Jiajun Xu, Beyond US Hegemony in International Development: The Contest for Influence at the World Bank. Cambridge University Press, 2017, hbk £69.99.
|
RATING: 85
|
Buy this book?
|
Yes
|
This is a process-tracing study of the rise of China in global economic governance, set in the context of the changing pattern of national contributions to the World Bank's International Development Association in successive triennial funding rounds (after the first one, they are called replenishments) from its founding in 1960 to 2013. That may not excite you much, but it should. It is a solid and beautifully crafted case study that throws significant light on the way the World Bank works, the extent and limits of US hegemony over it, and the strategy China has adopted to make its own influence felt, both within existing institutions, and through initiatives of its own. The question that motivates the study is admirably clear: why did China decide to become a new donor of the Bank's aid window in 2007 before launching a new set of multilateral institutions, including the Asian Infrastructure Investment Bank (AIIB), outside the US-Centred Bretton Woods Institutions and other established multilateral agencies? But there is a good deal more to it than that, given the longer period covered. The study is crisply introduced with a short discussion of the mechanistic and heavy-handed literature on power transitions and rising powers (the sanctimonious and self-regarding nonsense that is 'socialisation' theory is summarily dismissed much later, 233-5), and a justification for focusing on multilateral institutions as simultaneously vehicles for international cooperation, 'spaces in which competition between states plays out', and bureaucracies with the capacity 'to play an independent role shaping power politics' as material power shifts among states (3). This is about all the theory of multilateral institutions as such that you need, and it serves the author well. She is thoroughly versed in the relevant literature across the liberal to realist spectrum, and conversant with leading theoretical approaches within it to burden-sharing and power politics. Various of these are invoked from time to time, but none is allowed to dominate or over-ride the search for the internal and contextual logic of change over time - not least because Xu insists at the same time on the need for a thorough understanding of the way institutions work, and especially the rules under which they operate. The result is a study that is elegant, sophisticated, convincing, and path-breaking in its implications, and while in hardback only it will be too expensive for some, it is still one for the bookshelf. What is more, it meets high editorial standards that are increasingly rare these days – I spotted only three typographical errors; boarder for broader (40, 8 up), 'the its' (223, 5 up); and a missing ‘to’ before IDA (243, 7 up), and the English is clear, and faultless throughout.
Xu starts out from the baseline proposition that influence should relate to the share of funding provided, and that this in turn should relate to material resources, but quickly establishes that this is not the case. She then identifies three layers of 'power plays' behind the politics of IDA burden-sharing: the US-led Western donor group versus the Soviet Union/Third World; the internal donor struggle over voting rights between ascending powers and the hegemon/waning powers; and the informal influence of donors upon Bank management. Examining these issues over time, she finds that the hegemon was more likely to maintain its burden share, even if its relative level of resources was falling, when the Western-centred world order faced perceived threats from the 'East' or the 'South' (and conversely when threat levels were low, accelerated shifts were possible as the hegemon cut its share); that if the hegemon and the waning powers wanted to expand total IDA resources, they were likely to cede voting rights to ascending powers in exchange for financial support; and that if the hegemon shirked obligations but at the same time unilaterally pursued undue influence (violating the 'fairness' principle), secondary powers would seek to restore the balance between contribution and influence, unless they were structurally dependent on the hegemon (for defence, for example), or lacked other options (40, 43, 50). You may say that these are sensible but hardly earth-shattering suggestions, and you would be right. But this is a field in which common sense is in short supply, evidence is twisted to fit simplistic 'theoretical' postulates, and the conjunctural logic of specific situations is routinely ignored in favour of pointless exercises in quantification and correlation.
In what follows, I summarise the replenishment negotiations of the 1960s in some detail, then address the following two decades more briefly, before focusing on the 'zenith of US hegemony' in the 1990s, the 'tipping point' subsequently reached, and the rise of China.
The moment of negotiation of the first replenishment round, IDA-1, in 1962-3 was one of intense competition with the Soviet Union, whose influence was at its peak (also the time of the Vietnam War, the Cuban Revolution, and the anti-communist 'developmental' Alliance for Progress in Latin America). It mattered more to the US to establish a substantial development fund that it could hope to control than to go to the wire with its allies over funding, so it insisted that it should be under the umbrella of the World Bank rather than the UN, but virtually stuck to its original share in order to secure a renewal at the founding level of $750 million (only half what it originally wanted). In IDA-2, with international tensions easing, resources stretched and its current account deficit growing, the US sought a share cut and tried to tie its contribution to procurement benefits, prompting a set-to in which the overall fund fell to $400 million; but in the third round, after the Soviet invasion of the Czech Republic, and with developing countries pushing hard to link aid to Special Drawing Rights and boost automatic transfers, global security issues once again trumped narrower goals, and Nixon over-rode Congressional pressure for cuts, pledging to hold the US share steady, while Robert McNamara, at the World Bank, commissioned the Pearson Report, which proposed the target of 0.7% of GDP for official aid donations from developed countries (UNESCO, 1970 - read the article on population control too to get a sense of 'development policy' at the time). Alongside this account of US policy towards replenishment, Xu explores from the archives the rationale for positions adopted by other leading donors - for example, France was reluctant to raise its contribution in line with its economic growth as its favoured former colonies in West Africa received very little from the fund; the UK eventually made concessions on its voting rights to keep the fund high because British firms were substantial beneficiaries while India and Pakistan remained major recipients of aid. In all of this, the Bank comes across over time neither as a puppet of the US and other powerful states, nor as 'a corporation of technocrats free of political influence' (76). It generally concentrated on maximising the size of the fund, and retaining the autonomy of its Board of Directors in allocating it, and as we shall see, would work successively with the UK and China after 2000 to pursue these goals.
