The European Union, the World Bank and the Policymaking of Aid

Cooperation among Developers

Eugenia Baroncelli

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781317032793
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

Based on the experience of the author, an IPE scholar and former trade policy consultant at the World Bank (WB), the book offers an in-depth exploration of the EU–WB relations, conceptualized as hybrid delegation.

Coupling cross-time analyses of their interaction in the regions of the Middle East and North Africa, Europe and Central Asia and Sub-Saharan Africa with an original investigation on the coordination among the EU member states at the Executive Board of the International Bank for Reconstruction and Development over the 'voice and participation reform' of 2008–2010, the book advances an innovative theoretical framework to assess the EU–WB joint institutional and field policy performances. Augmented PA models of delegation, role theory and performance analyses are engaged, and selectively recombined, to investigate the nature, evolution and impact of the interactions of the two organizations, both in their everyday and constituent politics. Hybrid delegation-in-motion is reconstructed, against the background of post-Washington Consensus and post-Lisbon EU, to unveil the changing division of labour between the two largest development multilaterals of the new global context.

The book will be of interest to scholars, students and practitioners in European Politics, Development, International Relations, International Political Economy and Global Economic Governance.

1 Researching the EU–WB cooperation

Inter-organizational relations and the making of multilateral development

1.1 Introduction

The European Union (EU) and the IBRD (International Bank for Reconstruction and Development, hereinafter World Bank) are currently the two major multilateral actors in development policy. In addition to being a key player in the world trade system and the largest provider of foreign direct investment (FDI),¹ the EU and its member states (MS) are collectively the most generous donor worldwide, supplying Euros 75.5 bn, or almost 60% of total development assistance (European Commission–DG DEVCO 2017a).² In turn, the World Bank is the major multilateral development bank, and the sole with a global vocation, having provided more than USD 500 bn loans since its creation (World Bank 2017a). The EU-cum-MS tops the donors’ list, accounting for approximately 60% of the World Bank’s contributed resources.³ In recent years, both organizations have made tangible progress to increase transparency on their relations. Yet, surprisingly little is known about why EU’s aid allocation through the World Bank (‘channeling’) takes place, and to what effect, for citizens in donor and lending states.

The EU and the World Bank have navigated multiple challenges since their inception: the EEC-EC-EU enlargement rounds and deepening phases, the World Bank’s adjustments to the post-colonial developments since the 1950s, the postdebt crisis challenges in the early 1980s, to name a few. Between the 1990s and the 2000s, the EU and the World Bank have faced the tests posed by the double transitions in post-Communist regimes, and by the redefinition of the Washington Consensus, respectively. Across the turn of the millennium they have jointly engaged in the achievement of the Millennium Development Goals (MDGs), a task that has become particularly challenging after the global crisis in 2008, and the ensuing ‘Great recession’. Reaffirmed with the EU ‘Agenda for change’ (2011) and the support to the launch of the 2030 Agenda and the Sustainable Development Goals in 2015, both organizations have focused on coupling the poverty eradication goal to that of reducing inequality (the World Bank’s ‘twin goals’ of ending extreme poverty and boosting shared prosperity) through sustainable and inclusive practices across a range of new challenges.⁴

At specific junctures, the EU and the World Bank appear to have also influenced one another, in their normative and policy practices. Relative to the former, the template for the EU’s ‘Brussels Consensus’ on development, agreed in 2005 and launched in 2006, does bear several similarities with the ‘Comprehensive development framework’ developed by the World Bank in the mid-1990s, and with its broader ‘post-Washington Consensus’ (Baroncelli 2018). With respect to the latter, there is evidence that the World Bank has influenced the recent EU’s venturing the business of loan leveraging through (EU-led) trust funds – a business traditionally run by the World Bank. Influence at the policy level is also being played by the EU on the World Bank, which has furthered its role as a ‘knowledge bank’ in the new EU MS and broader Neighborhood. Redefinition of the ‘division of labour’ in development policymaking is certainly at play between the two multilaterals.⁵ The extent to which these evolutions have responded to strategic behavior, by either organization, or to other non-consequential logics is specifically investigated in this book.

