World Bank and IMF Spring Meetings – Nancy Birdsall and Todd Moss

Summary

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The CGD Podcast: World Bank and IMF Spring Meetings – With Nancy Birdsall and Todd Moss

Date: April 9, 2013
Host: Lawrence MacDonald
Guests: Nancy Birdsall (President, Center for Global Development), Todd Moss (Vice President & Senior Fellow, CGD)

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Episode Overview

In this episode of The Global Prosperity Wonkcast, Lawrence MacDonald sits down with Nancy Birdsall and Todd Moss to explore the major issues confronting the World Bank and International Monetary Fund (IMF) ahead of their 2013 Spring Meetings. Key topics include the changing roles of these institutions, the future of the International Development Association (IDA), debates around IMF quota reform, the potential rise of a BRICS development bank, and a growing institutional focus on climate change. All discussions are geared toward understanding smarter international development policy in a rapidly evolving global landscape.

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Key Discussion Points & Insights

1. Why the Tone Around the World Bank and IMF Has Changed

[00:27 – 03:50]

• Backdrop: In the 1990s and early 2000s, the World Bank and IMF annual meetings were marked by large, often violent street demonstrations.
• Shift in Perception:
  • Nancy points out significant adaptation by both institutions, especially in the last decade, in response to global pressures for more attention to poverty, inequality, and climate change.
  • Recent leaders like Christine Lagarde and Jim Kim are actively raising issues of social inclusion and climate, marking a new focus.
  • “Jim Kim, in his speech today at Georgetown, talked about the inequality issue and he used the words injustice and justice, which is a really different way of thinking about the problems... the demonstrators were so concerned about.” (Nancy, [01:53])
• Emerging Markets:
  • The rise of emerging markets has led to insistent demands for reform at both the Bank and the IMF.
  • “So we are in a very different world. It is the 21st century.” (Nancy, [02:42])
• Credibility & Accessibility:
  • Todd credits former World Bank president Jim Wolfensohn for making the Bank more accessible and sensitive to outsider concerns, but notes that new safeguards now sometimes impede competitiveness.

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2. The Future of the International Development Association (IDA)

[03:50 – 10:15]

• Graduation and Shrinking Eligibility:
  • Todd explains that growth in many countries means fewer remain eligible for IDA’s concessional loans. Of 81 current countries, it’s projected to drop to about 31 in the next decade, mostly in Sub-Saharan Africa.
  • “We estimate that within the next sort of 10, 12, maybe 15 years, that will be reduced down to just 31 countries, of which 25 will be in Sub Saharan Africa.” (Todd, [04:46])
• Rethinking IDA’s Purpose:
  • Nancy argues the tri-annual donor gatherings represent a unique asset, fostering global discussions about aid.
  • As fewer countries need traditional aid, she suggests deploying funds for global public goods, such as climate mitigation and adaptation.
  • “If it could be used for new kinds of transfers… issues like climate mitigation and adaptation… it would be helpful for the World Bank to have a mandate and a grant instrument to push along and move along collective action.” (Nancy, [06:34])
• Donor Politics:
  • Todd highlights the “perfect storm” of shrinking need, new private capital, and donor fiscal strains as reasons for rethinking IDA’s size and scope.
  • “Maybe IDA doesn't need to keep growing… the model of IDA should probably try to adapt to these new realities.” (Todd, [09:27])

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3. Decoding the IMF Quota Debate

[10:15 – 20:45]

• Why Quota Reform Matters:
  • The US Congress’ delay in approving IMF quota reform is holding up changes agreed on during the global financial crisis.
  • Nancy clarifies quotas function similarly to capital contributions and determine both financial resources and political influence in the IMF.
  • “The quotas will double… The second thing… some countries, like China, like India, like Brazil… will have higher quotas, more influence, more votes.” (Nancy, [15:36])
  • “It's embarrassing for the US as a fading leader in international development… it's bad for Americans interests in the larger sense, and it's bad for the rest of the world.” (Nancy, [19:26])
• US Polity as a Barrier:
  • Todd explains that the US political system and powerful Congressional individuals can block international agreements for idiosyncratic reasons, unlike most other countries.
  • “So it's a small number of people that have unusual leverage and that they use that at particular times.” (Todd, [18:04])

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4. Emergence of the BRICS Bank – Competitor or Complement?

