP determines its eligibility on technical grounds, such as whether the complainants are affected by the project and whether they have already tried to resolve the issues with Bank management, and then decides whether to recommend an investigation; the recommendation goes to the management for a response within 21 days; both documents go to the Board; and the Board decides whether to authorise an investigation and on what scale (desk study, field study). If the Board authorises an investigation, the IP writes a report; management responds to the report by proposing changes or additional work; the IP report and the management response go to the Board; and the Board decides what to do. For background on the IP, see Gudmunder Alfredsson and Rolf Ring (eds), The Inspection Panel of the World Bank (M. Nijhoff, 2001). This exercise was also prompted by an internal examination of the reasons for the deterioration in the performance of Bank-supported projects. The report of the internal task force, finished in 1992, confirmed much of what the NGO critics had been saying about the disconnect between the Bank's policy statements and actual implementation. Effective Implementation: Key to Development Impact, Report of the World Bank's Portfolio Management Task Force, 3 November 1992 (The Wapenhans Report). See, for example, James Wolfensohn, ‘Coalitions for Change’, address to Board of Governors, The World Bank Group, Washington DC, 28 September 1999. In the next door province of Ganzu, for example, the Bank earlier helped to prepare and finance the Hexi Corridor resettlement project involving 200,000 settlers, some of them Tibetans, and the Tibet lobby and other NGOs had raised no alarms. These claims were made orally and in email correspondence with the IP, which I heard and saw as a consultant to the IP. Specifically, the Qinghai campaign provided the US government with ammunition against China's claims for compensation for the allegedly accidental US bombing of the Chinese embassy in Belgrade on 8 May 1999, which the Treasury was having to deal with at that very time; and fortified its pressure on China in the difficult ongoing negotiations over Permanent Normal Trade Relations (PNTR) and China's WTO membership. After Qinghai ended the head of the Bank's unit dealing with China's economic statistics agreed – against the advice of her own professionals – to China's request to lower its per capita income (by removing the Bank's 20 per cent uplift on China's own figures, which the Bank had applied to offset poor accounting of the informal sector) so that it could continue to enjoy IDA privileges for a while longer (access to which depends on per capita income being below a certain level). Insiders say this was at the request from the top of the Bank, responding to a request from the Treasury seeking to find a method of compensation outside the US political process. According to a Washington Post editorial, ‘The World Bank's technical people, having launched 31 ‘poverty reduction projects’ in China, saw no problem with No. 32. That is why, incredibly, only when ‘British Tibet advocates started spreading the word seven or eight weeks ago did the Bank learn of the project's political aspect: it would resettle some 60,000 poor Chinese farmers on lands that Tibetans say is traditionally theirs … . It becomes a political embarrassment to deal with the project now. But it is an avoidable and manageable embarrassment. The World Bank cannot accidentally become the instrument of a Chinese policy that affects the survival of Tibetans as a distinct people and culture.’ (‘The U.N.'s New China Project’, 22 June 1999, p. A16). The Boston Globe printed an ‘op-ed’ on Chinese torture in Tibet, which linked the Qinghai project with torture (Cesar Chelala, ‘Torture in Tibet’, 22 June 1999, p. A15). The New York Times ran an ‘op-ed’ after the Board's first vote, ‘But enough people of good heart raised so much protest about the loan helping China to occupy Tibet that the World Bank ordered an “inquiry” before the $40 million is actually spent … . The delay does not satisfy Tibet's supporters, at all. But at least the protest tells the Tibetans they are not alone, not entirely’ (A.M. Rosenthal, ‘On my mind: slaves, stay out’, 25 June 1999, p. A23). The New York Times' reporters David Sanger and Joseph Kahn ran a story headlined, ‘World Bank criticises itself over Chinese project near Tibet’ (27 June 2000, p. A7). They stated that the project is ‘on the edge of Tibet’ and ‘just outside the Tibet boundary’. They stated that a result of the project ‘would be to put ethnic Han Chinese farmers into Qinghai’. They stated that the Dalai Lama ‘was born in the resettlement region’. The only article in defence was Robert Wade, ‘A move for the good in China’, Personal View, Financial Times, 3 July 2000. In response to the article the chairman of the IP lodged a formal complaint to the Bank's Ethics Office on grounds that it broke rules of confidentiality. The Ethics Office mounted an enquiry which took five months and yielded a file several inches thick, in the course of which I showed in elaborate detail that everything in the article was already in the public domain by the time of publication, except for one single phrase. The Ethics Officer accepted this defence, but still judged I had committed a ‘serious offence’ – to be entered into my employment record – by not obtaining clearance prior to publication. For a defence of the campaign and the Inspection Panel report, see Dana Clark & Kay Treakle, ‘The