"DON'T TELL ME WHAT TO DO"

3:38 PM Jul 7, 1995

"DON'T TELL ME WHAT TO DO" - WORLD BANK
Geneva 7 July (twn/Martin Khor) -- A high-level economic policy dialogue at the United Nations involving the heads of the three key international economic institutions was marked by a lively exchange on the need for and nature of coordination between the United Nations and the Bretton Woods institutions.

The day-long dialogue on developments in the world economy, held on 6 July, was part of the high-level segment of the current ECOSOC session. It started with brief presentations by World Bank President James Wolfensohn, IMF Managing Director Michel Camdessus, WTO Director General Renato Ruggiero and UNCTAD Officer-in-Charge Carlos Fortin.

The four panelists also circulated their written texts, providing orally brief highlights. While that of the Bank, Fund and the WTO presented what has come to be called "the Washington consensus" on the overall framework of global macro-economics for development, UNCTAD's was the exception that challenged this thesis: on short-term capital flows and the policy lessons from Mexico (different from that of the Fund, Bank and the G7); recent exchange rates movements of the major countries (with dollar devaluation and yen and deutchmark appreciation) contrary to convergence in these countries of inflation rates and long-term interest rates; and the growing unemployment problem of the North and its potential for creating trade conflicts so long as unemployment is not addressed through demand creation.

But with the UNCTAD being shuttled further down the panelists order -- the UN secretary-general interjecting with his question to the BWIs how the problems of conflict in Africa which made development difficult could be resolved -- this basic issue posed by UNCTAD was neither presented orally nor addressed in the policy dialogue. Delegates who posed questions to the BWIs, perhaps read the UNCTAD views later, if at all, but were not aware of it at the meeting and did not pose the questions and the heads of the Bank and the Fund did not have to answer their Mexican failures, both in not anticipating it before the crisis and their current solutions.

Questioned, after their speeches, as to what they planned to do to collaborate more with the United Nations, the heads of the World Bank, IMF and WTO all said that they wanted to and would cooperate more closely.

But it was clear from their responses, nuanced but carrying the same core message, that the cooperation between these three and the UN and the Specialized Agencies would be on their own terms, and would not include any overall policy guidance from the UN.

Clearer still, they will not accept the UN setting the framework for international policy, within which the agencies would operate.

This message was most sharply put across by Wolfensohn, who said he was taking steps to get the World Bank to work more closely with the UN. "But I don't want guidance from you or to be coordinated by you," he told the ECOSOC high level segment.

Wolfensohn, who assumed his post on 1 June, repeated this message three times during the dialogue session, in answer to separate questions or comments. He lived up to his promise, made in his opening presentation, to speak bluntly, in the style of the private sector from where he came.

But while the directness in speech may have been refreshing initially, as the day progressed, and the same core message was repeated again and again, in response to different questioners, many delegates and participants found it verging on excessive self-confidence and even arrogance.

The questions came from the countries of the South who borrow (and have to be careful) and some from the North who provide the monies and the callable capital guarantees that help the Bank raise funds from the 'market' to lend to the developing world and now the transition economies. The funds raised by their own definitions of liquidity and invested to earn profits are used to run the Bank -- and maintain a high life style for its staff. There were also questions from one or two from heads of the specialized agencies.

Wolfensohn responded in the same way to all of them.

It started off very well, with the new Bank president saying how thrilled he was to be addressing the ECOSOC for the first time, and how working together with the UN was a major priority for him.

"I have come here today because I wish to demonstrate my own personal commitment to stronger partnership with the UN system," said the prepared text of his speech.

His oral elaboration was even better.

"We must cooperate, there are no turf battles between us," he said. "We are anxious to solve common problems. The World Bank can't do it alone. We can work better together, with UN agencies, on the ground. You'll find an open door at the World Bank."

After the four oral presentations, and an intervention from UN Secretary-General Boutros Boutros-Ghali, UNDP Administrator Gus Speth, who made the first comment, expressed his "excitement" with what the speakers said, and his delight with "the new spirit of cooperation that's emerging between the Bretton Woods institutions and the UN."

Speth, who has been entrusted by Boutros-Ghali with the task of coordinating the UN's economic and social activities and agencies, asked the speakers to comment further on what they thought could be the role of the UN institutions and of the UN setting international policy and providing guidance. He also asked how they saw the UN as setting the framework for agreements, and as implementors of development operations.

