Sarah Babb

 

On her book Behind the Development Banks: Washington Politics, World Poverty, and the Wealth of Nations

Cover Interview of August 17, 2009

The wide angle

The banks’ governing structure mirrors that of private corporations, with voting on their boards weighted by capital contribution.  This gives wealthy countries influence out of proportion to their share of the world’s population.

But the reason for the overwhelming American influence in the banks is not so obvious.  After all, the U.S. doesn’t have a majority share in any of banks, and it only has a veto on major policy changes in two of them (the World Bank and the Inter-American Development Bank).  So why does it carry such weight?

While there are a number of additional reasons, I argue that the most important one—also the most ironic—is that the U.S. does not support the banks wholeheartedly.  American policy toward the banks is made by both the executive and Congress—and Congress is almost predictably skeptical.

As a result, when wealthy governments sit down to replenish the banks’ resources, the U.S. negotiator can argue that Congress won’t appropriate the money unless American policy preferences are followed.  As the perennial “squeaky wheel,” the U.S. has been very successful in shaping the banks over the past quarter-century.

As a consequence, events in the world of American politics—such as elections, social movements, and the rise of political ideologies—have had a major impact on things multilateral development banks say and do.  It is no coincidence that the World Bank became a major promoter of market-liberalizing reforms during the Reagan administration; nor is it a coincidence that the World Bank became more “green” at a time when environmental NGOs had been successfully lobbying key members of Congress.