By Jesse Griffiths
Normally, I enjoy reading flagship annual reports from august international institutions; they can provide useful overviews and normally have one or two nuggets. The World Bank’s new Global Financial Development Report 2013, however, left me hoping they don’t issue any more of these.
Not just because we already have enough flagships – even for a report junky like me. It’s worth quoting from the comprehensive study of World Bank research undertaken by a team of (self-styled) ‘academic superstars’ led by Princeton Professor Angus Deaton:
“The large number of flagship reports makes it virtually impossible for [World Bank] management to exert sufficient quality control precisely where it is most needed.”
“We believe that the Bank produces too many of these reports.”
(Side note: This was released in 2006 - and the evaluators complained that it had been seven long years since the previous evaluation - surely it’s time for an update?)
No, what really left me tearing my hair out were too many attempts to draw one-sided conclusions about the highly contested issue of the role of the state in finance.
Here’s an obvious example that others have highlighted. The report finds that:
“Lending by state-owned banks is less procyclical than lending by private banks, and some state banks played a countercyclical role during the global financial crisis”
This is an interesting finding, but clearly one the authors feel uncomfortable with [though they all work for a state-owned Bank themselves, of course]. So they do some interesting contortions – highlighting past poor performance of state banks as the reason their role should not be emphasised:
“…the track record of state banks in credit allocation remains generally unimpressive, undermining the benefits of using state banks as a countercyclical tool.”
It seems to me that private banks have had a pretty disastrous recent track record in credit allocation, and have behaved in an incredibly procyclical manner, so we should be far more interested in this finding that the report authors are. Previous Eurodad research has highlighted how the rapid growth in lending by development finance insitutions, including the World Bank’s International Finance Corporation, was in part justified by the need to step in when private credit dried up. Surely a better conclusion to draw is that we need to urgently study the successful state banks, and see what can be learned?
This is just one example. There are plenty of others, leading some to be far less charitable about the report: University of London banking expert, Paulo Dos Santos called it a “rearguard action seeking to defend old policy shibboleths”. Perhaps it’s time for another group of academic superstars to do a thorough evaluation of this report…