Wolfensohn in reply said in the month he had been on the job, he had "discovered atmospherics in our relationship which I can't understand." He said that on the ground, the Bank was cooperating with UN agencies. He was not in competition with the UN for funds and he would be delighted if the UN has twice or three times more money than the Bank, he said.

"I'm happy to work with you but I don't want want or need guidance from you," he said. "I want to work with you but not to be coordinated by you."

And that was that.

In their responses, Camdessus and Ruggiero also vowed to improve cooperative links with the UN. But, couched though in a style much more conventional and indirect than Wolfensohn, they also advocated sticking to the status quo, with their agencies keeping the UN at arm's length when it came to policy.

Camdessus expresed "surprise" that Speth had perceived a "new" spirit of cooperation. "This is the ninth year I have come to ECOSOC and I have perceived this spirit from the first day." He said the G7 Halifax statement concluded that the UN and the Bretton Woods institutions should build on their respective strengths.

Camdessus said the UN should do more of the work for which it was indispensable, primarily the task of preventing war, and the human and social concerns in development.

He pointedly omitted economic policy making or activities inscribed in the UN Charter as part of the UN's tasks, thus implying that these issues should be left to the Bretton Woods institutions.

Ruggiero commented that the G7 had made an urgent call to improve coordination among the Bretton Woods institutions, and between them and the UN. "There has been a very receptive atmosphere from the institutions to this task," he said, adding however that the WTO was a contractual organisation with a strong dispute settlement system, and could only discuss what had been agreed to.

It was not clear whether he meant this in relation to the WTO's relations with the UN or also with the BWIs, with whose heads he is trying to forge even closer relations than the vague Marrakesh call for coherence. The BWIs governance does not involve 'contractual relations' and their managements, in practice, look for authority and guidance only from the G-7, and more so the US, and not from their other members or, as in WTO, the other contracting parties.

The constant references of the three heads to the Halifax communique, but not once, say to the Social Summit made this clear.

Ruggiero also said the governments had decided in the WTO that it should be outside of the UN system, although it could improve cooperation with the UN. He also spoke of the WTO's reliance on policy analysis and research work elsewhere -- meaning at the BWIs.

During the lunchbreak, a hot topic of conversation was the World Bank chief's categorical statement that he would not take "guidance" from the UN nor recognise its coordination role. Several Ministers and diplomats from developing countries felt that this response was not in line with key sections dealing with institutional follow-up in the Social Summit declaration and programme of action signed by over a hundred heads of governments and states in March at Copenhagen.

Para 98 of the Programme of Action says that to ensure coherance in following up on the Summit, the UN General Assembly should consider: "Promoting and strengthening the coordination of United Nations system activities, the Bretton Woods institutions and the World Trade Organisation at the global, regional and national levels in the areas of economic and social development programmes, including, inter alia, through reports to and meetings in coordination with the Economic and Social Council."

There are also several references in the Programme of Action to the need for the World Bank, IMF and other financial institutions to act, especially in the area of financial resources and in ensuring that structural adjustment does not hinder social development. Para 92 (c) for example calls on the UN, in cooperation with the World Bank and IMF, to study the social impact of structural adjustment and assist adjusting countries to create conditions for growth, job creation, poverty eradication and social development.

Para 95 (a) of the Copenhagen document of the Heads of States/Governments also appoints the UN General Assembly as the principal policy-making and appraisal organ on matters relating to the Summit follow-up, whilst para 95 (f) appoints ECOSOC to oversee system-wide coordination in implementinng the Summit outcome. Para 95 (f) says that within the framework of ECOSOC discussions, consideration be given to organise joint meetings of ECOSOC, and the Development Committee of the World Bank and IMF to consider implementation of the Declaration and Programme of Action prior to the Development Committee sessions.

A developing country diplomat, who HAD played a leading role in the negotiations on institutional matters in the Social Summit, remarked that the World Bank president's attitude ignored and went against what the heads of government had agreed to in the Copenhagen Summit.

When the ECOSOC resumed after lunchbreak, the Benin delegate referred to Speth's comment on coordination and pointed out that the General Assembly had adopted a resolution referring to coordination between the UN and Bretton Woods institutions. He said he would like to bring this to the World Bank's attention as a minimum of coordination was needed to enable harmonious sustainable development. He added that in assessing development success, one had to look not just at macroeconomic indicators and balances but at the human costs. On structural adjustment policies, the impact on rural population, women and social aspects had to be looked at but this was being referred to.