[20:45 – 26:19]

• Motivation:
  • Frustration with slow reform of global financial institutions and a desire for infrastructure investment drive BRICS' interest in creating their own bank.
  • “It's much easier for them to do that with a new, fresh institution than to try to retrofit an institution that's already captured by the big powers.” (Todd, [22:16])
• Differences within BRICS:
  • Todd cautions that the “BRICS” label hides very divergent interests among member countries.
  • Nancy notes that concerns about World Bank recapitalization and over-regulation on social/environmental safeguards have also played a role.
  • “It's a good thing. I think they're being very smart about saying we're not competing. But it is a little bit a sense of frustration and a little bit of a rebuke of the powers…” (Nancy, [25:28])

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5. Climate Change as a Core Development Issue

[26:19 – 32:25]

• Newfound Institutional Focus:
  • Both the IMF and World Bank are placing climate change at the center of their public agendas, with leaders like Jim Kim and Christine Lagarde calling for urgent action.
  • “Climate change is not just an environmental challenge. It shows fundamental threat to economic development in the fight against poverty.” (Jim Kim, quoted by Lawrence, [26:42])
• Mandates and Instruments:
  • Todd notes neither institution has tailored financial instruments for global public goods like climate, but both want to shape the debate and develop solutions.
  • European shareholders are hesitant to trust a Washington-based institution with climate leadership, complicating the politics.
  • Nancy emphasizes that the IMF and World Bank should develop technical expertise (esp. on carbon taxes) and use their voices to mobilize action and resources, especially beyond traditional lending models.
  • “The first thing that has to happen is that in using the bully pulpit, the members of the World Bank say, yes, you have a mandate to do something with resources that have to come somehow from somewhere.” (Nancy, [30:18])

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Notable Quotes

• [01:53] Nancy Birdsall: “Jim Kim, in his speech today at Georgetown, talked about the inequality issue and he used the words injustice and justice, which is a really different way of thinking about the problems in the international system that the demonstrators were so concerned about.”
• [04:46] Todd Moss: “We estimate that within the next sort of 10, 12, maybe 15 years, that will be reduced down to just 31 countries, of which 25 will be in Sub Saharan Africa.”
• [15:36] Nancy Birdsall: “The quotas will double… some countries, like China, like India, like Brazil, some emerging markets will have higher quotas, more influence, more votes.”
• [19:26] Nancy Birdsall: “It's embarrassing for the US as a fading leader in international development… it's bad for Americans interests in the larger sense, and it's bad for the rest of the world.”
• [22:16] Todd Moss: “It's much easier for them to do that with a new, fresh institution than to try to retrofit an institution that's already captured by the big powers.”
• [26:42] Jim Kim (quoted): “Climate change is not just an environmental challenge. It shows fundamental threat to economic development in the fight against poverty.”
• [30:18] Nancy Birdsall: “The first thing that has to happen is that in using the bully pulpit, the members of the World bank say, yes, you have a mandate to do something with resources that have to come somehow from somewhere.”

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Important Timestamps

• 00:27 – 03:50: Changing attitudes toward the World Bank/IMF and the legacy of protest
• 03:50 – 10:15: The future relevance and model of the IDA soft loan window
• 12:33 – 20:45: IMF quotas, U.S. politics, and global influence
• 20:45 – 26:19: The advent of the BRICS Bank and its likely impact
• 26:19 – 32:25: Climate change at the heart of development; institutional challenges in mandate and resources

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Tone & Flow

The conversation is thoughtful, occasionally candid, and reflects the speakers’ deep expertise in global economic governance. There is a clear sense of urgency regarding adaptation and reform, but also a recognition of entrenched political and institutional realities. The tone is informed, pragmatic, and at times lightly irreverent (e.g., jokes about the BRICS acronym).

