How the World Bank can serve political ends, too

THE heated triennial debate over funding for the World Bank's program to help the poorest developing countries has begun with characteristic uncertainty. And if events play themselves out as they have done in the past, the decision on just how much to give will ignore an issue vital to world peace. Every three years the industrialized nations replenish funds for the International Development Association (IDA), the bank's soft-loan window reserved for countries with annual per capita incomes under $790. In the debate over aid effectiveness -- what taxpayer dollars actually buy -- the focus always centers on IDA's economic achievements.

Looking at economic payoffs makes sense. But the implication is that the bank cannot contribute to US political objectives, that only bilateral aid can do that.

There is a kind of surface logic to this, if one looks at the short-range political benefits that come with using bilateral aid to buy base rights in Turkey, South Korea, or the Philippines.

The bank gives credence to the view that it is strictly an engine of economic growth. For good reason bank executives realize that the success of their economic programs is tied to the perception that economic, not political, concerns motivate them.

Saying that politics doesn't have anything to do with economics, however, makes as much sense as saying that thunder doesn't follow lightning. Whatever the common rhetoric and wisdom has been, all of the bank's affiliates, including IDA, have been enormously effective diplomatic actors, promoting long-term political accommodations that bilateral aid could never achieve.

The acrimonious breakup of the East African Community (EAC) in 1974 provides a classic example of bank diplomacy. Having made loans to Tanzania, Uganda, and Kenya through the EAC, the bank had an interest in seeing them resolve differences. The three countries, in turn, trusted the bank to organize the mediation, which it did quietly and successfully.

The bank may very well contribute to reconciliation between the Greeks and Turks on Cyprus. The Greek side of the island, the only government with which the bank can legally deal, has an annual per capita GNP approaching the point that Cyprus will no longer be eligible for bank loans. The bank has made it clear that it will recalculate GNP if reunification with the poorer Turks is achieved and that it will extend existing projects into the Turkish-controlled area, thus ensuring that both sides benefit.

Since shortly after it was founded in the late 1940s, the bank has recognized that the success of development projects is often dependent on political agreement among neighboring countries, as was evidenced in its first important diplomatic venture, an agreement between India and Pakistan on division of the Indus River Basin.

Negotiations between countries often result in the creation or stengthening of regional organizations designed to survive well into the future: for example, the Paraguayan and Argentine Commission, or the commission managing the Yacyreta hydroelectric project on the Paran'a River, and the nine-country Niger Basin Authority in Africa.

Bank diplomacy often moves as slowly and imperfectly as diplomacy of other kinds. But it promotes badly needed discussion and gets countries in the habit of thinking about shared interests. The bilateral commission working on the Yacyreta project has produced joint policies on water quality, protection of flora and fauna, public health, and the rerouting of transportation networks, as well as an archaeological survey.

Bank lending also promotes international norms of commercial behavior. Development projects typically require the import of goods and services. The terms of bank loans require borrowers to make these purchases through open, fair international bidding competition.

One recent and notable example of the long-range effect of such urging is China, which since joining the bank in 1980 has adopted bank procedures for nonbank-related procurement from abroad.

Past diplomatic achievements do not suggest that the United States and other donors should now seek to load the bank with their own short-term political agendas. That would only diminish the bank's ability to work toward long-term economic and political objectives.

Just as surely, adequate financial resources are critical to achieving those objectives. The bank, after all, cannot become involved in issues in which it plays no economic development role.

Three years ago the US engineered a 40 percent cut in IDA funding. In our view economic development successes alone argued for an increase then -- and now.

Not only economic development is at stake, but the opportunity to fashion a world governed by cooperation and negotiation, instead of reckless self-interest.

John Maxwell Hamilton, author of ``Main Street America and the Third World,'' recently served at the World Bank. James Wolfe is a professor of political science at the University of Southern Mississippi.

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