Has anything changed at #WorldBankIMF?
Some can still remember the oil crisis of the 1970s and the economic downturn following the crisis. Many sub-Sahara African countries were caught ill-prepared without the institutional capacity or capability to respond to the emerging global economic crisis and its effects on the flow of funds into the region. As the situation worsened, several sub-Sahara African countries began looking for rescue from outside, mostly from the North.
The Bretton Woods institutions – the World Bank and IMF – stepped-in with 'rescue' packages on rescue missions with many strings attached. The countries accepting the 'rescue' packages had to meet the following harsh conditions:
Open their markets
Cut back spending on social programs
Restructure governments
Divest from businesses and privatize government corporations
Raise interest rates and devalue currencies, and
Balance budgets under an arrangement where the Bank's loans would cover shortfalls to guarantee the servicing of the loans would not suffer default.
The World Bank/IMF conditions for countries seeking help to qualify for the rescue packages disregarded the political, social, and cultural dimensions of the affected sub-Sahara African countries. In an environment where social security safety programs were non-existent, the employed took care of the immediate families and their unemployed kith and kin. Cutting back spending on social programs or restructuring governments by scaling down on employment threatened the very social-cultural fabric of the region's peoples and communities.
The sub-Sahara African countries that went along with the World Bank/IMF reforms lacked the expertise on how to carry out the reforms. In what became experimentation on governmental and financial institutions and systems structuring - at huge payouts to consultants - the experimentation, invariably, ended with "mixed results." The consultants who appeared to follow the source of funding to the point of disbursement failed to rescue sub-Saharan Africa despite the World Bank/IMF promises on rescue packages.
Unlike the reconstruction of Europe after World War Two – from 1948 to 1952 under the Marshall Plan – where the Bretton Woods institutions injected cash into "already existing physical, legal, and social infrastructures which simply needed fixing," the situation in sub-Saharan Africa was vastly different. The physical, legal, and social infrastructures were all weak or non-existent. Few credible tangible improvements came out of the World Bank and IMF prescriptions for reforms in sub-Saharan Africa. The experiment in the sub-Saharan Africa crucible, demonstrated more than anything else that institutional structures and systems could not be grown in petri-dishes. The IMF/World Bank prescriptions for sub-Saharan Africa failed to incorporate knowledge and skills building for the region's long-term development.
One of the World Bank/IMF critics, Professor Joseph Stiglitz, was the Chief Economist and Senior Vice-President of the World Bank from 1997 to 2000. In one of his criticisms, Stiglitz notes:
The IMF likes to go about its business without outsiders asking too many questions. In theory, the fund supports democratic institutions in the nations it assists. In practice, it undermines the democratic process by imposing policies. Officially, of course, the IMF doesn't impose anything. It negotiates the conditions for receiving aid. But all the power in the negotiations is on one side — the IMF's — and the fund rarely allows sufficient time for broad consensus-building or even widespread consultations with either parliaments or civil society. Sometimes the IMF dispenses with the pretense of openness altogether and negotiates secret covenants.
In August 1993, Kenya's government launched the Civil Service Reforms Program designed to improve the civil service's efficiency and productivity. A lean and well-remunerated civil service - it was argued - would provide services and create an enabling environment for private investments to thrive.
The civil service reform program had three phases. The first phase entailed containing costs through staffing levels rationalization. Hitherto, every Kenyan graduating from the tertiary institutions was automatically guaranteed employment in the public sector without considering the public sector's actual staffing needs. This practice, plus other politically driven employment decisions, resulted in over-staffing, and this needed to change.
The second phase focused on performance improvement through a comprehensive restructuring program, not just of the civil service but of the entire public sector; and the third phase was to refine and consolidate the gains realized through the first two phases.
While the support from the World Bank and the IMF for Structural Adjustment and the Civil Service Reform Programs appeared noble, it lacked the seriousness required to succeed. The World Bank personnel who prepared project information documents (PIDs) for the reform programs lacked the requisite knowledge and expertise. The PIDs lacked the vital information required to guide the client institutions in hiring qualified consultants to manage the sub-Sahara African countries' reforms. For instance, the PIDs lacked the necessary technical details and objectives for compensation and benefits structuring – a key component of the restructuring process. Due to the lack of detailed information in PIDs, it was difficult for the sub-Sahara African governments to prepare precise terms of reference for consultants – assuming this might be possible.
What followed civil service reform programs was a trail of failed SAPs, primarily due to flawed technical information and flawed execution methods. The PIDs failed to address critical areas requiring reforms. Instead, they focused on irrelevant functional activities, emphasizing controls, auditing oversight, and austere budgeting. The PIDs wandered into areas that had little or no relevance to the execution of the intended reforms.