In the 1960s, then, burden-sharing arrangements remained relatively stable despite significant shifts in relative economic capabilities as France, Germany and Japan recovered while the UK declined and the US slipped into deficit. In the following decade, relative economic capability was more stable overall, but an accelerated shift in burden-sharing took place. In the 1980s, Reagan cut the US contribution despite the rising international tension after the Soviet invasion of Afghanistan [and the Iranian revolution], seemingly refuting the link between rising tensions and US commitment to maintaining its share, only to maintain it at the end of the decade as tensions eased, and the UK voluntarily ceded its second place in World Bank voting shares to Japan. Xu explores each successive conjuncture from the perspective of her three overlapping 'power plays', drawing on archival material supplemented by interviews to confirm the salience in the minds of those involved of jockeying for position, issues of fairness, and broader strategic concerns, and to account for the mix from round to round.
In the 1990s (in fact, rounds 9-12, as the 1989 negotiation is the first included in this set, which reflects the zenith of US hegemony), in the absence of the Soviet threat, the US let its contribution drop from 25 to just above 20 per cent (a level that still maintained its 'Major Donor' status), while simultaneously falling into substantial arrears on making the payments. The secondary powers were critical of the persistence of the US in reducing its share (already out of line as a proportion of GDP), but practically all kept up their funding at first in order to win developing country acceptance of contentious environmental standards they wished to attach to loans, while refusing to increase it to cover any shortfall. The result of these combined circumstances was a funding crisis at the end of the decade, reflected in an unprecedented funding gap of almost 10 per cent. Meanwhile, the US exerted its authority over the Bank over the decade to the extent of threatening a complete withdrawal of funding if reforms were not carried out, winning improvements in oversight and transparency, and succeeding in 'graduating' (i.e. excluding) China from IDA funding (186). With the dollar appreciating, and reforms to the Bank achieved, the US kept up its dollar contribution in IDA 12, and the funding shortfall was eliminated.
Paradoxically or not, this moment of US hegemony was the prelude to its rapid decline. In the first decade of the present century US contributions to IDA funding tumbled, taking the 'Major Donor' status with them, and the UK briefly became the major donor as Japan too pulled back. The decade began with an intricate set-to over a US proposal (from George Bush, mind), to convert 50 per cent IDA funding from loans to grants - a proposal that was very well received by the NGO community and particularly the Jubilee Debt Campaign, but strongly opposed by the UK (backed by European partners), with Clare Short, the UK Development Minister at the time, denouncing it as 'crazy' (200). Xu explains this neatly: by this time, a substantial proportion (over a third) of IDA funding was coming from 'reflows' (repayment of loans), and the US was concerned over the loss of leverage from donors if the fund became self-sustaining, as it was on track to do in the following decade, so wished to deplete the resources it controlled for itself. In the event, a grant share of 18-21 per cent was agreed, but the outcome was read in the US as falling far short of the original goal, and presaging a shift of influence to Europe. In its wake, there was a spat over the unilateral introduction by the US of new criteria for results management, followed by its default on the second of two payments promised in return, which further eroded its authority (204-6). It was in this context that the Bank turned to the UK, which had increased its share in the previous round, reflecting 'New Labour' support for the Bank (see Cammack, 2001). The UK now made a sharply increased offer for IDA-14, hoping thereby to encourage minor donors (who in aggregate were twice as important as the US) to accept a high overall total, while the US quite extraordinarily pressed Wolfensohn at the Bank to accept an independent chair for the replenishment procedure. Pushing the issue to a vote, the US found itself entirely isolated, and traditional practice was preserved (213). Mayhem followed, with the UK increasing its share sharply, most minor donors holding steady or increasing their shares too, and the two major donors, US and Japan dropping theirs by 7.17 and 4.25 per cent respectively , the upshot being the widening of the financing gap to a new high 18 per cent. In IDA-15, the UK became the largest donor as it strove to keep the overall level of funding high. At the same time, it worked closely with Bank management over the decade to reform conditionality in the direction of 'country ownership' (a policy already in place at the Bank, on which see Cammack, 2002: 40), and, once the global financial crisis hit, to secure the creation of a Crisis Response Fund. These trends, incidentally, have continued: in IDA-17 and -18 (not covered here) the UK returned to the position of lead donor; and the IDA gives the Crisis Response Window a high profile on its web page. Overall, Xu's interpretation of change in this decade is that it reflects not primarily a shift from US to UK leadership, but a shift from 'a coercion-anchored power relationship to a persuasion-oriented process' (227), with which the US has fallen into line.
