U.S. Should Demand Accountability From World
Bank, Carnegie Mellon Professor Tells Congress
Decrying Failed Policies, Tepper School's Adam Lerrick
Supports Conditioning U.S. Funding on Greater Transparency
PITTSBURGH—The World Bank has become a misguided and ineffective institution, and the United States should demand greater accountability and transparency in return for continued funding. That's the message delivered today in testimony to a subcommittee of the U.S. Senate by Professor Adam Lerrick of Carnegie Mellon University's Tepper School of Business.
"After 60 years and $600 billion, there is little to show for bank efforts," Lerrick said. "In the last 20 years, the world has changed dramatically, but the World Bank has refused to change with it."
Lerrick described how the bank's "historic comparative advantage is gone and its role inevitably diminished" in light of private capital that now channels more than 300 times the funds offered by the bank to the emerging world. The bank's founding mission of financing development and offering knowledge and expertise has become marginalized as "the private sector dwarfs official funding and emerging nation leaders are just as smart, just as skilled and know their countries infinitely better than anyone at the bank," he said.
"The bank is desperate to maintain the illusion of relevance to emerging countries that no longer need its money nor want its advice," Lerrick said. In addition, the World Bank isn't really lending to countries where the poor live, as "more than half of bank loans since 2000 have flowed to six upper-middle-income nations where only 10 percent of the developing world lives."
With the next round of U.S. funding for the World Bank looming (between $4 and $5 billion), Lerrick encouraged legislators to demand transparency and accountability from the bank, drawing upon the existing information that the institution maintains but does not disclose for each of the approximately 280 projects its funds each year. "The world will be the independent evaluator of the World Bank ... and a whole universe of activist shareholders will keep count every step of the way," he said.
Lerrick, the Friends of Allan H. Meltzer Professor of Economics and director of the Gailliot Center for Public Policy at the Tepper School, is considered a leading authority on international banking and finance. He also serves as a visiting scholar at the American Enterprise Institute. His testimony was presented to the Subcommittee on Security and International Trade and Finance of the Senate's Committee on Banking, Housing and Urban Affairs.
The full text of Lerrick's testimony is available for download.