From the EU side, the normative and policy developments described above are evidence of a broader transformation that has taken place since the new millennium in the Union’s aid policy, particularly advocated by the search for a more vocal role by the EU Commission (European Commission 2007). The existence, and strength, of an EU distinct actorness in aid policy has been the subject of specific analyses in EU studies (Holland 2002). To a large extent, these contributions have been mostly interested in the domestic determinants of the Union’s identity in development policy. Yet, the EU’s assumption of a more assertive role in aid policymaking in the 2000s has responded to several triggers, both internal and external to the organization (Carbone 2007). Still largely unexplored is the extent to – and the ways in which the change in EU’s aid policy has been influenced by its relation with the World Bank, and by the redefinition of the World Bank’s own mission over that period. Equally uncharted by the academic literature is the reverse dynamic, whereby the World Bank’s programs and strategies have been impacted by EU policies in sectors and geographical contexts where the two organizations have cooperated during those same years.

Since the 2000s a lot more is known about the dynamics of states’ delegation to International Organizations (IOs), much thanks to the seminal work of IR (International Relations) institutionalists. Resorting to transaction cost literature and, subsequently, Principal-Agent (PA) models, IR institutionalism has contributed to make sense of the puzzling endurance of IOs deviating from the mandates of their founding members. However, the anomaly of multilaterals which delegate to one another (to accomplish tasks that fall well within their original missions) has yet to be fully explained. Perhaps even more baffling is why IOs should fund one another without claiming formal principality rights in each other’s main decisionmaking bodies, limiting themselves to express preferences in a piecemeal fashion, in ad hoc boards and across multiple funding facilities. Furthermore, given such piecemeal representation, how does the interaction between global governors influence their respective actions and policies? What is the role played by political decision makers (states and their representatives) and managements, respectively, and what are the logics that inform these processes?

To solve these puzzles and answer the above questions, the book conceptualizes the nature and effects of the multiple ties that exist between the EU and the World Bank in the promotion of multilateral development. To this aim, it builds an original eclectic framework, that encompasses both IR–IPE (International Political Economy) rationalist and reflectivist approaches to the study of IOs, and which includes insights from EU, political economy of development and business studies. Empirically, it unpacks the relations between the two governors, at both the political and organizational (management) levels, tracking their interactions since the late 1990s, against the broader changes that were taking place in multilateral development norms and practices across the turn of the millennium. Particularly, it looks at the EU’s performance, at the World Bank’s Board and, in the field, in selected joint and parallel programs. Engaging with implementation issues, the book unveils how different interactional dynamics between the two multilaterals have impacted on their performance on the ground. Providing specific inputs into the EU’s making of its aid policy, the analysis also sheds light on how the changing ‘division of labour’ between the two organizations is likely to feedback on the broader making of development policies at the multilateral level.

The rest of this chapter is organized as follows: section 1.2 discusses the core questions that are addressed throughout the book, arguing about the need to shed light on the interactions between the two largest multilaterals in development policies, on grounds of both EU-specific and global development perspectives. Section 1.3 offers a synthetic overview of the different EU, IR and IPE contributions that have provided seminal inputs on the EU’s role in international organizations. Section 1.4 discusses selected inputs from the rationalist and reflectivist literatures on the relations between states and IOs, particularly in aid policymaking. Reviewing their merits and limitations on the basis of IR seminal academic debates, the section provides fresh insights on their potential and pitfalls in the analysis of the relations among global governors. Building on the previous discussion, Section 1.5 makes a case for analytical eclecticism⁶ as the best approach to study the interactions between the EU and the World Bank and, more broadly, the microfoundations of global governance processes. Section 1.6 concludes, outlining the goals and structure of the book.

1.2 Studying global governors through their interactions: the EU–WB case

While the role of the United States (US) at the World Bank has been under scrutiny for a while (Ascher 1992; Brown 1992; Woods 2003; Fleck and Kilby 2006), the EU’s relations with the World Bank, and more specifically the EU’s role at the Executive Board, have to a large extent been terra incognita in the academic debate on multilateral governance (Baroncelli 2011). The theoretical void may be justified by the fact that the EU institutions do not have voting rights in the World Bank’s Board, and that, on the contrary, the US are to date the only World Bank shareholder which can singlehandedly mobilize its voting power to veto proposals of constitutional change (i.e. to block attempts at amending the Articles of Agreement). The shared character of the EU’s competence in development policies, and, more broadly, the EU’s peculiar nature (not a state, not a fully supranational organization), also concur to explain the dearth of scholarly interest in its role at the World Bank. Adding to the sheer magnitude of their joint support to development financing, there are in fact several reasons, of theoretical and practical relevance, to take a closer look at the role played by the European Union at the World Bank and with the World Bank in the making of development policies.