China had first received IDA finance in 1981, after joining the World Bank in 1980, and graduated from IDA at the end of the century. It became a donor, contributing in 2007 to IDA-15, despite its self-proclaimed identity as a developing country, voting rights at the Bank that were well below what its economic status warranted, and a huge capacity for bilateral aid initiatives over which it had complete control. On the face of it, commercial gain seems a possible but weak motive (as China could already bid for contracts without being a donor), the desire to be seen as a responsible member of the international community a stronger one. Xu dismisses the idea that China was pressured by the 'hegemon', although responsible stakeholding was urged upon it - arguing that the US had no means of coercion to hand. As noted above, she also rejects the notion that China was susceptible to 'socialisation' by Western powers (via the OECD in particular) concerned to amend its unwillingness to attach 'good governance' or social or environmental conditions, and wary of its commitment to state capitalism. As Xu succinctly points out, China has reinforced its commitment to its own criteria, and the OECD has moved towards 'open dialogue without conditions', as indeed did the UK in the same period (234, 221-2). Her own evidence, supported by elite interviews, suggests that China's motivation was 'to vie for influence': 'As a member of the World Bank Group, China felt keenly that the equity line between influence and contribution was skewed to breaking point, and so decided to work proactively to win "voice opportunities"' (235). It was a particular concern that the IDA donors in practice drove policy prescriptions across the whole of the Bank's operations, 'so IBRD [World Bank] borrowers (such as China) had to comply with policy conditionality set by IDA deputies, even though these middle income IBRD countries did not receive a single penny from rich donor countries' (236). Additionally, while acknowledging that the basic needs approach was an antidote to the structural adjustment policies of the 1980s, China 'felt that the pendulum had swung back too far, shying away from fundamental challenges of improving productivity, diversifying industrial structures, and moving up the global value chain' (237); excessive upfront environmental and social safeguards could only hamper progress, making incremental improvement in a dynamic development process a better option; it was wary of having the agenda set by Western NGOs rather than professional Bank staff, especially after the experience of the Western Poverty Reduction Project in Qinghai, withdrawn in 2000 after a pro-Tibet NGO campaign (238); it was sceptical of the merits of externally imposed conditionality and one-size-fits-all policy prescriptions; and the 'anti-corruption' + cronyism debacle of the brief Wolfowitz presidency tested its patience to the limits.
With the day in sight when China would cease to be a borrower at all, then, the Ministry of Finance decided to seek a transition from 'big borrower' to 'big donor', but faced the task of winning support for this strategy across other domestic agencies, against the views of some that it should concentrate on running itself well and bide its time. Xu recounts the emergence of a 'stakeholder' strategy aimed at 'mitigating suspicion and fears that China would overturn the existing system as it ascended' (247), the grudging acceptance of the strategy by MOFCOM, whose preference was for bilateral aid, and the resulting decision to offer a token initial contribution of only $30 million (247-8). In IDA-16, though, China quickly became the 'reference donor' - other donors looked for a significant increase if they were to contribute generously themselves as the 'global financial crisis' raged. Reluctant to step up its commitment too fast, China acceded instead to a Bank-negotiated outcome where it repaid $1 billion of its outstanding debts ahead of schedule, and upped its contribution only to $50 million, or 0.15 per cent of the total [in ID-17 and -18 it would rise to 0.95 and 1.94 per cent respectively, suggesting a commitment to steady but still modest increments in each round]. The UK was the largest donor again in each round, as noted above, with the US dropping close to 10 per cent in IDA-17 and rising to 12.5 per cent in ID-18, and Japan pursuing its consistent strategy of positioning a little below the US each time. In the meantime, China pressed ahead with massive bilateral and related programmes, which Xu rightly identifies as having transformed development finance by creating and deploying outside options that exert competitive pressure on the Bank (252), while generally refraining from proactive engagement in policy debates in replenishment rounds themselves. Able as it is to exert considerable external leverage, China is sitting quietly and placing very small bets at its seat at the IDA table, and currently standing in eleventh place in the list of donors.
Xu's conclusion identifies three stages with distinctive power dynamics in IDA replenishments - the 1960s and 1970s, in which the primary US goal was to expand resources to counter threats from the Soviet Union and the South; the 1980s and 1990s, in which its main objective was to control Bank management to enforce policy conditionalities upon developing countries while reducing its own commitments where possible; and the period since, in which its hegemony began to be contested. Looking ahead, she ends this section with the suggestion that 'the World Bank is heading towards a turning point where financing and governing the World Bank-IDA no longer requires full US participation' (266). The following section, 'An Entrepreneurial China as a Reform-Minded Stakeholder' (266-271) captures what is not only her analysis but also her preferred vision of China's role in global governance, amounting practically to an op-ed for the Centre for New Structural Economics which she co-founded with former World Bank Senior Vice-President and Chief Economist (2008-2012) Justin Lin. But there is also a compelling logic behind it: 'Suspicions that China's commitment to work within the existing system is mere rhetoric disguising a longer term Chinese insurgency have to encounter the fact that China's rise as a development financier has reached a point where it now has basic interests and responsibilities in the systemic functioning of global development financing as it is intimately integrated with the international economic system that incubates its ascendancy' (267). Within this broader context, 'China is bringing a fresh perspective to the development effectiveness agenda, learning from its recent rapid economic transformation of the past thirty years, wherein the state has played a vital facilitating role in creating a dynamic market economy, integrating with and moving up global value chains' (268) - a perspective immediately identified (268-9) as than of Justin Lin and New Structural Economics. It would be naive to think that China's path is set in stone, but these are strong arguments, with near enough four decades of momentum behind them. Xu highlights the spirit of 'public entrepreneurship' embedded in the Chinese approach to development finance, in which massive public investment, public-private cooperation and the 'creative destruction' of existing governance frameworks combine to overcome the 'first mover' problem - getting development started on a sufficient scale for it to become self-sustaining in the presence of uncertainty and risk (270). On this basis, she is optimistic that China can contribute to a new and morally superior multi-polar world - this itself of course another key World Bank preoccupation (World Bank, 2011).
