Development by International Fiat: Is This not a Contradiction in Terms?

In a 2005 report, the staff of the World Bank concluded that the formulaic, government-constraining, proactive role that the World Bank had played during the structural adjustment period was ill-conceived. Development, it concluded, is too idiosyncratic, too indeterminate to justify such an approach. The main elements of a proposed new orientation would be a less didactic, more country-specific approach and a move to create structures that constrain, rather than eliminate, government discretion. This paper argues that, while the Bank's staff diagnosis of the problem is largely correct, it fails to address the more fundamental problem. Can a Bank that has evolved into an agency designed to "engineer" development be the same agency that encourages independent thinking and innovative and adaptive policy formulation at the country level? An analysis of development process, based on new institutional economics principles, suggests otherwise. In fact, farming out the Banks research and policy advice function may be the best means of creating the environment the Bank's review admits is most likely to produce improved results at the country level. This paper was presented at the 16th International Conference of the International Trade and Finance Association at the University of Lodz, Poland, May 11, 2006.