Both formal (even if piecemeal, through the EU’s channeling via World Bank-managed trust funds) and informal (but regular, via the coordination of EU MS at the World Bank’s Executive Board), the cooperation between the two global governors has grown to a level that makes it increasingly difficult to avoid considering its shape, determinants and implications. As said, the EU-cum-MS are collectively the main supplier of financial resources to the Washington-based IFI (International Financial Institution), via capital subscriptions by EU MS, on the one side, and via EU institutions and MS channeling to World Bank managed trust funds, on the other. The World Bank shares part of its membership with the EU (all the EU’s MS sit in the World Bank’s Executive Board), but neither organization has representatives in each other’s executive bodies.

In official practice the EU and the Bank interact as two distinct multilateral agencies, cooperating with other actors (private donors, NGOs, civil society and different institutions in MS and at the transnational level) in a wide variety of programs and projects to alleviate poverty worldwide. Generally neglected by the academic literature, however, the interactions between the EU and the World Bank have in fact crucially influenced the evolution of the system of multilateral aid since the late 1990s. Disregarding such a relational dimension would substantially limit the opportunities to investigate the transformation of today’s development policies and practices. It would also narrow down the analytical avenues that scholarly research may pursue to understand processes followed and outcomes achieved by each of the two governors.

Under the policy angle, then, a major incentive to look at EU–WB relations is provided by the evolution of their joint financial efforts and by the EU attempts at strengthening informal coordination at the World Bank’s Executive Board. The resources devoted by the EU to multilateral development financing through the World Bank have remarkably increased in the new millennium: in 2005 the Commission channeled to the Washington-based institution an amount that was 50 times that supplied in 2000 (ADE 2008; Faini and Grilli 2004).⁷ At the high institutional level, progress has also occurred since 2003, when an informal consultation group (the so-called Eurogroup) was set up by the Office of the Italian Executive Director (hereinafter ED) to coordinate the position of EU EDs at the Board on matters of joint European interest. Along such an increased effort, however, as noted above, the EU has shown its readiness to build on its grant-making core activity and provide for its own trust funds, potentially entering the (once) World Bank’s preserve business of blending facilities for loan-leveraging among potential donors.

To make sense of these apparently paradoxical developments (EU increased channeling, no formal voice, creation of own trust funds), the book explores how the different missions of the two organizations have either boosted or impaired their cooperation at different points in time. Global in reach and – in theory – a-political in its mandate, the World Bank has officially claimed for itself a neutral role in times and places of military, political and diplomatic tensions, always paying particular care to find a compromise among the heterogeneous preferences of its member states. Conversely, the EU has an explicitly principled nature, and has actively engaged in norm promotion through its cooperation with developing countries. How has such divergence in missions been reconciled by the two organizations when they have cooperated in fragile contexts? More generally, are partially divergent missions a positive element for successful cooperation, or should aid multilaterals converge on both ends and means?

The overtly political mission of the EU, a partially supranational organization composed by states, originally regional in scope, makes arguing about the (formal) WB presence in EU fora a matter of mostly taxonomical interest. The issue has however gained salience relative to the World Bank’s membership in the EU’s grant-leveraging facilities such as the WBIF (Western Balkans Investment Framework), launched in 2009. Conversely, the absence of an EU’s official representation in the World Bank’s Executive Board – notwithstanding the prominence of EU institutions among World Bank’s donors – has been the subject of several speculations, and has gained momentum in policy circles, particularly after the establishment of an EU external legal standing, through the Lisbon Treaty of 2009. Specifically addressed in the book is why the most generous multilateral donor, and the main creditor to the World Bank, is still not a shareholder at its Board. Official statements indicate that the issue of the EU external representation in the Bretton Woods institutions has made its way to EU formal declarations (EC SEC (2010) 420, 34). In May 2011, the post-Lisbon upgrading of the Union to an ‘enhanced observer’ status in the United Nations General Assembly (UNGA) suggested that a similar evolution could take place also in the Washington-based IFIs. However, the EU’s endorsement of such key role through its political rhetoric, was not reflected in Brussels’ policy targets at the time (Grimm and Phillips 2006; Maxwell and Gavas 2010). In spite of academic think tanks, and Commission-based calls, the EU MS, through the Council (in its Foreign Affairs composition), deleted the question of a common representation of the EU in the two Washington-based IFIs from the list of priorities in the 2010 Spring Package.⁸ The consequences of the Eurozone crisis first, and the expected impact of Brexit subsequently, have led the Juncker Commission to focus on internal priorities, driving attention further away from the issue. However, the migration emergency, as well as the conflict-related crises in the Middle East and North Africa (MENA) region (Iraq, Syria), amidst the broader challenges from Sub-Saharan and MENA fragile countries, indicate that a renewed attention to how the two governors coordinate their development efforts is both timely and prospectively relevant.⁹