This is an exceptionally valuable study, and streets ahead of all the quantitative-correlative outpourings on the Bank and similar institutions, and the ideologically driven literature on power transitions, socialisation and the like. What can we make of it, though, from an historical materialist perspective? Quite a lot, it turns out. Xu takes for granted without comment the conflictive, transformative and crisis-ridden development of global capitalism over time, which forms the backdrop to the study. At the same time, she does not claim to explain its dynamics, as she restricts the scope of her enquiry to successive replenishments of IDA resources, and China's recent emergence of a donor. As regards the latter, too, her institutional process-tracing approach has a materialist underpinning - China's rise is premised in the first place on its having become the most dynamic global centre of accumulation, and this in turn provides the context for second-level manoeuvres at the IDA. What is more, the process-tracing methodology, focused on the unique dynamics of successive conjunctures, is in principle compatible with an historical materialist approach, where of course an abstracting quantitative-correlative approach would not be. It is also the case that in a time-frame that is relatively narrow in world-historical terms (1960-2013) her analysis clearly reflects a shift from underlying geopolitical to political-economy issues as the Cold War comes to an end and the world market develops on a global scale (193).
And in fact the study, if read in the appropriate context, enriches and is enriched by an historical materialist or critical political economy approach. Xu covers only one aspect of the role of the World Bank in global economic governance, but she does it very well. She also provides the relevant cues for setting her story in the broader contexts of the role of the World Bank Group as a whole, and the evolution of the world market - though with one mis-step that requires comment. I noted above her identification of the apparent anomaly that at a time of East-West and North-South contention, Reagan sought to reduce rather than expand IDA funding. Her explanation is crucial: the Reagan administration 'held a deep conviction that the magic of free markets was the road to prosperity for the rich and poor nations alike, and thus cast severe doubt on IDA's 'overtly statist and redistributive' approach to poverty reduction', and 'took the critical view that the World Bank was undermining private enterprise and promoting socialism' (126); and Reagan responded to the global tensions of the period not by throwing development funding at them, but by building up US military resources. Xu is attuned to the significance of this epochal shift, as she shows when she comments later that the parallel decision taken by George Bush Sr to run down IDA resources in order to push developing countries towards dependence on the market after 1989 'stood in stark contrast with the US leadership for IDA expansion in the 1960s to win hearts and minds in the Third World in fierce aid contests with the Soviet Union' (162-3). Falling funding, in other words, means one thing at one moment, and quite another at another. The mis-step in her analysis, though, is to take far too little account of the extent of the neoliberal shift when she argues that in the 1980s other donors tolerated Reagan's approach because 'they were structurally dependent upon the hegemon for economic recovery amidst debt crises and for military protection against the hostile Soviet Union' (159), while in the 1990s they maintained their contributions and diverted further resources elsewhere, despite feeling unfairly treated, because they wished to fund environmental safeguards. These are unconvincing arguments in themselves, but more, they miss the widely shared commitment to the neoliberal turn, which was just as evident at the OECD as at the World Bank, and no more intense in the US than in the UK and the European Union, whose Commission shifted the focus of its development strategy towards the ACP states in Lomé III in 1983 from state to private-sector led development, and consistently pushed the change further in successive reforms in Lomé IV in 1989, and the Cotonou Agreement in 2000 (Nunn and Price, 2004). With the neoliberal turn, the promotion of markets, or 'deep marketization', became the central objective (Carroll and Jarvis, 2014), and this meant in turn both that IDA was no longer the central element in the global promotion of development, and that the level to which it was funded was no longer a measure of the extent of commitment to it. In turn the shift from conditionality to 'ownership' was an intensification, not a relaxation, of pressure towards neoliberal reform. In the World Bank Group as a whole, the shift to private sector development was reflected after the turn of the century in the growing priority attached to the International Finance Corporation (IFC), which works as much around as through the state (Carroll, 2014); and the growing closeness between the IDA and the IFC has been marked by increasing annual grants to the former from the latter, the increasing concentration of IFC activity on IDA countries, and, in IDA-18, the creation of a formal IFC-MIGA Private Sector Window.
Reflecting again on Xu's analysis in the light of these considerations, it is clear that it supports a generalisation that works well for the longer run, which is that hegemons retain their position as long as they promote the development of the world market, but that once they lose their capacity to do so, that hegemony is more or less swiftly eclipsed. When the US became incapable of playing this role (a situation that paradoxically became apparent only when it reached the 'zenith' of its hegemony), that hegemony disappeared like the morning dew. China's insistent focus on the 'fundamental challenges of improving productivity, diversifying industrial structures, and moving up the global value chain', marks it out as the successor champion of the expansion and deepening of the world market, as do its efforts to reconstitute the World Bank as an effective agent of this process, and its bilateral initiatives outside the Bretton Woods system. In short, Xu's path-breaking analysis brings home something that so much scholarship from left and right on the global economy has missed: the US Emperor has no clothes.
