“Hypocrisy Trap provides a fresh look at a long-standing problem: Why do international organizations such as the World Bank so often say one thing but do another? Weaver combines an impressive array of interviews and secondary sources with organizational sociology to show why there is a trap and why it is not easy to avoid or escape. The resulting analysis will be of interest to scholars concerned with how international organizations actually operate–and to practitioners who want to operate them more successfully. Unfortunately, it turns out that good governance is easier to say than to do.”–Duncan Snidal, University of Chicago

“When institutional pressures and bureaucratic goals collide, hypocrisy is almost inevitable. The contradiction between talk and action is built into the very fabric of the World Bank. The outcome, as Catherine Weaver argues in this timely and compelling study, is systemic rather than sporadic hypocrisy.”–Peter J. Katzenstein, Cornell University

“An excellent book: theoretically sophisticated, empirically rich, and refreshingly accessible. This is the best book I have seen about the World Bank in a long time.”–Martha Finnemore, George Washington University

“While others have examined dysfunction and pathology more generally in international organizations, Weaver’s book is the first to offer a theoretically sophisticated analysis of hypocrisy specifically. Weaver casts a broad net and aims high.”–Paul J. Nelson, University of Pittsburgh

Catherine Weaver is assistant professor of political science at the University of Kansas.

Hypocrisy Trap

THE WORLD BANK AND THE POVERTY OF REFORMBy Catherine Weaver

PRINCETON UNIVERSITY PRESS

Copyright © 2008 Princeton University Press
All right reserved.
ISBN: 978-0-691-13819-0

Contents

List of Figures and Tables…………………………………………………………….ixPreface……………………………………………………………………………..xiAbbreviations………………………………………………………………………..xvChapter One Introduction: Hypocrisy and Change in the World Bank………………………….1Chapter Two The World Bank Hypocrisy Trap………………………………………………19Chapter Three The World’s Bank and the Bank’s World……………………………………..44Chapter Four Good Governance and Anticorruption: From Rhetoric to Reality?…………………92Chapter Five The Poverty of Reform…………………………………………………….140Chapter Six The Fog of Development…………………………………………………….176List of Interviews……………………………………………………………………193References…………………………………………………………………………..195Index……………………………………………………………………………….219

Chapter One

Introduction: Hypocrisy and Change in the World Bank

In his brief tenure as World Bank president between May 2005 and June 2007, Paul Wolfowitz made fighting corruption his top priority. He aggressively pushed the governance agenda on the Bank’s reluctant borrowing states. He openly criticized the Bank’s management and staff for tolerating corruption in lending. He went so far as to unilaterally cancel big loans and projects, over the objections of Bank staff and client governments, where he suspected corruption was present. Wolfowitz declared that under his watch the World Bank would have “zero tolerance” for corruption.

Then in late March 2007 news broke of the generous secondment, salary, and promotion deal Wolfowitz had arranged for his romantic partner, staff member Shaha Riza. Opponents of Wolfowitz—including his own management and staff—accused the leader of contradicting his own standard of good governance. Events quickly snowballed. Many European donor states threatened to pull the plug on the World Bank’s financial support and their passive support of the U.S. privilege of selecting the Bank’s president. Major developing country borrowers, especially in Latin America, used the crisis to ramp up anti-U.S. sentiment and called for a clean break from dependence on the World Bank and its sister institution, the International Monetary Fund. Inside the normally staid institution, staff members openly booed the president, wrote open letters of protest, and donned blue ribbons to symbolize support for good governance in the World Bank itself. In an editorial published on 15 April 2007, the Financial Times bluntly stated: “if the president stays, [the Bank] risks becoming an object not of respect, but of scorn, and its campaign in favor of good governance not a believable struggle, but blatant hypocrisy.”

While many reacted with indignation at Wolfowitz’s transgression, longtime observers of the World Bank were not shocked to find that behavior did not match declared standards. In the past few decades, strange bedfellows from the political left and right have pointed with outrage to the gaps between the rhetoric and the reality of the international organization. In critics’ eyes, hypocrisy is not monopolized by the Bank’s president, but is in fact endemic to the institution. Hypocrisy is apparent in the Bank’s incompliance with its own policies. It is evident in the “mainstreaming gaps” between what the Bank says are its priorities in alleviation of poverty and in socioeconomic development and what it actually does to pursue these goals. Hypocrisy is in essence the persistent failure of the Bank, as a collective entity, to act in accordance with its ideals.

