“… I am not an engineer, I am not a technician and everything that I have done in my life is only law. So, I need expert advice and I am going to put experts and not politicians at the Head of the CEB and the CWA. I am not going to do appel international and all that.”

Ivan Collendavelloo, in Parliament, March 2015

“… Nun fini konpran ki nu bizin lasistans de la bank mondyal pu ki nu kapav fer bann bon developman dan sekter delo.” Ivan Collendavelloo, Feb 2016

The World Has No Time

For This Kind of Nonsense

So reported The Economist at the end of last May. It referred to a study by the World Bank

Sanjay Jagatsingh

on the popularity of its policy reports. As almost half of them are supposed to at least improve public debate the two authors of the report – Doerte Doemeland and James Trevino – looked at how many times 1,611 of these policy documents were downloaded. Turns out that almost a third was never downloaded. I am not surprised. I got to read a few of them over the years and I must say there’s a lot of rubbish in there. So I perfectly understand that no one is bothering about so many of these reports. Who has time for crap in this fast-moving, intelligent and hyper-connected world?

Maybe the World is Wrong?

And that many of her problems would go away if more people read those reports and implemented the recommendations spelled out in there. After downloading them that is. Because after all the World Bank’s mission is to end poverty. Maybe that’s what Mauritius needs to do to get out of the middle-income trap where we’ve been stuck for 27 years? And start breathing down Singapore’s neck. Nah, not really when we consider a number of things. We could start by looking at what Lee Kuan Yew had to say to Foreign Affairs about the World Bank – one of two controversial Bretton Woods institutions, the other being the International Monetary Fund (IMF) – back in 1994: « The World Bank report’s conclusions are part of the culture of America and, by extension, of international institutions. It had to present its findings in a bland and universalizable way, which I find unsatisfying because it doesn’t grapple with the real problems. It makes the hopeful assumption that all men are equal, that people all over the world are the same. They are not. » It’s quite a handy quote given that we celebrated 50 years of our sovereignty barely two months ago. Let’s look at a few more examples.

How Malawi Ended Extreme Poverty

An interesting 2007 New York Times article tells the story of the role played over two decades by the World Bank in pushing our fellow SADC member “to eliminate fertilizer subsidies entirely… its theory was that Malawi’s farmers should shift to growing cash crops for exports and use the foreign exchange earnings to import food…” It always starts with one of their dumb theories doesn’t it? The result was famine in the country until the then President stopped listening to the World Bank and reintroduced the fertiliser subsidies. The return of common sense did not only roll back acute child hunger but also enabled Malawi to sell food to neighbouring countries. Jeffrey Sachs summed up the cause of the hardship endured by Malawi nicely in that article: “The donors took away the role of government and the disasters mounted.” That’s not the only problems that donors create.

Meet Indonesia,

Star Client of the World Bank

Flip through Sebastian Mallaby’s excellent The World’s Banker to go back to July 1997 in Indonesia. Dennis de Tray is heading a big country office of the World Bank there – a staff of more than a hundred – when the Thai baht loses value fast after its peg to the US dollar is abandoned. De Tray reassures the bank’s board that Indonesia will not be adversely affected and that his staff was giving corruption the attention that was required. But six months later the country was « falling like a stone. » The model country saw its economy contract by 13% in 1998 and unemployment increased by a factor of ten. Mallaby mentions that when news broke out in the second half of July 1997 that 30% of the loans made by the World Bank to Indonesia had disappeared in corrupt hands the bank released a statement whereby it « knew exactly where our money is going, we don’t tolerate corruption in our programs. » But an internal memo in October that same year confirmed that the loss was between 20% and 30%. So there we have a confirmation of what LKY and many others have diagnosed namely that the World Bank « doesn’t grapple with the real problems. » A worldview that’s way too rigid to allow basic common sense in doesn’t help.

We can stay a little longer on this topic and look at what Bertrand de Speville former ICAC Commissioner of Hong Kong said on attempts to roll back corruption in an interview to Le Mauricien in May 2007: Pourquoi rien ne marche et pourquoi ne voit-on que du flat lining? Pour vous dire franchement, je réalise que ce qui s’est passé est que les institutions internationales se sont trompées. Elles ont démarré du mauvais pied. Il faut voir de plus près ce qu’ont fait les donateurs internationaux. En vérité, c’est leur faute. En vérité, le principal responsable, je regrette de le dire, c’est la Banque mondiale. It’s true that humility is not the middle name of the World Bank but her sister institution, the IMF, is even more arrogant.

Tunisia, Egypt and the Arab Spring

An institution that deals with so many countries should be able to anticipate major problems in any one of them. Yet in April 2010 the IMF « commended the authorities’ sound macroeconomic management and the reforms implemented since 2004, which had strengthened the resilience of the Egyptian economy in the face of the global crisis. » This is ten months before Hosni Mubarak resigned as President of the land of Pharaohs. They didn’t do any better in the case of Tunisia. A mere three months before Mohamed Bouazizi set himself ablaze its « executive directors noted that Tunisia weathered the global crisis well, largely reflecting its sound macroeconomic management and structural reforms over the last decade and timely responses since the onset of the crisis. » This is precisely what LKY and many other right-thinking people have said of their typical analysis: it’s too bland to pick up social volcanoes that may be brewing right under the surface.

The IMF Doesn’t Put Out Fires,

It Starts Them

That’s the title of a December 1998 article in Business Week by Robert Barro from Harvard. In it he went as far as suggesting that the IMF change its name to the IMH (the Institute for Moral Hazard), « admit that it was insolvent and go out of business. » Sachs who we mentioned above described the Asian crisis as a case of the Wrong Medicine. We can also look at the reports published by the IMF’s own Independent Evaluation Office (IEO) to get a better sense of its performance. Or if you’re pressed for time the summary of the one for May 2007 – which by the way was out just before the start of the Great Financial Recession – where it found that the Bretton Woods institution « was simply not as effective as it needs to be in both its analysis and advice, and in its dialogue with member countries. » 

The report listed its « lack of understanding of its role in exchange rate surveillance » as one of its failings. It is good to remember at this point that exchange rate surveillance is a core skill of the IMF which is as Mallaby remarked a one-product institution. Read the summary a little further and find that « the effectiveness of the dialogue was hampered in some cases because staff teams did not bring with them sufficient expertise and experience. » So there you go. Another institution which doesn’t seem to know what it is supposed to do and how to do it. Looks like it has a massive skills mismatch. We can also look at an experience that all Mauritians can relate to. 

Bretton Woods Ali

And Policy Spaghetti

So far we’ve seen a number of things about the two institutions from Bretton Woods: 1. that about a third of the reports of the World Bank are never downloaded; 2. following their advice has led to famine; 3. ignoring them can lead to massive improvements; 4. people that are not completely brain dead find their recommendations too superficial; 5. they cannot see the elephant in the room; 6. they probably have a fantasy that they have been elected by voters and 7; they are not too sure what their role is. Still it is possible that many of these reports contain a lot of good stuff and some countries have had mostly positive experiences with these two institutions.

What if someone had sifted through enough of them, picked those that had worked and adapted them to our local context? Well, this is precisely what Ali Mansoor said he was going to do – he had worked at the World Bank or the IMF for a long time – when he was given the job of Financial Secretary by his university buddy at the beginning of 2006. Don’t we have enough vivid examples of the crappy kind of statements and policies that were implemented by him for almost eight years or by his alter ago for five? We do. Shall we look at a couple of them? Let’s do this tomorrow.