References
Cammack, Paul (2001),'Making the Poor Work for Globalisation?', New Political Economy, 6, 3, 397-408.
Cammack, Paul (2002), ‘The Mother of All Governments: The World Bank’s Matrix for Global Governance’, in R. Wilkinson and S. Hughes, eds, Global Governance: critical perspectives, Routledge, pp. 36-53.
Carroll, Toby (2014), 'The International Finance Corporation's Transformation of Development in the Asia-Pacific: Working on, through and around the state', in Toby Carroll and Darryl S.L. Jarvis, eds, The Politics of Marketising Asia, Palgrave Macmillan, pp. 43-70.
Carroll, Toby and Darryl S.L. Jarvis, eds (2014), The Politics of Marketising Asia, Palgrave Macmillan.
Nunn, Alex, and Sophia Price (2004), 'Managing Development: EU and African Relations throught the Evolution of the Lomé and Cotonou Agreements, Historical Materialism, 12, 4, 203-230.
UNESCO (1970), The UNESCO Courier, February 1970, at http://unesdoc.unesco.org/images/0005/000567/056743eo.pdf.
World Bank (2011), Multipolarity: The New Global Economy, World Bank.
Xu starts out from the baseline proposition that influence should relate to the share of funding provided, and that this in turn should relate to material resources, but quickly establishes that this is not the case. She then identifies three layers of 'power plays' behind the politics of IDA burden-sharing: the US-led Western donor group versus the Soviet Union/Third World; the internal donor struggle over voting rights between ascending powers and the hegemon/waning powers; and the informal influence of donors upon Bank management. Examining these issues over time, she finds that the hegemon was more likely to maintain its burden share, even if its relative level of resources was falling, when the Western-centred world order faced perceived threats from the 'East' or the 'South' (and conversely when threat levels were low, accelerated shifts were possible as the hegemon cut its share); that if the hegemon and the waning powers wanted to expand total IDA resources, they were likely to cede voting rights to ascending powers in exchange for financial support; and that if the hegemon shirked obligations but at the same time unilaterally pursued undue influence (violating the 'fairness' principle), secondary powers would seek to restore the balance between contribution and influence, unless they were structurally dependent on the hegemon (for defence, for example), or lacked other options (40, 43, 50). You may say that these are sensible but hardly earth-shattering suggestions, and you would be right. But this is a field in which common sense is in short supply, evidence is twisted to fit simplistic 'theoretical' postulates, and the conjunctural logic of specific situations is routinely ignored in favour of pointless exercises in quantification and correlation.
In what follows, I summarise the replenishment negotiations of the 1960s in some detail, then address the following two decades more briefly, before focusing on the 'zenith of US hegemony' in the 1990s, the 'tipping point' subsequently reached, and the rise of China.
The moment of negotiation of the first replenishment round, IDA-1, in 1962-3 was one of intense competition with the Soviet Union, whose influence was at its peak (also the time of the Vietnam War, the Cuban Revolution, and the anti-communist 'developmental' Alliance for Progress in Latin America). It mattered more to the US to establish a substantial development fund that it could hope to control than to go to the wire with its allies over funding, so it insisted that it should be under the umbrella of the World Bank rather than the UN, but virtually stuck to its original share in order to secure a renewal at the founding level of $750 million (only half what it originally wanted). In IDA-2, with international tensions easing, resources stretched and its current account deficit growing, the US sought a share cut and tried to tie its contribution to procurement benefits, prompting a set-to in which the overall fund fell to $400 million; but in the third round, after the Soviet invasion of the Czech Republic, and with developing countries pushing hard to link aid to Special Drawing Rights and boost automatic transfers, global security issues once again trumped narrower goals, and Nixon over-rode Congressional pressure for cuts, pledging to hold the US share steady, while Robert McNamara, at the World Bank, commissioned the Pearson Report, which proposed the target of 0.7% of GDP for official aid donations from developed countries (UNESCO, 1970 - read the article on population control too to get a sense of 'development policy' at the time). Alongside this account of US policy towards replenishment, Xu explores from the archives the rationale for positions adopted by other leading donors - for example, France was reluctant to raise its contribution in line with its economic growth as its favoured former colonies in West Africa received very little from the fund; the UK eventually made concessions on its voting rights to keep the fund high because British firms were substantial beneficiaries while India and Pakistan remained major recipients of aid. In all of this, the Bank comes across over time neither as a puppet of the US and other powerful states, nor as 'a corporation of technocrats free of political influence' (76). It generally concentrated on maximising the size of the fund, and retaining the autonomy of its Board of Directors in allocating it, and as we shall see, would work successively with the UK and China after 2000 to pursue these goals.
In the 1960s, then, burden-sharing arrangements remained relatively stable despite significant shifts in relative economic capabilities as France, Germany and Japan recovered while the UK declined and the US slipped into deficit. In the following decade, relative economic capability was more stable overall, but an accelerated shift in burden-sharing took place. In the 1980s, Reagan cut the US contribution despite the rising international tension after the Soviet invasion of Afghanistan [and the Iranian revolution], seemingly refuting the link between rising tensions and US commitment to maintaining its share, only to maintain it at the end of the decade as tensions eased, and the UK voluntarily ceded its second place in World Bank voting shares to Japan. Xu explores each successive conjuncture from the perspective of her three overlapping 'power plays', drawing on archival material supplemented by interviews to confirm the salience in the minds of those involved of jockeying for position, issues of fairness, and broader strategic concerns, and to account for the mix from round to round.