Accusations of hypocrisy, once considered inflammatory, are now quite commonplace. Consider for a moment the recent scandal over the Bank’s financing of the Bujagali Hydropower Power project in Uganda. The $225 million loan approved for the dam in 2001 provoked a massive NGO protest campaign, triggering an investigation by the Bank’s own Independent Inspection Panel. At heart were charges that the proposed project violated the World Bank’s policies and espoused goals on numerous fronts: safeguards against the involuntary resettlement of indigenous peoples, adequate assessment of the potential environmental impact, disclosure of information, a proactive consultation with local “stakeholders” (i.e., the affected population), and an objective evaluation to ensure a positive economic return on the investment. Further allegations of corruption in the contract procurement process eventually led to a temporary suspension of the loan. In April 2007, despite continued concerns about the project’s viability, the political instability in Uganda, and the pending inspections panel investigation, the Bank renewed and even increased the size of the loan. For activists, the Bujagali project is an example of the hypocrisy of a self-depicted “green” Bank. Indeed, from their perspective, the Bu jagali case continues a long record of environmental and social neglect and tolerance of corruption in the Bank’s work. To the most unforgiving critics, the Bujagali case exemplifies the Jekyll and Hyde character of the Bank, which preaches sustainable, participatory, and accountable development while, in practice, doing whatever is necessary to get big loans approved and out the door as quickly as possible.

Charges of hypocrisy exert a heavy toll on the Bank. Since the mid-1990s, malaise and open dissent have grown within the organization, already beleaguered by demands for reform, reinvention, or even demolition. Increasingly, its highly trained and well-intentioned staff works under politically charged conditions as the Bank takes on goals and tasks that challenge its mandates, modus operandi, and raison d’être. The result is an institution under persistent pressure to change, yet increasingly uncertain about its identity and path to reform.

For these reasons, the phenomenon of the Bank’s hypocrisy merits a close examination that gets beyond polemics to an analytically satisfying explanation. Indeed, the goal of this book is not to prove the Bank guilty of hypocrisy. My intent is to explain the nature of, and reasons for, the hypocrisy, a behavioral characteristic I find to be embedded in the Bank’s political environment, its internal bureaucratic culture, and the complex process of organizational change. Paradoxically, in investigating the causes and dynamics of hypocrisy, I also argue that hypocrisy may be a natural, enduring, and even necessary feature of Bank life.

While I do not seek to generalize my explanation of hypocrisy beyond the critical case of the Bank, I do see its hypocrisy as an exemplar of the bureaucratic “pathologies,” dysfunctions, and legitimacy crises that we observe in international organizations today. Others have invoked the concept of organized hypocrisy and in some cases have explicitly theorized on the types of organized hypocrisies found in other IOs. Organized hypocrisy constitutes a salient puzzle for IO theory. Increasingly, scholars (particularly those in the constructivist tradition) recognize IOs to be relatively autonomous and powerful actors who help both to regulate and to constitute the world by “defining meanings, norms of good behavior … and categories of legitimate social action.” Hypocrisy impedes these functions, undermining the authority, and potentially limiting the normative and material influence, of IOs. Hypocrisy may be linked to the ineffectiveness or overt failure of an IO. For these reasons, the phenomenon of organized hypocrisy is directly relevant to those considering how to rationally design and delegate authority and tasks to IOs in ways that avoid errant behavior by agents. At first glance, therefore, it seems counterintuitive to view hypocrisy as predictable, even essential for organizational survival. Yet this is exactly what an empirical investigation of the World Bank leads us to believe.

The Sociology of Organized Hypocrisy And Change

This book is driven by two sets of questions. First, why does the Bank exhibit hypocrisy? What does this hypocrisy look like in the manifested behavior of the Bank? What factors, external or internal to the Bank, drive the divergence of bureaucratic talk and action? Second, why is hypocrisy so difficult to resolve, especially when it is exposed as a critical threat to legitimacy and authority? Stated differently, what is it about the nature of change, and specifically strategic reform efforts within international organizations, that enables or even requires hypocrisy?

I tackle these questions theoretically in chapter 2. I draw extensively from organizational sociology, in particular work on sociological institutionalism, resource dependency, and organizational culture. Here I owe a large intellectual debt to the work of Nils Brunsson (1989, 2003), who first theorized the concept of hypocrisy and later, in collaboration with Johan P. Olsen (1993), linked it to the study of organizational reform. Collectively these sociological theories share the assumption that organizations depend upon their external environments for critical resources, including both material (financial) support and conferred legitimacy. An organization must appear responsive to environmental demands in order to survive. Hypocrisy arises when these demands clash and the organization is compelled to separate talk from action so as to reconcile conflicting societal norms or placate multiple political masters with heterogeneous preferences.