In reply, Wolfensohn said he was not aware of a UN resolution on coordination. The Bank was already cooperating with UN agencies. "I have a job to do and I don't want someone doing it for me," he said. "I don't want to carry out my business according to some resolution made at the UN." He added the Bank was interested in human and social aspects of structural adjustment, not only on macroeconomic aspects.

The WTO head said questions of policy coordination and coherance had been extensively discussed in the WTO, which had a very specific mandate to work with the Bretton Woods institutions to pursue greater coherance in economic policy making, both micro and macro level coordination to avoid policy contradictions. The contacts of WTO with the World Bank and IMF were being strengthened.

But Ruggiero notably did not mention moves to improve contacts with the UN as part of the pursuit for greater policy coherance or to avoid policy contradictions.

In statements elsewhere, Ruggiero has spoken of the budget constraints on his outfit and hence desire to rely and cooperate with the Fund and the Bank and their policy analysis and research capabilities.

But if, as the UNCTAD presentation showed, the BWIs policy analysis and research work was fundamentally wrong as proved in the Mexican case, and could be worse for global economic growth and development and could only create trade conflicts with everyone trying to be competitive, what would be the result of such a kind of 'coherence'? No one asked the question, and hence no answers.

The delegate from Denmark remarked to the World Bank president that his "philosophy" in replying (on coordination) raised a question relating to the Social Summit, whose texts were adopted unanimously by countries of the world, and were not resolutions by some UN entity. He asked what was the World Bank's position on the Social Summit text relating to the social consequences of structural adjustment, "which was agreed to by all countries, including those who own your Bank."

Wolfensohn made an in-joke that was lost on most of his audience, though they were polite enough to laugh, about his not having married a Danish girl, and went on to reply that perhaps he had not been correctly understood.

"I am more positive and more anxious to have cooperation than anyone in recent memory," he said, adding he had made overtures to the UN and was trying to get cooperation from the NGOs and the multilateral system. The reason was that the Bank could not do the whole job by itself."

The World Bank president added: "But what does coordination mean? When someone wants to coordinate me, that's giving me instructions... I have a job to do and I don't want to be instructed by someone else, unless my shareholders asked me to (take such instructions)."

He would then try, but if he could not agree he would quit his job. He was, however, most anxious to work with others.

On social consequences of structural adjustment, Wolfensohn said he joined the World Bank because he was interested in social issues and cared about poverty and social justice. When people say the Bank is not interested, "I resent it," he said. He was committed to balance macroeconomic and social goals. With or without the Social Summit, he cared about the social impact of policies.

And if the World Bank's Board did not have the confidence in him, it could fire him, Wolfensohn added. The Bank chief and African delegates had something to agree about though.

An African delegate, from Frencophone Africa, complained of the CNN-type of media perception of Africa (conflict, corruption, failures etc) that affected outside perceptions and disadvantaged Africa in getting official or private funds and wondered what could be done by the Bank?

Wolfensohn seemed to agree on problems of misperception, and spoke of the Bank's image suffering, at the hands of NGOs, another CNN-type of perception - over its environment, poverty approach and other issues.

But no solution to either problem emerged - though UNCTAD's Fortin did interject about its just published study on foreign investments in Africa being more profitably in returns than elsewhere.

The dialogue generated a long list of delegates who wanted to speak. Due to time constraints - with the session having lost more than an hour in late start in the morning, due to the UN Secretary-General having to go to another meeting to speak there, and having lost another hour towards the end (with the executive heads and their representatives not wanting to stay on), most delegates, many of them Ministers, were not able to speak or pose their questions or make comments.

ECOSOC president, Pakistan's Ahmad Kamal, said at the end that the IMF and World Bank heads had both agreed to spend a day each in another dialogue session with ECOSOC members in New York in the autumn.

Perhaps for that occasion, the ECOSOC could select within itself a few who have been reading up on these and specializing, to act as a panel of questioners and pose the questions to the two, as well the other viewpoints ignored at Geneva. It would atleast enhance the understanding of the member-States, even if it does not change the ways of the Fund and the Bank immediately.