The defective PIDs led to hiring the wrong consultants, and often, for jobs they were not qualified to undertake. The task managers assigned by the World Bank to assist the governments in the restructuring programs lacked the necessary qualifications. The task managers were either economists or generalists who had little training in organization development (OD). The task managers' mismatch with the tasks at hand made it impossible for them to provide the necessary support or guidance to the institutions undergoing reforms.
I recall two instances where the task managers at the World Bank offices in Nairobi were assigned to oversee job evaluation projects. In both cases, the consultants did not have the expertise in job evaluation. As an expert in this area, it was clear to me they were using the wrong methods. When I brought to the task managers' attention at the World Bank of the possibility of failure of the two projects, one of the task managers explained that it was the client's responsibility to engage consultants and follow up on the progress. In the second case, the task manager was concerned about the possibility of failure but could do nothing about it as the client was responsible for hiring the consultants. In the end, the consultants produced two project document reports that joined many others on the shelves in archives, with no possibility of ever implementing the results. They joined a growing list of structural reform projects that had failed across sub-Sahara African countries.
The general lack of expertise within the client organizations and the task managers attached to reform programs often led to outcomes that the World Bank called 'mixed results.' A case in point is a civil service restructuring project in Malawi where the consultant used job evaluation as a restructuring basis and ended up with 'mixed results.' Commenting on Malawi's experience, the Director of Management Services, Office of the President and Cabinet, Mr. Msosa, had the following to say:
The public sector in Malawi is faced with the problem of prioritizing and sequencing the key implementation measures. For example, functional reviews of government ministries should have been succeeded by job evaluation. The purpose of carrying out the functional reviews is basically to streamline government's administrative structures resulting in the elimination of some functions and attendant jobs. Thus, functional reviews would be a "mopping up exercise" which ensures that only necessary jobs should remain in the civil service. However, the situation is that functional reviews and job evaluations are being implemented simultaneously. This gives rise to the potential of duplication of effort and dysfunctional outcomes in reform implementation.
Malawi's experience was replicated across the sub-Saharan countries. In Tanzania, for instance, the consultants used a basic ranking (paired comparison) method to evaluate jobs for the entire civil service. The job ranking method was inappropriate since it is suitable for small organizations only (see Chapter III of my book "The Wage Bill Beast" available on Amazon).
The SAPs experiment was extended to local governments and government corporations, with the same outcomes – 'mixed results' after spending colossal sums of money.
In 2003, I expressed my concern to the Vice President World Bank, Africa Region, about the likelihood of continued project failures in sub-Saharan Africa. I received the following response from the acting manager for the Public-Sector Reform and Capacity Building for Africa Region, which read, in part:
The World Bank is assisting Governments in a number of African countries to reform public services in view of improving the delivery of services to the poor. While we share your concern about the impact of certain kinds of restructuring projects, the World Bank monitors the quality of its products on a regular basis through its Operations Evaluation Department (OED). The findings and recommendations of OED form the basis for an adjustment of ongoing projects and programs and serve as important input and guidance for the development of new lending programs.
Similarly, the World Bank is committed to ensuring that the client Governments receive high-level technical advice for the design and implementation of relevant reforms. In accordance with World Bank procurement guidelines, the selection of consultants is subject to a competitive process to ensure that African Governments receive good advice.
The evidence on the ground reflected a different reality. External consultants, who appeared to follow the restructuring programs' funding, knowingly or unknowingly, readily accepted poorly authored consultancy assignments with inadequate PIDs. The sub-Saharan countries undertaking the reforms often ended worse off after huge payouts for projects that, in the end, showed little evidence of a positive impact on poverty reduction - the intended outcome.
The experimentation extraordinaire in a sub-Sahara African crucible confirmed that institutional structures and systems could not grow in Petri-dishes. Instead, it required the development and deployment of human capital with relevant knowledge and expertise.
Some critics questioned the rationale behind the prescriptions for the restructuring reform programs the World Bank and the IMF prescribed for sub-Saharan Africa, arguing that, in some cases, poverty had increased rather than decreased as a direct result of the restructuring activities. In an update of Global Issues, Anup Shah (2013) elaborates:
In April 2001, Greg Palast conducted an interview with Joseph Stiglitz which was published in the British newspapers Observer and Guardian.
