Samuelson (1951): “the backward nations cannot get their heads above water because their production is so low that they can spare nothing for the capital.

Samuelson (1951): “the backward nations cannot get their heads above water because their production is so low that they can spare nothing for the capital formation by which their standards of living could be raised”

Friedman (1958): “despite the intentions of foreign economic aid, its major effect, insofar as it has an effect at all, will be to speed the Communization of the underdeveloped world”

Sachs (2005): The End of Poverty: Economic Possibilities of our Time, Penguin Press

Jim Wolfensohn(1995-2005): We dream of a World Free of Poverty

William Easterly (2006): The White Man’s Burden, Penguin Books

I. Does foreign aid work? My conclusions from 30 years at the World

Bank (and 10 years since) Analytical evidence on aid effectiveness

II. Recommendations for the Future of the World Bank

1. Early experiences The knowledge Bank Apolitical Bank leadership

2. Working with the East Asian Tigers Leadership committed to development most

critical Openness to external influences, but clients

always in driver seat Stick with the basics – simple approaches to

development

3. China: The Development Marathoner Get the best from others (the Bank), but make

your own decisions Policy and institutions are sui genres Start new ideas on small scale and then build up “Responsibility system” – no hand outs

4. NGOs: The new foes of development The Pak Mun episode and its ramifications

5. Discovery of Private Sector Pseudo reformers vs real reformers Failure of structural adjustment; more harm than

good Limitations of conditionality

 6. The Wolfensohn Era

Start of politicization of the Bank Showing holes in Bank governance

7. Rebuilding Failed and Failing States Unrealistic donor goals Clients as bystanders in a donor-driven show Donors draining limited capacity

Foreign aid works in countries that work and fails in countries that fail

Foreign aid cannot drive development Back to the forgotten concept of aid as a

catalyst

1. Project Outcomes – very mixed record

No. Projects

1971-2000

% Satisfacto

ry

Bankwide 5,590 71%Africa 1,790 60%

% Sustainab

le

48%

33%

Minus 5-10% ex-post evaluation disconnect

Overall success: 25-30% in Africa

2. Missing Aid/Growth Linkage No. of countries >2.5% per capita GDP

growth 1971-2000: 15 No correlation between level of aid and

growth

Total Aid ($billions)

Aid/Capita/Year ($)

Avg GDP/Capita Growth (% p.a)

2000-2008 Avg GDP/Capita Growth (% p.a)

AsiaBangladesh 35.3 11.0 0.7 4.1China 38.0 1.5 7.1 3.8Indonesia 33.0 6.5 4.2 3.8India 48.5 2.1 2.5 5.9Korea 2.1 2.2 6.0 3.9Lao PDR 3.8 29.0 NA (<2%) 5.0Malaysia 3.5 7.6 4.3 3.1Nepal 7.7 13.4 1.5 1.5Philippines 18.2 10.0 1.0 2.9Sri Lanka 12.1 24.0 3.2 4.1Thailand 14.1 8.5 4.6 3.7Vietnam 15.0 8.0 NA (>2.5%) 6.1

AfricaBotswana 2.7 75.0 7.3 2.9Ethiopia 15.7 10.8 NA (<0%) 5.4Ghana 10.7 24.6 -0.4 3.2Kenya 14.4 22.0 1.1 1.5Lesotho 2.4 53.0 2.8 2.8Liberia 2.4 38.4 -4.6 -3.6Nigeria 3.8 1.4 0.2 3.6Senegal 12.0 55.4 -0.5 1.6Swaziland 1.0 44.0 2.9 1.5Tanzania 20.6 28.2 NA (<0%)) 3.9Uganda 10.3 18.2 NA (<1%) 4.0Notes: N/A not available; author estimate in parenthesisSource: World Development Indicators, The World Bank

Overload of good intentions:

“The central challenge faced by the Bank is to reconcile the expanding scope and ambition of its development agenda with a need to improve project performance”

- 1992 Review of Portfolio Performance, OED, 1994

“The problems we are encountering in today’s projects are the same problems encountered in projects many years ago. We keep making the same mistakes because we did not learn from earlier experience…. Most project officers think that their project is unique and will succeed where others have failed”

- The Wapenhans Report 1992

The ever growing “Safeguards”.

Obsession with volume of loans: Missing link with actual performance

Successful projects do not equate to successful development

1971-2000 Avg GDP Growth

(% p.a)%

Satisfactory%

Sustainable

Asia

Bangladesh 0.7 67 31

China 7.1 91 85

Indonesia 4.2 81 54

India 2.5 74 47

Korea 6.0 90 81

Lao PDR NA (<2%) 59 53

Malaysia 4.3 85 80

Nepal 1.5 64 38

Philippines 1.0 70 54

Sri Lanka 3.2 74 43

Thailand 4.6 84 64

Vietnam NA (>2.5%) 100 67

Africa

Botswana 7.3 83 83

Ethiopia NA (<0%) 67 36

Ghana -0.4 69 45

Kenya 1.1 38 23

Lesotho 2.8 70 65

Liberia -4.6 50 0

Nigeria 0.2 42 18

Senegal -0.5 70 37

Swaziland 2.9 88 100

Tanzania NA (<0%)) 53 37

Uganda NA (<1%) 59 35

World Average 71 47

Project Outcomes

Why do we still want the World Bank?

Still the most competent aid institution Still deep expertise, but need to separate

out from large numbers of bean counters Large balance sheet $200 billion

1. Strengthen governance Asking hard questions on past performance Reconciling conflicted recipient roles: forget

solidarity Resist fads and fashions Codify Board role; severely restrict papers; trim

staffs; transparency in all proceedings Voting power of developing countries not the

issue

2. Depoliticize presidential selection A qualification-driven process for the selection

of the president Nationality not the issue

3. Make IEG truly independent and fully transparent

4. Budget support instead of project lending – no mix and match Project lending only for large, transformational

projects

5. A Leaner Bank as the True Knowledge Bank