In the 1990s (in fact, rounds 9-12, as the 1989 negotiation is the first included in this set, which reflects the zenith of US hegemony), in the absence of the Soviet threat, the US let its contribution drop from 25 to just above 20 per cent (a level that still maintained its 'Major Donor' status), while simultaneously falling into substantial arrears on making the payments. The secondary powers were critical of the persistence of the US in reducing its share (already out of line as a proportion of GDP), but practically all kept up their funding at first in order to win developing country acceptance of contentious environmental standards they wished to attach to loans, while refusing to increase it to cover any shortfall. The result of these combined circumstances was a funding crisis at the end of the decade, reflected in an unprecedented funding gap of almost 10 per cent. Meanwhile, the US exerted its authority over the Bank over the decade to the extent of threatening a complete withdrawal of funding if reforms were not carried out, winning improvements in oversight and transparency, and succeeding in 'graduating' (i.e. excluding) China from IDA funding (186). With the dollar appreciating, and reforms to the Bank achieved, the US kept up its dollar contribution in IDA 12, and the funding shortfall was eliminated.
Paradoxically or not, this moment of US hegemony was the prelude to its rapid decline. In the first decade of the present century US contributions to IDA funding tumbled, taking the 'Major Donor' status with them, and the UK briefly became the major donor as Japan too pulled back. The decade began with an intricate set-to over a US proposal (from George Bush, mind), to convert 50 per cent IDA funding from loans to grants - a proposal that was very well received by the NGO community and particularly the Jubilee Debt Campaign, but strongly opposed by the UK (backed by European partners), with Clare Short, the UK Development Minister at the time, denouncing it as 'crazy' (200). Xu explains this neatly: by this time, a substantial proportion (over a third) of IDA funding was coming from 'reflows' (repayment of loans), and the US was concerned over the loss of leverage from donors if the fund became self-sustaining, as it was on track to do in the following decade, so wished to deplete the resources it controlled for itself. In the event, a grant share of 18-21 per cent was agreed, but the outcome was read in the US as falling far short of the original goal, and presaging a shift of influence to Europe. In its wake, there was a spat over the unilateral introduction by the US of new criteria for results management, followed by its default on the second of two payments promised in return, which further eroded its authority (204-6). It was in this context that the Bank turned to the UK, which had increased its share in the previous round, reflecting 'New Labour' support for the Bank (see Cammack, 2001). The UK now made a sharply increased offer for IDA-14, hoping thereby to encourage minor donors (who in aggregate were twice as important as the US) to accept a high overall total, while the US quite extraordinarily pressed Wolfensohn at the Bank to accept an independent chair for the replenishment procedure. Pushing the issue to a vote, the US found itself entirely isolated, and traditional practice was preserved (213). Mayhem followed, with the UK increasing its share sharply, most minor donors holding steady or increasing their shares too, and the two major donors, US and Japan dropping theirs by 7.17 and 4.25 per cent respectively , the upshot being the widening of the financing gap to a new high 18 per cent. In IDA-15, the UK became the largest donor as it strove to keep the overall level of funding high. At the same time, it worked closely with Bank management over the decade to reform conditionality in the direction of 'country ownership' (a policy already in place at the Bank, on which see Cammack, 2002: 40), and, once the global financial crisis hit, to secure the creation of a Crisis Response Fund. These trends, incidentally, have continued: in IDA-17 and -18 (not covered here) the UK returned to the position of lead donor; and the IDA gives the Crisis Response Window a high profile on its web page. Overall, Xu's interpretation of change in this decade is that it reflects not primarily a shift from US to UK leadership, but a shift from 'a coercion-anchored power relationship to a persuasion-oriented process' (227), with which the US has fallen into line.
China had first received IDA finance in 1981, after joining the World Bank in 1980, and graduated from IDA at the end of the century. It became a donor, contributing in 2007 to IDA-15, despite its self-proclaimed identity as a developing country, voting rights at the Bank that were well below what its economic status warranted, and a huge capacity for bilateral aid initiatives over which it had complete control. On the face of it, commercial gain seems a possible but weak motive (as China could already bid for contracts without being a donor), the desire to be seen as a responsible member of the international community a stronger one. Xu dismisses the idea that China was pressured by the 'hegemon', although responsible stakeholding was urged upon it - arguing that the US had no means of coercion to hand. As noted above, she also rejects the notion that China was susceptible to 'socialisation' by Western powers (via the OECD in particular) concerned to amend its unwillingness to attach 'good governance' or social or environmental conditions, and wary of its commitment to state capitalism. As Xu succinctly points out, China has reinforced its commitment to its own criteria, and the OECD has moved towards 'open dialogue without conditions', as indeed did the UK in the same period (234, 221-2). Her own evidence, supported by elite interviews, suggests that China's motivation was 'to vie for influence': 'As a member of the World Bank Group, China felt keenly that the equity line between influence and contribution was skewed to breaking point, and so decided to work proactively to win "voice opportunities"' (235). It was a particular concern that the IDA donors in practice drove policy prescriptions across the whole of the Bank's operations, 'so IBRD [World Bank] borrowers (such as China) had to comply with policy conditionality set by IDA deputies, even though these middle income IBRD countries did not receive a single penny from rich donor countries' (236). Additionally, while acknowledging that the basic needs approach was an antidote to the structural adjustment policies of the 1980s, China 'felt that the pendulum had swung back too far, shying away from fundamental challenges of improving productivity, diversifying industrial structures, and moving up the global value chain' (237); excessive upfront environmental and social safeguards could only hamper progress, making incremental improvement in a dynamic development process a better option; it was wary of having the agenda set by Western NGOs rather than professional Bank staff, especially after the experience of the Western Poverty Reduction Project in Qinghai, withdrawn in 2000 after a pro-Tibet NGO campaign (238); it was sceptical of the merits of externally imposed conditionality and one-size-fits-all policy prescriptions; and the 'anti-corruption' + cronyism debacle of the brief Wolfowitz presidency tested its patience to the limits.
