The shifting landscape for international development institutions

Since 1944, when the World Bank and IMF were established, the arena of international development institutions has changed a lot. Some changes are hard to miss. Decolonization and the dissolution of the Soviet Union meant that the number of developing countries mushroomed. Other changes are less obvious. For instance, many development institutions now tie their economic assistance to “extra-economic” considerations such as environmental safeguards, gender equality, or good governance. 

One could discuss many others. But here I focus on three changes that create the conditions international development institutions face today, and will continue to shape their future: proliferation, pressure for performance, and a need for partnerships. (I will also be discussing these changes at the Duke Conference on International Development, November 15-16.)

Institutional proliferation

The number of international development institutions has grown. Part of the reason is that development is a fraught topic, inextricably linked not only with economic development but also with social and political life. Developed and developing countries both display a not-yet-satiated—indeed, possibly insatiable—desire to find or create inter-governmental institutions that will “do development their way.”

Consider a specific type of institution: inter-governmental development banks. The world now has institutions such as the Inter-American Development Bank (centered on a particular geographic region), the Islamic Development Bank (centered on a particular religious affinity), the BRICS’ New Development Bank (centered on particular emerging lenders), and the Asian Infrastructure Investment Bank (centered on a particular project category). These are just a few examples, of just one type of development institution.

Yet there is a common thread: an unabated attraction to “bespoke” development institutions catering to specific needs or constituencies. To put a finer point on it, the proliferation of development institutions implies a widespread sense that the world needs complements—some might even say substitutes—to the World Bank’s approach. And it’s not just inter-governmental banks that have moved into this space. There are non-bank entities such as the United Nations Development Program, plus a variety of private banks, charitable foundations, and non-governmental organizations (NGOs).

Demands for performance

This is a demand that’s being made not just of development institutions but organizations more generally. Practitioners and researchers continue to debate whether the “right” way to measure performance is by monitoring inputs, or activities, or outputs, or outcomes, or impact. But nobody argues that performance should not be measured at all. As major new funders such as the Bill & Melinda Gates Foundation demand more proof of results, and as traditional funders such as the U.S. government trim international assistance, it is impossible for development institutions to ignore the ever-louder demands to demonstrate their good performance.

But demonstrating good performance is easier demanded than done. Program evaluations with randomized control trials (RCTs) tell us something about narrow interventions, but they aren’t equipped to inform broader interventions or the design of organizations behind them. Surveys can tell us something about elite or public opinion toward organizations, but there is no development institution on the planet that would please all the stakeholders all the time. The private sector’s mantra of “failing fast” sounds catchy, but failures are a lot less palatable when they consume public resources rather than private capital.

A peculiar aspect of this pressure to perform is that, although it’s unlikely to recede anytime soon, it’s also unclear how much it will accomplish in the long term. Development institutions that are deemed “poor performers” may experience pressure to reform, but would they be shut down if they failed? This is where the evolutionary parallels behind the push for measurable performance become fuzzy. The notion of the “survival of the fittest” that operates in natural ecology faces at least two impediments in organizational ecology: Fitness itself is often in the eye of the beholder, and those beholders can intervene to prolong survival. No surprise then that the world of international development institutions has more additions than subtractions.

The need for partnerships

With the proliferation of institutions and with ever-increasing expectations to do more with less, even the most potent organizations cannot hope to do everything on their own. They have to collaborate. The World Bank and other traditional inter-governmental organizations are not the uncontested nexus of action. There is excitement about bottom-up initiatives, instead of top-down programs. There is excitement about horizontal networks, instead of vertical hierarchies. There is excitement about NGOs and private investment, instead of governmental bureaucracies.

How can this wide variety of development actors make their mark in a theater that is likely to remain crowded for years to come? Mainly, by spotting conditions conducive to cooperation. In particular, development institutions need to be on the lookout for partners whose values are similar but who draw resources from different pools.

These three features—proliferation, performance, and partnerships—are important individually. But they also interact. The demand for demonstrable performance and the proliferation of institutions make it difficult for a single institution to distinguish itself; it has to form partnerships that help both to boost and demonstrate performance. And the potential partners are ever more numerous. We cannot understand what’s ahead of international development institutions without understanding how their theater is changing.