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This summary offers a detailed account of the major themes and arguments explored in the episode—a resource both for those familiar with, and new to, issues at the World Bank and IMF.

Transcript

[A]

Welcome to the Global Prosperity Wonk cast. I'm Lawrence MacDonald and I'm delighted to have in the studio with me today Nancy Birdsel, the president of the center for Global Development, and Todd Moss, who is the vice president and a senior fellow. Nancy and Todd, welcome to the show.

[B]

Thank you, Lawrence.

[C]

Hi, Lawrence.

[A]

We're just about two weeks out from what around here people call the annual meetings. It's the annual meetings of the boards of governors, the ministers of finance and treasury who oversee the World bank and the International Monetary Fund. And I thought it would be interesting to look at the whole bundle of issues. We've got about 20 minutes. We've got a lot to cover. There's the replenishment of the International Development association, ida, the soft loan window of the World Bank. There's the question of US Support for the International Monetary Fund that goes by the somewhat arcane question of quotas. There's a newfound interest at both the bank and the fund. I was just at an event at the IMF today where Christine Lagarde, the managing director, was talking about climate change. Jim Kim, in a visit here, stressed climate change and did the same thing again today in a public speech. I want to touch on that. But first I have a question for both of you. When I started working at the World bank in 93, and especially, especially in the years that followed, that if it was spring in Washington, there were World Bank IMF annual meetings and there were demonstrations in the streets, sometimes violent. There were hundreds of people out there chanting at these terrible institutions for destroying the world. Nobody's talking about that. What's changed?

[B]

I think the institutions have changed. They've adjusted quite dramatically even in the last 10 years, but particularly, particularly in the last couple of years to the sense in the global system that they need to deal more with certain issues, including, of course, poverty, which is always there. But now Jim Kim, in his speech today at Georgetown, talked about the inequality issue and he used the words injustice and justice, which is a really different way of thinking about the problems in the international system that the demonstrators were so concerned about. And as you said, Christine Lagarde has raised the issue of climate.

[A]

So and even when she came and spoke at cgd, she talked. There were about three crises, three sources of risk, financial, which you would expect. Social. She also talked about social inclusion, the need for social inclusion and failure of social inclusion is a risk. And then of course, climate was her thing.

[B]

And of course, the second thing that's changed in the larger geopolitical space is the rise of the emerging markets and the more insistent demands on their part for changes at the IMF and the World Bank. So we are in a very different world. It is the 21st century.

[A]

What do you think, Todd? Were the demonstrators right?

[C]

Well, I don't know whether they're. Certainly some of them were right. A lot of them were probably pretty wrong. But one of the legacies of Jim Wolfensohn's tenure as president of the World bank is that he really opened the doors of the bank. He made it much, much more penetrable by constituencies that have particular interests. And we saw operations of the bank change. For example, a lot of additional social and environmental safeguards were implemented, which in some ways actually are now coming around full circle and starting to affect the competitiveness of the bank when there are lots of other financing options out there for countries. And so I think we're starting to see a little bit of that balance, maybe come back. We'll see.

[A]

You've reminded me. I need to add to the list of things we want to cover today, the BRICS Bank, Brazil, Russia, India, China, South Africa, the idea that they may indeed be forming a bank. I'm going to hold on that for a minute. I want to go first, Todd, to this question of the replenishment of the bank's concessional lending window, the International Development Association. I wasn't surprised, but maybe a little disappointed that in Jim Kim's speech today, he said that we need a big IDA replenishment. Your work here has said, hey, countries are growing pretty well. They're going to graduate pretty soon. Maybe you need a different kind of thinking about ida. What's the story on ida?