Besides the gap between devoted resources and principality rights, the book investigates how informal coordination has served as a substitute for an enhanced role of the Union at the World Bank’s Board so far. Concomitantly, it explores how cooperation between the EU and the Bank has proceeded on the ground, in partner countries, most notably considering the changes that have occurred in development policymaking since the launching of the MDGs in 2000, and in the post-Soviet enlargements.¹⁰ Deepening the focus on the early EU motivations to channel through the World Bank Trust Funds, it analyzes the subsequent creation of EU blending facilities since 2007. Plausibly, they are a further indication that Brussels is trying to forge a more effective and pragmatically oriented role for the Union in multilateral aid. What has been the influence of the World Bank, and of the EU–World Bank relations, on Brussels’ new venture? Given the parallel redefinition of the World Bank role, particularly as a strategic knowledge provider for some new EU MS, a further issue raised by the book concerns the welfare implications of the two organizations’ incursions into each other’s respective domains.

Mostly interested in the relations between states and IOs, only recently have IR and IPE begun to explore the ties that exist between IOs (Avant et al. 2010; Bierman and Koops 2017). In this vein, the analysis of the EU–World Bank relations offered here aims to contribute to the scholarly research on how global governors interact. Investigating their endogenous connection, through imperfectly overlapping membership, and their exogenous tie, through the trust fund track, the book conceptualizes the set of links that connect the EU to the World Bank as a hybrid encompassing different forms of delegation. Unpacking the mix of ties between the two organizations, the book looks at how its evolution has impacted on Brussels’ redefinition of the EU’s role in development policymaking, and, more broadly, on the wider process of aid delivery and politics at the multilateral level.

1.3 Researching the EU in international organizations: European studies and the political economy of the `governance turn'

In spite of the vagaries of the ratification of the Constitutional Treaty, finally adopted in December 2009 as the Lisbon Treaty, the EU’s role in international affairs has not ceased in these recent years to be the object of extensive research by the academic and policy communities.¹¹ Indeed, since the 1990s the number of contributions in EU studies investigating the Union’s role in world politics has distinctly increased (Carlsnaes and Smith 1994; Hill 1996; Piening 1997; Bretherton and Vogler 1999).¹² Somehow parallel to the ups and downs of the EU’s integration and enlargement trajectories, those studies have explored actorness, power (substantial and normative) and foreign policy (style and impact).

In trade policies,...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• List of figures
• List of tables
• Acknowledgements
• 1 Researching the EU-WB cooperation: inter-organizational relations and the making of multilateral development
• 2 Intersecting accountabilities: the beauty of difference and the challenge of coordination
• 3 Comprehensive and coherent: change and stasis in the EU and the World Bank's policies across the turn of the new millennium
• 4 The EU's development policy and the EU-World Bank relations: the contribution of role theories
• 5 Analyzing performance I: the Eurogroup and its effectiveness at the World Bank's Board
• 6 Analyzing performance II: the EU's contributed effectiveness to the World Bank's programs
• 7 Europe, Central Asia and the challenge of double transitions
• 8 Development, democracy and peace? The EU-World Bank cooperation in the MENA region
• 9 The EU and the World Bank in Sub-Saharan Africa: declining trust, role change and the challenges of coordinating under fragility
• 10 Cooperation among developers: hybrid delegation, role change and the accountability-effectiveness trade off revisited
• Bibliography
• Index