The World Bank talks of assistance strategies for every poor nation using careful country by country investigations. However, as reported in the article, according to insider Stiglitz, the Bank's investigation involves little more than close inspection of five-star hotels. It concludes with a meeting with a begging finance minister, who is handed a restructuring agreement pre-drafted for voluntary signature.
Stiglitz then tells Palast that after each nation's economy is analyzed, the World Bank hands every minister the same four-step program (emphasis added), described in the article as follows:
1. Privatization. Stiglitz tells Palast that some politicians were corrupt enough to go ahead with some state sell-offs: Rather than object to the sell-offs of state industries, he said national leaders—using the World Bank's demands to silence local critics—happily flogged their electricity and water companies. You could see their eyes widen at the prospect of 10% commissions paid to Swiss bank accounts for simply shaving a few billion off the sale price of national assets. According to Palast, Stiglitz asserts that the US government knew about, at least in one case: the 1995 Russian sell-off: The US Treasury view was this was great as we wanted Yeltsin re-elected. We don't care if it's a corrupt election. (Emphasis added)
2. Capital market liberalization. According to Palast, Stiglitz describes the disastrous capital flows that can ruin economies as being predictable, and says that when [the outflow of capital] happens, to seduce speculators into returning a nation's own capital funds, the IMF demands these nations raise interest rates to 30%, 50% and 80%.
3. Market-based pricing. Palast writes that it is at this point that the IMF drags the gasping nation to this third point, described as a fancy term for raising prices on food, water, and cooking gas which, Palast continues, leads, predictably, to Step-Three-and-a-Half: what Stiglitz calls, The IMF riot. These riots, which the article clarifies are peaceful demonstrations dispersed by bullets, tanks and teargas[sic], cause further capital outflows, a situation which, as Palast points out, is not without a bright side: foreign corporations … can then pick off remaining assets, such as the odd mining concession or port, at fire-sale prices.
4. Free trade. But a version dominated by rules of the World Trade Organization and the World Bank, which according to Palast, Stiglitz likens to the Opium Wars: That too was about opening markets, he said. Palast writes that: As in the nineteenth century, Europeans and Americans today are kicking down barriers to sales in Asia, Latin American, and Africa while barricading our own markets against the Third World's agriculture. (Note that while even President Bush will claim that we want rules-based global mechanisms, the mainstream media often does not ask what the rules themselves are and whether they are most appropriate.) Palast highlights Stiglitz's problems with the IMF/World Bank plans, plans that the article describes as devised in secrecy and driven by an absolutist ideology: first, they are not open to discourse and dissent, and second, that they don't work. Palast writes that Under the guiding hand of IMF structural assistance, Africa's income dropped by 23%.
(Joseph Stiglitz is one of the most cited economists in the world. The former chief economist at the World Bank resigned under pressure from criticisms he made of the IMF and World Bank).
The need for capability capacity development in Kenya, and sub-Saharan Africa, in general, remains even more critical today. The Kenya Government began a retirement program for the civil service in the 1990s as part of the civil service reforms. In what became known as the 'golden handshake' exercise, civil servants received package payments for opting to retire early. Up to this time, the civil service in Kenya had not undertaken job evaluation. The government commissioned the first job evaluation exercise for the sector in 2004. The results did not see the light of day.
It was not until the Constitution of Kenya 2010 created the Salaries and Remuneration Commission (SRC) when job evaluation exercises gathered momentum in the public sector. The SRC's activities motivated me to write "The Wage Bill Beast," hoping to provide beacons or pointers for setting up logical frameworks for compensation and benefits structuring, not just for the public sector but also for other organizations.
"The Wage Bill Beast" goes beyond looking at the possible challenges the SRC would encounter in the execution of its mandate to suggest ways the Commission could do things differently to avoid the pitfalls into which others have fallen.
Kenya is now a client of the World Bank/IMF. The question is: Has anything changed at Bretton Woods Institutions? My guess is as good as yours!
References
Shah, A. (2017). Development assistance and conditionality: Challenges in design and options for more effective assistance. Brookings Institution, Washington, DC. Retrieved April 28, 2020, from http://www.oecd.org/cfe/regional-policy/Shah-Development-assistance-and-conditionality.pdf
Shah, A. (2020, February 27). Social, Political, Economic and Environmental Issues That Affect Us All. Top of Form
Structural Adjustment — a Major Cause of Poverty. Global Issues. Retrieved May 25, 2020, from https://www.globalissues.org/article/3/structural-adjustment-a-major-cause-of-poverty#WhatistheIMFWorldBankPrescription
Moyo, N., (2009). Dead Aid. Why aid is not working and how there is another way for Africa. London: Penguin Books Ltd.