[C]

Yeah, so the soft loan window has an eligibility criteria. It's principally your average income. And countries are. A lot of countries are bumping up against that threshold. There are now 81 eligible countries for IDA resources. We estimate that within the next sort of 10, 12, maybe 15 years, that will be reduced down to just 31 countries, of which 25 will be in Sub Saharan Africa. So it will be 25 African countries and a handful of other very poor countries.

[A]

That's it.

[C]

Now, that is a radical departure from what the world looked like just a few years ago and what it looks like today.

[A]

But that assumes they won't just raise the bar. After all, in these countries, even if you graduate, you've still got plenty of poor people. I saw Ravi Kanbur today at the event at the imf. He tells me they've extended the window for India for three more years. It'll be eligible for iba.

[C]

Of course, these countries have a lot of poor people. But the question is, you know, first, are countries that are getting over these thresholds, countries like India and Vietnam, do they need concessional resources from the traditional donors? Can they borrow on private markets? Do they have their own resources? The answer is largely yes, not entirely, but largely yes. And secondly, you know, at a time when Europe is still in fiscal crisis, there's a political question about whether the traditional shareholders that have supported IDA for 50 years, whether they will want to continue to subsidize with their taxpayer dollars projects in countries that are doing quite well.

[A]

Nancy, I want to bring you in on the IDA question. Todd's been leading this work, but of course, you've been involved in the multilaterals for a long time. What's your sense? Should the donors, the IDA deputies who pony up the money every three years, should they be rethinking the purpose of this fund?

[B]

I think they should consider options. One of the, I think, really interesting contributions of the report that Todd put together is that a big asset of the bank as an institution is the process of every three years bringing together potential donors and talking about what should grant money be used for. And this is in the context of a bank that was actually set up as a credit cooperative using capital to borrow and lend. So it's a whole different creature, ida, and in some ways it's a very precious asset because of the custom that's been built up, the history and the habit. So the question is whether some of this money could be used as more and more countries need traditional aid less, if it could be used for new kinds of transfers. And you know, of course we both have in mind issues like climate mitigation and adaptation where because it's a global public good, there isn't really there's an incentive for every country to wait for every other country to do something on mitigation, and that includes the poorest of developing countries. If so, in order to, you have to act collectively. And it would be helpful for the World bank to have a mandate and a grant instrument to push along and move along collective action and country participation in reducing and adapting to climate change.

[A]

Todd, what has the response been? I mean, the IDA pledging session is sort of unusual. You've got the bank management people who full time do this and they decide. The president, Jim Kim, decides that previous presidents have always gone out and got a bigger and bigger itis, so I better do the same thing. They've got a big machine that does that. Then You've got the deputies, I'm guessing maybe in the larger governments there's somebody who thinks about this full time, but I'll bet a lot of them, they think about a lot of things so they're not devoting as much energy to it. But I know that in disseminating the report, the recommendations you've been in touch with the IDA deputies. Talk to me about the differences or similarities between the views of the deputies. When you say you're going to have a whole bunch of graduates, what do you want to use the fund for and your conversations with bank management.

[C]

Well, I think bank management is understandably focused on let's get through this next replenishment cycle, let's have a successful negotiation round and particularly with a new president, the first thing he doesn't want is a shrinking pot of money. So I understand the push for that. But the shareholders, partially because of this graduation issue, because the world is changing, but also to a big extent because all of these countries, even those with big, big aid pledges like the UK are still facing very strong fiscal questions at home that they need, they want to be able to justify asking for ever larger contributions to ida. And I think that in that context this is in a sense a perfect storm where thinking about the model for ida, how do we want to use grant money? Is it for global public goods? Do we concentrate it in the most fragile states? If it's mostly Africa? Okay, well what should we do with the African Development bank which by the way is also going through its triennial replenishment negotiations and very often these are the same officials negotiating both at the same time. You know, all of those things should be on the table. So you know, I've hinted that maybe IDA doesn't need to keep growing. You know, maybe it should. But what we were trying to push were the shareholders to think beyond just the current negotiations, but to think ahead because the conditions for IDA are changing so rapidly that the model of IDA should probably try to adapt to these new realities of new private capital, much richer poor countries and fiscal crisis in the traditional donors.