China Western Poverty Reduction Project’, in Dana Clark, Jonathan Fox & Kay Treakle (eds), Demanding Accountability: Civil Society Claims and the World Bank Inspection Panel (Rowman & Littlefield, 2003). Clark and Treakle were leaders of the Bank Information Center in 1999. Source: China Western Poverty Reduction Project, Public Information Document, 1 June 1999. An environmental specialist who had worked across East, Southeast and South Asia on rural development projects for many years, both in the World Bank and outside, said, ‘We know that China's rural development projects are the best the Bank has been involved in, compared to all other [Asian] countries. We know they do good environmental analysis, though the range of what they recognise as ‘environmental problems’ is narrower than in the West. We know they act to mitigate what they define as major environmental problems. The same could not be said of many of our other borrowers. We also know they do at least fairly good Social Assessments, compared to most of our other borrowers. They do a pretty good job of disclosure of information – generally speaking the people affected by the projects I've worked on in China know a lot more about it than the people affected by Bank projects in any of the other countries I work in. So the Bank does not press them too hard on ‘participation’, it does not hold them to the letter of the Operational Directive. Compromise is inevitable, in all countries, between what a one-eyed Operational Directive calls for and what is achievable on the ground. Even the US Executive Director's office agrees that if an Environmental Assessment for an A project is ready 90 days before the Board rather than 120 days as called for in the Operational Directive, that's OK. The problem is, once a project is put into the spotlight of single-interest public attention, it is hard to defend these compromises even though they are necessary.' Interview with Wade, 18 October 1999. On resettlement performance in dam projects in China, India, Thailand, Indonesia, Brazil and Togo see Robert Picciotto, Warren van Wicklin & Edward Rice (eds), Involuntary Resettlement: Comparative Perspectives, World Bank Series on Evaluation and Development, Vol. 2. (Transaction Publishers, 2001). The book examines two dam-related resettlement projects in China. It finds that ‘[The two projects in China] set new standards in preparing for income restoration … . [A]ffected farmers were brought into discussions of compensation rates, relocation and employment options from the beginning’ (pp. 15–16). ‘China's performance in these two projects is impressive … . China takes income restoration and development as seriously as physical relocation … . China's evident concern for jobs, incomes, full participation, family welfare, and equitable growth – at least as demonstrated on these two schemes – illuminates the ongoing debate over Chinese respect for human rights. It supports government's assertion that whatever its attitude toward freedom of political expression, its recent record on furthering the ideals of family welfare must be respected’ (pp. 55–6). The project was vastly oversubscribed, as is normal in large-scale resettlement projects in China. The Chinese government said that the selection was made on the basis of features of the sending villages, including ‘ecostability’, per capita income, and alternative income opportunities, not ethnic group membership. Many more Mongols were affected, but their fate received almost no notice in the absence of a Mongol lobby in the West. See Bob, The Marketing of Rebellion. The World Bank has its share of slippery, duplicitous, whichever-way-the-wind blows characters, and in my years as a World Bank staff member and then researcher of the Bank I met a good number, but there were none at the operational levels of the Qinghai project. The consultant clearly stated his agreement with the environmental reviewer's decision to classify Qinghai as a B several times over, including in A. Schumacher to Petros Aklilu, copy to Rob Crooks and others in the project team, ‘Response to Rob Crooks’ comments', 7 April 1998, email (4.5 pages single-spaced). The following is based on my own field-work inside the Bank on behalf of the IP, and on my earlier research reported in ‘Greening the Bank’. Transcript of interview with IP, 10 November 1999. Later in the investigation the chairman ordered that all copies of all the transcripts be destroyed. Shortly afterwards BR's managers encouraged him to leave the Bank, and he did. In addition to the social reviewer, several other staff members directly involved in the project left the Bank within the following year; but one would have to see personnel files to know to what extent in response to Qinghai. Janet Guttman, ‘Interview: World Bank admits it was naive on China’, Reuters, Washington, 1 September 2000. The memo instantly became known as ‘the dumb shits’ memo. The regional vice president took to bringing a woman with him whenever he went to see Wolfensohn, having noticed that Wolfensohn controlled his temper better in the presence of women. ‘I only know that the Chinese completed the project according to the original design with central government funds, that is, all funds were provided as grants to Qinghai from the central government’ (Sari Soderstrom, second task manager for Qinghai, working in World Bank Beijing office in the several years up to 2008, personal communication, 8 September 2008). See Wade, ‘Greening the Bank’. See Wade, ‘US Hegemony’.