With the day in sight when China would cease to be a borrower at all, then, the Ministry of Finance decided to seek a transition from 'big borrower' to 'big donor', but faced the task of winning support for this strategy across other domestic agencies, against the views of some that it should concentrate on running itself well and bide its time. Xu recounts the emergence of a 'stakeholder' strategy aimed at 'mitigating suspicion and fears that China would overturn the existing system as it ascended' (247), the grudging acceptance of the strategy by MOFCOM, whose preference was for bilateral aid, and the resulting decision to offer a token initial contribution of only $30 million (247-8). In IDA-16, though, China quickly became the 'reference donor' - other donors looked for a significant increase if they were to contribute generously themselves as the 'global financial crisis' raged. Reluctant to step up its commitment too fast, China acceded instead to a Bank-negotiated outcome where it repaid $1 billion of its outstanding debts ahead of schedule, and upped its contribution only to $50 million, or 0.15 per cent of the total [in ID-17 and -18 it would rise to 0.95 and 1.94 per cent respectively, suggesting a commitment to steady but still modest increments in each round]. The UK was the largest donor again in each round, as noted above, with the US dropping close to 10 per cent in IDA-17 and rising to 12.5 per cent in ID-18, and Japan pursuing its consistent strategy of positioning a little below the US each time. In the meantime, China pressed ahead with massive bilateral and related programmes, which Xu rightly identifies as having transformed development finance by creating and deploying outside options that exert competitive pressure on the Bank (252), while generally refraining from proactive engagement in policy debates in replenishment rounds themselves. Able as it is to exert considerable external leverage, China is sitting quietly and placing very small bets at its seat at the IDA table, and currently standing in eleventh place in the list of donors.
Xu's conclusion identifies three stages with distinctive power dynamics in IDA replenishments - the 1960s and 1970s, in which the primary US goal was to expand resources to counter threats from the Soviet Union and the South; the 1980s and 1990s, in which its main objective was to control Bank management to enforce policy conditionalities upon developing countries while reducing its own commitments where possible; and the period since, in which its hegemony began to be contested. Looking ahead, she ends this section with the suggestion that 'the World Bank is heading towards a turning point where financing and governing the World Bank-IDA no longer requires full US participation' (266). The following section, 'An Entrepreneurial China as a Reform-Minded Stakeholder' (266-271) captures what is not only her analysis but also her preferred vision of China's role in global governance, amounting practically to an op-ed for the Centre for New Structural Economics which she co-founded with former World Bank Senior Vice-President and Chief Economist (2008-2012) Justin Lin. But there is also a compelling logic behind it: 'Suspicions that China's commitment to work within the existing system is mere rhetoric disguising a longer term Chinese insurgency have to encounter the fact that China's rise as a development financier has reached a point where it now has basic interests and responsibilities in the systemic functioning of global development financing as it is intimately integrated with the international economic system that incubates its ascendancy' (267). Within this broader context, 'China is bringing a fresh perspective to the development effectiveness agenda, learning from its recent rapid economic transformation of the past thirty years, wherein the state has played a vital facilitating role in creating a dynamic market economy, integrating with and moving up global value chains' (268) - a perspective immediately identified (268-9) as than of Justin Lin and New Structural Economics. It would be naive to think that China's path is set in stone, but these are strong arguments, with near enough four decades of momentum behind them. Xu highlights the spirit of 'public entrepreneurship' embedded in the Chinese approach to development finance, in which massive public investment, public-private cooperation and the 'creative destruction' of existing governance frameworks combine to overcome the 'first mover' problem - getting development started on a sufficient scale for it to become self-sustaining in the presence of uncertainty and risk (270). On this basis, she is optimistic that China can contribute to a new and morally superior multi-polar world - this itself of course another key World Bank preoccupation (World Bank, 2011).
This is an exceptionally valuable study, and streets ahead of all the quantitative-correlative outpourings on the Bank and similar institutions, and the ideologically driven literature on power transitions, socialisation and the like. What can we make of it, though, from an historical materialist perspective? Quite a lot, it turns out. Xu takes for granted without comment the conflictive, transformative and crisis-ridden development of global capitalism over time, which forms the backdrop to the study. At the same time, she does not claim to explain its dynamics, as she restricts the scope of her enquiry to successive replenishments of IDA resources, and China's recent emergence of a donor. As regards the latter, too, her institutional process-tracing approach has a materialist underpinning - China's rise is premised in the first place on its having become the most dynamic global centre of accumulation, and this in turn provides the context for second-level manoeuvres at the IDA. What is more, the process-tracing methodology, focused on the unique dynamics of successive conjunctures, is in principle compatible with an historical materialist approach, where of course an abstracting quantitative-correlative approach would not be. It is also the case that in a time-frame that is relatively narrow in world-historical terms (1960-2013) her analysis clearly reflects a shift from underlying geopolitical to political-economy issues as the Cold War comes to an end and the world market develops on a global scale (193).