[A]

Thanks very much. We're going to take a quick break. When we come back, Nancy, I want to ask you to unpack for us in a way that a well educated non specialist could understand the mysteries of IMF quota. This is the Global Prosperity Wonk cast from the center for Global Development. My guests today, Nancy Birdsel and Todd Moss. We're talking about the World bank and the International Monetary Fund in the run up annual spring meetings. Welcome back to the Global Prosperity WONKAST I'm Lawrence MacDonald. Nancy, I've been following, really, with your expertise and others here at CGD and occasional conversations with people at the imf, the whole question of the funding for the imf, I'm going to explain it as I understand it, which is wrong, and then you can correct me, you can set me straight if I got it wrong. My understanding is that when we had the financial crisis of 2007, 2008, that prior to that the nations of the world said, you know, we haven't had a fire in a long time, maybe we don't need a fire department. There was a lot of talk, loose talk around here about maybe we don't really need the IMF anymore. And then kabam, we got the crisis and suddenly thought, oh my gosh, we really do need a fire department. And not only that, it needs a whole lot of new fire engines and new hoses. And that's basically money to come in and prop things up. And there was a quick agreement to do that, but now going forward, they need to put that on a more institutional basis to have the IMF capitalized so that it's large enough to deal with the increasingly globalized world. My understanding is that basically all the countries in the world, except the United States or anyway all the big ones have agreed to put in additional capital and everybody is on board except the United States, which is holding things up. Is that right?

[B]

It's kind of the idea. I mean, I would say it's not capital, but that's a technical issue. It is what are called, it's the arcane word in a way, or the elusive word quotas. But you could think of it as sort of. It's recognized, it's something. It's central bank reserves, it's callable capital.

[A]

In the event that the IMF went bustling. You'd have to pony it up. No. Why not?

[B]

Let's just think of it as. Okay, think of it as capital, if that's easier. It does represent the amount that the IMF can use, as you suggested, both for lending in the case of a crisis, but also, as has been the case for many decades now, to developing countries when they're having balance of the payments problems. So it could be in the case of a global crisis or even a regional one, but also to assist countries get over particular humps. Now, of course, the Eurozone crisis that's been ongoing for the last few years, but was particularly intense about a year, until about a year or two ago, really did also worry people. Did the IMF have the resources to deal both with problem in Europe and a problem in major emerging markets at the same time? But in any event, the idea had been for many years to increase the quotas, which are also tied to votes and influence of different countries in the imf.

[A]

Before you go on, I want to drill down a little further on this question of the quotas, because maybe there's something that I misunderstand. If I misunderstand it, probably a lot of my listeners do too. In the World bank we've got ida, we've discussed that. You also have the International bank for Reconstruction Development, as I understand that the IBRD gets pledges from member countries and then against those pledges it goes and borrows on capital markets and then that's the money that it lends. And in the event that the countries that borrowed from the IBRD didn't pay and the bank would not go belly up because then it would get that money that it borrowed against in the capital markets. Is that the same with the IMF or is there an important difference?

[B]

It's a little bit different in the following sense, that if you take the example of the global financial crisis, which what happened is that the IMF was able to go out and borrow, then it has something called the Special Arrangement to Borrow. And there's another one, the nab, I forget what it stands for.

[A]

New Arrangement to Borrow.

[B]

The New Arrangement to Borrow. So at that time, the US and several other countries, even China, I think Brazil, they in a few committed some of their reserves. That's the way it works to the new Arrangement to Borrow, which shored up the imf. So what's going to happen if and when the quota increase is approved by the US is two things, actually. One is that the quotas will double, so.

[A]

So everybody will put in more money.

[B]

Everybody twice as much money. They commit more of their own reserves, which also entitles them to borrow more. So it's like you're committing anyway. The second thing that will happen is that in the process, the actual new commitments will vary slightly in a way that will mean that some countries, like China, like India, like Brazil, some emerging markets will have higher quotas, more influence, more votes.

[A]

And this is a good thing because it gets them to be more tied into the international system. It gives them a stake in the game because they feel they've got a voice.

[B]

That's right. So the US has actually supported this. The administrations, prior administrations and this administration have always supported in the last five, six years, this movement to have both an increase in the quotas and some rearrangement so that the influence of some countries and their potential engagement becomes greater. The losers on paper would be Europe, and the problem has been the Europeans resistance. But finally they negotiated at least a modest reform in the direction of these rearrangement of the quotas. The difficulty is that the US has an effective veto on anything major like an increase in quotas that's associated with these reforms and rearrangements in influence and votes. And as we've said on blog posts and discussed on our website, that requires it requires in U.S. legislation, approval on the Congress on the Hill. And that has not happened yet.

[C]

Yet.

[B]

So it's becoming embarrassing, this question of embarrassing.

[A]

Todd, I want to bring you in here because you've been in the US Government. You're a pretty astute observer of politics. You've got a lot of contacts with people in treasury and also internationally. What is it about the United States? It's obviously technical. Nancy's done a good job explaining it. I imagine in most countries it just happens that, you know, the equivalent of treasury and Her Majesty's treasury in the UK says, yeah, it's a good thing and it's kind of done. What is it about the United States? Is there something peculiar about our politics? Is it because we have the biggest stake that we're unwilling to give up a little bit? What's going on here?

[C]

Well, every country thinks they're unique. I do think what's special about the US in the case of the relations with the international financial institutions and all international organizations, is that our Congress is unusually powerful and unusually active, certainly in relation to European parliamentary system. And, you know, in our political system, a small handful, sometimes even a single congressional staffer can really hold things up if they want to do that. And so there may be a pet issue. I don't really understand what's holding up the IMF issue on Capitol Hill right now, but certainly in the relations with the World bank, it can often be a single tiny issue. It can even be an employment issue within the World bank that can hold up a whole large process, because most of Capitol Hill not only doesn't care about the World bank, but really doesn't even know what it is or need to know, feel that it needs to know. So it's a small number of people that have unusual leverage and that they use that at particular times.

[A]

It's this whole idea of embarrassing. It's embarrassing if you knew about it, but most people haven't got a clue. So the Number of people embarrassed is really small.

[C]

There's no congressman that's home over Easter break that's going to be asked by their constituents, why haven't we passed IMF quota reform?

[B]

Yeah, I would say it's embarrassing for the US as a fading leader in international development, in international financial safeguarding, international financial systems stability, because it's clear that the U.S. administration and this is a very bipartisan issue. There were, you know, 150 people who wrote a letter, including 30 or 40 former treasury officials across the political spectrum.

[A]

Across the political anybody who knows about it says we should just do this.

[B]

We should just do this. And it's also embarrassing because we it doesn't really cost the taxpayers anything. So this is not about the fiscal problem that Todd referred to in the context of IDA at all. It's a matter for the US of having very nicely negotiated an arrangement where what had been loaned to the IMF under this new arrangement to borrow would now be shifted into the heart of the IMF in the quota doubling. So it's embarrassing because it kind of explains exposes the dysfunction of our political system at a time when we are losing leadership, which is bad for the US it's bad for Americans interests in the larger sense, and it's bad for the rest of the world.

[A]

We're going to take our second break. When we come back, I want to touch very briefly on the BRICS bank and the newfound enthusiasm for climate change issues at the IMF and the World Bank. This is the Global Prosperity Wonkast from the center for Global Development. I'm with Todd Moss and Nancy Birdsall. We'll be back in. Welcome back to the Global Prosperity wonkast. I'm Lawrence McDonald. Brics Bank. There's been a lot of talk that the big emerging powers might start their own bank. I gather they've just had a meeting. There's been a lot of press coverage. The headlines frankly contradict one another. AFP quotes an official saying this is not going to compete with the World bank and the imf. A couple other headlines, including one from MSNBC says basically, look out World bank imf. Todd, what's your sense of this BRICS Bank?