And in fact the study, if read in the appropriate context, enriches and is enriched by an historical materialist or critical political economy approach. Xu covers only one aspect of the role of the World Bank in global economic governance, but she does it very well. She also provides the relevant cues for setting her story in the broader contexts of the role of the World Bank Group as a whole, and the evolution of the world market - though with one mis-step that requires comment. I noted above her identification of the apparent anomaly that at a time of East-West and North-South contention, Reagan sought to reduce rather than expand IDA funding. Her explanation is crucial: the Reagan administration 'held a deep conviction that the magic of free markets was the road to prosperity for the rich and poor nations alike, and thus cast severe doubt on IDA's 'overtly statist and redistributive' approach to poverty reduction', and 'took the critical view that the World Bank was undermining private enterprise and promoting socialism' (126); and Reagan responded to the global tensions of the period not by throwing development funding at them, but by building up US military resources. Xu is attuned to the significance of this epochal shift, as she shows when she comments later that the parallel decision taken by George Bush Sr to run down IDA resources in order to push developing countries towards dependence on the market after 1989 'stood in stark contrast with the US leadership for IDA expansion in the 1960s to win hearts and minds in the Third World in fierce aid contests with the Soviet Union' (162-3). Falling funding, in other words, means one thing at one moment, and quite another at another. The mis-step in her analysis, though, is to take far too little account of the extent of the neoliberal shift when she argues that in the 1980s other donors tolerated Reagan's approach because 'they were structurally dependent upon the hegemon for economic recovery amidst debt crises and for military protection against the hostile Soviet Union' (159), while in the 1990s they maintained their contributions and diverted further resources elsewhere, despite feeling unfairly treated, because they wished to fund environmental safeguards. These are unconvincing arguments in themselves, but more, they miss the widely shared commitment to the neoliberal turn, which was just as evident at the OECD as at the World Bank, and no more intense in the US than in the UK and the European Union, whose Commission shifted the focus of its development strategy towards the ACP states in Lomé III in 1983 from state to private-sector led development, and consistently pushed the change further in successive reforms in Lomé IV in 1989, and the Cotonou Agreement in 2000 (Nunn and Price, 2004). With the neoliberal turn, the promotion of markets, or 'deep marketization', became the central objective (Carroll and Jarvis, 2014), and this meant in turn both that IDA was no longer the central element in the global promotion of development, and that the level to which it was funded was no longer a measure of the extent of commitment to it. In turn the shift from conditionality to 'ownership' was an intensification, not a relaxation, of pressure towards neoliberal reform. In the World Bank Group as a whole, the shift to private sector development was reflected after the turn of the century in the growing priority attached to the International Finance Corporation (IFC), which works as much around as through the state (Carroll, 2014); and the growing closeness between the IDA and the IFC has been marked by increasing annual grants to the former from the latter, the increasing concentration of IFC activity on IDA countries, and, in IDA-18, the creation of a formal IFC-MIGA Private Sector Window.
Reflecting again on Xu's analysis in the light of these considerations, it is clear that it supports a generalisation that works well for the longer run, which is that hegemons retain their position as long as they promote the development of the world market, but that once they lose their capacity to do so, that hegemony is more or less swiftly eclipsed. When the US became incapable of playing this role (a situation that paradoxically became apparent only when it reached the 'zenith' of its hegemony), that hegemony disappeared like the morning dew. China's insistent focus on the 'fundamental challenges of improving productivity, diversifying industrial structures, and moving up the global value chain', marks it out as the successor champion of the expansion and deepening of the world market, as do its efforts to reconstitute the World Bank as an effective agent of this process, and its bilateral initiatives outside the Bretton Woods system. In short, Xu's path-breaking analysis brings home something that so much scholarship from left and right on the global economy has missed: the US Emperor has no clothes.
References
Cammack, Paul (2001),'Making the Poor Work for Globalisation?', New Political Economy, 6, 3, 397-408.
Cammack, Paul (2002), ‘The Mother of All Governments: The World Bank’s Matrix for Global Governance’, in R. Wilkinson and S. Hughes, eds, Global Governance: critical perspectives, Routledge, pp. 36-53.
Carroll, Toby (2014), 'The International Finance Corporation's Transformation of Development in the Asia-Pacific: Working on, through and around the state', in Toby Carroll and Darryl S.L. Jarvis, eds, The Politics of Marketising Asia, Palgrave Macmillan, pp. 43-70.
Carroll, Toby and Darryl S.L. Jarvis, eds (2014), The Politics of Marketising Asia, Palgrave Macmillan.
Nunn, Alex, and Sophia Price (2004), 'Managing Development: EU and African Relations throught the Evolution of the Lomé and Cotonou Agreements, Historical Materialism, 12, 4, 203-230.
UNESCO (1970), The UNESCO Courier, February 1970, at http://unesdoc.unesco.org/images/0005/000567/056743eo.pdf.
World Bank (2011), Multipolarity: The New Global Economy, World Bank.