[C]

Well, look, I think that the rising international powers are frustrated with the large international organizations like the bank and the fund are still dominated by, you know, by Europe and North America. But I also think that they bring a somewhat different model and that they want to, in a sense, set up their own institution, not necessarily necessarily as a competitor, but as a way to try to show that they can do things a bit differently. And it's much easier for them if they want to try to use an International Development bank to buy influence in other parts of the world. It's much easier for them to do that with a new, fresh institution than to try to retrofit an institution that's already captured by the big powers.

[A]

And some of them are sitting on pretty big piles of reserves. So the. The cash is not the problem.

[C]

The cash is definitely not the problem. Although I would say that, you know, the brics as a group, it's a very catchy phrase and it's very convenient, but in no way it's not like after World War II, when Europe and North America had very aligned interests to come together. For Bretton woods, the interests of Russia, India, China, Brazil, South Africa are all over the place.

[A]

I'm thinking if it didn't make a catchy acronym, they wouldn't even have the meeting, right? Nancy?

[C]

I don't know.

[B]

I don't. I would put it a slightly different way. I think several things have happened. One is that a recent recapitalization of the World bank was much smaller than some of the BRICs wanted. They want more resources, particularly for infrastructure.

[A]

They want a bigger World Bank.

[B]

They wanted a bigger World bank, maybe not a really much bigger World bank, but a bigger World bank with a little bit more engagement and resources available to them. And one of the reasons the World bank didn't have a bigger recapitalization was we're back at the U.S. congress and the reluctance of the U.S. treasury to agree to a big recapitalization, which would require asking Congress for more resources for paid in capital. Second, they do want more emphasis on infrastructure and big infrastructure projects. And the World bank has, over the years, you know, found it more and more difficult, in part because of worthy pressure and in part because of maybe too much pressure that amounted to a lot of bureaucratic hassle. Has it been imposing these safeguards.

[A]

When we say big infrastructure, we're talking about roads and dams and power plants. So these things are not without some controversy.

[B]

And hydroelectric plants, where you have issues of resettlement and biodiversity. So I think that their sense was we need to do this ourselves and we need to arrange it in a way that's more like the model of, say, the Andean Development Corporation, which is Development bank based in the Andean countries of Latin America, where they really are the members and they run it. And they have found ways to support infrastructure, especially without all of the bureaucratic, say, painfulness or hassle associated with borrowing from the World Bank. There's also the European Investment bank, you know, so we've got more and more of these investment banks and development banks. It's a good thing. I think they're being very smart about saying we're not competing. But it is a little bit a sense of frustration and a little bit of a rebuke of the powers that have been the advanced economies of Europe and the US for decades, running the show at places like the World bank to say we're going to run our own show, we're going to have more resources, we have more of our own resources and we're going to do it in a different way that may not meet the standards that have long been invoked for sort of near perfection on environmental and social issues.

[A]

In the last few weeks, there's been increasing discussion from both the bank and the IMF on climate change. I'm reading from Jim Kim's remarks today. Climate change is not just an environmental challenge. It shows fundamental threat to economic development in the fight against poverty. Late last year, the bank released a landmark report warning that we're headed for a 4 degree world. The event I was at today at the International Monetary Fund might have been impossible to imagine. A few years ago it was jointly hosted with the World Resources Institute. And Nick Stern, the author of the Stern Report, spoke at some length about the challenges. Christine Lagarde, the managing director, was there and spoke powerfully. Apparently she and World Bank President Jim Kim were in Davos together, both sounding the alarm on climate change. I'm going to go to Todd first because I know less what you think about this than I do. Nancy, what do you make of all this?

[C]

Well, I mean, I mean, dealing with changing weather patterns is the big global public goods challenge out there. And these are the big institutions that we have. And really neither of them have instruments to deal with this. So I think they're both. And particularly the World bank, which I know better, is grappling with what's its role in the climate debate. And I think there's a little bit of, you know, related to the BRICS discussion. You know, there's a little bit of a sense from the BRICS that the World bank is too captured by Western interests. And even in Europe, there's a little bit of a sense that the World bank is too sort of American. And why would we have a Washington based institution playing the lead role in climate change? Certainly in our IDA working group, there was a lot of skepticism that European shareholders, which feel like they're dragging the US along kicking and screaming. Why would they make major commitments to a Washington based institution? Not at all on technical grounds, entirely on political grounds. So I think that they're going to both struggle to find a niche there and particularly instruments that fit within their system. But it seems perfectly within their mandate if they feel that these are the big threats out there to their client base, that they need to come up with other kinds of products and particularly on the research side.

[A]

Nancy, you've had a chance to speak privately with both Jim Kim and Christine Lagarde, and I don't want to ask you to reveal any of your conversation with them, but if you were to advise them, what could they do, given their concern, I would say justifiable concern about the need for sensitive policies on climate change. Keep on doing what they're doing. I didn't mention, of course, that the IMF's new report that just came out is, I think, being widely discussed in terms of finally putting a number on subsidies for fossil fuel and saying that these are destructive and should be removed. Is this the kind of thing they should keep doing or is there something different or in addition that you would advise them to do?

[B]

Well, I think the IMF is often running honestly. I think what they're doing is they're, they're ensuring that in their, particularly in their work with countries on fiscal issues that they highlight that it's good to have taxes that tax bad things. So they're doing a lot of the technical work around carbon taxes and I assume they'll be doing more and more technical work around various border adjustment taxes. In the case where a particular country imposes a carbon tax, then, you know, the discussion with the WTO and how to manage that larger process will be ongoing. In the case of the World Bank, I think it's very important that Jim Kim is using the bully pulpit. He has to highlight this issue. It's absolutely a fundamental problem for developing countries and for poor people. As we've said over and over again, we are going to have a setback in the progress against poverty that he hopes for and that he announced as a goal for the World bank if climate change is not slowed down. So the first thing that has to happen is that in using the bully pulpit, the members of the World bank say, yes, you have a mandate to do something with resources that have to come somehow from somewhere. You know, it's not that easy to do it via lending. The bank needs some resources that are global in concept, closer to when the bank and has continued to support, you know, agricultural research or using trust funds to support development of carbon markets or support arranging, you know, to measure deforestation, etc.

[A]

Some of this, it's grant money to do things collectively that can't easily be done by a single country.

[B]

Exactly. Thank you very much. And the bank has had 60 years of basically using an instrument which is the country loan. So this is a big, this would be a big change. So first step is to have a mandate and then to go out and raise some money. And that takes us right back to where we started this Wonkast. Maybe this IDA negotiating process can be used over time as one place to discuss with a large number of countries, not just the traditional deputies in the IDA discussion, which are the richer advanced economies, but now to bring in the Brazilians and the Chinese and other emerging markets and have them be contributors, since they are no, at the moment, they're neither contributors nor beneficiaries. They contribute indirectly in a way that they don't particularly like because the IDA is subsidized by the returns that they provide through their borrowing returns to the lending function of the bank.

[A]

Thanks very much. I think we're out of time. We're going to have to leave it there. I want to thank you both, Todd Moss and Nancy Birchell for joining me on the show.

[B]

Thank you, Lawrence.

[A]

This has been the Global Prosperity Wonkast from the center for Global Development. My guests today are Nancy Birdsel, the president of cgd, and Todd Moss, vice president and senior fellow. When we've been discussing the World bank and the International Monetary Fund and their role in solving big global problems. You can find the Wonkast online on itunes and on Stitcher. Just search for wonkcast or CGD and subscribe to hear new interview every week. Until next time, I'm Lawrence MacDonald. Thank you for listening.

[B]

Sam.

[C]

It.