These sociological theories also recognize that organizations develop informal structures and cultures—internal systems of ideologies, values, norms, and ways of interpreting the world—that over time create organizational preferences and behaviors that are quite distinct from those in the external environment. Bureaucratic culture provides stability and meaning to organizational identity and action, enabling the organization to respond predictably and efficiently to environmental uncertainty. Culture is not immutable. But by its nature, culture changes slowly and incrementally, in a path-dependent fashion often at odds with the direction and pace of change in the organization’s environment.

Hypocrisy is thus most likely to surface and endure when conflicts arise between institutional pressures and bureaucratic goals. In other words, when the demands imposed by the external material and normative environment conflict with internal structures and culture, organizations will decouple, building gaps between, on one hand, formal structures and “espoused theories” erected for symbolic purposes to obtain external resources and, on the other hand, the informal structures and “theories in use” that drive actual work. To cope with irreconcilable pressures, organizations in fact develop distinct “political” and “action” roles.

With these theories in mind, there is good reason to believe that international organizations, and the Bank specifically, are especially susceptible to hypocrisy. As multilateral governmental agencies, IOs are particularly dependent upon externally conferred legitimacy, public funding, and demand for services. Their authorizing and task environments are highly politicized, as legitimacy and material resources come from multiple member states as well as other actors (see chapter 3). This environmental complexity increases the likelihood of contradictory expectations and marching orders. Moreover, many large service IOs like the World Bank have developed distinct bureaucratic cultures over their lifetimes. While these cultures reflect in part the IO’s dependent relationship with its environment (particularly in the formative years), over time the professionalization and socialization of staff engender organizational preferences and worldviews that are often not easily deduced from the interests of dominant member states. In turn, bureaucratic cultures and the internal battles over ideas and practices play a large part in shaping how the IO behaves and changes over time. Understanding the dichotomy between the external environment and the internal culture of an IO can reveal the tensions that drive hypocrisy.

Underpinning these issues is the argument foreshadowed above: hypocrisy plays a paradoxical role in the life of an IO like the Bank. On the one hand, hypocrisy serves a critical function, shielding the Bank from the inconsistent demands of its political and task environments. It is lip service employed as a strategic tool. On the other hand, hypocrisy can become a liability. As evident in the NGO “whistle-blower” campaigns against the Bank over the past two decades, hypocrisy rarely stays hidden. Instances where the Bank is caught in an act of hypocrisy can become sources of dysfunction, undermining the organization’s legitimacy and moral authority, its political and financial support, and ultimately its ability to pursue its mission and to survive.

At such critical junctures, the Bank is called to task and compelled to try to rid itself of hypocrisy through strategic reform, as seen in the Strategic Compact reorganization in 1997 (see chapter 5). Yet reform programs may become a part of hypocrisy. Reform goals and formal structural changes may be enacted to signal conformity to environmental expectations, to mold public opinion and fend off external criticism, to secure needed resources and get on with the work. “Such an interpretation,” Brunsson and Olsen argue, “helps to explain why so many reforms are attempted, even though they have little effect on structures and processes, let alone results.” In the case of the Bank, Toye and Toye conclude, “the rhetoric of change [has moved] faster than the reality.”

At the same time, reform programs are not simply acts of smoke and mirrors. Quite often changes are initiated as the result of learning and the advocacy of new ideas and practices within the organization. In these instances, the intent to uproot hypocrisy and incite change is genuine, at least on the part of the champions of reform. Reform goals are pronounced and plans are enacted to align formal and informal structures and behavior with espoused goals. Yet change remains elusive. Why?

Aligning talk with action across an entire organization, especially one the size and age of the Bank, is not a straightforward task. Talk is cheap, but putting the Bank’s money where its mouth is can be very expensive. Reducing hypocrisy necessitates reorienting the staff’s expectations and behavior to comply with new agendas. Accomplishing such a change is not merely a matter of political will or of creating effective incentives and sanctions. Rather, uprooting hypocrisy requires arduous changes in structures, policies, mind-sets, and behavior. Such systemic cultural change is notoriously difficult to engineer. Moreover, reforms can be hindered by the very incongruence in environmental and bureaucratic goals that compels hypocrisy in the first place. When reform goals are inconsistent, and when they clash with existing ideologies, norms, incentive structures, and routines, reform is unlikely to succeed. Quite often such attempts produce unintended and undesired consequences, including continued hypocrisy. In the end, hypocrisy can become a trap: easy to fall into and hard to get out of. For these reasons, this book examines both the contentious process of change in the Bank and the sources and manifestations of organized hypocrisy.

Hypocrisy And Change In The World Bank

The road to hell is paved with good intentions. We have a lot of good intentions. —John Alvey, outgoing president, World Bank Staff Association, December 2004

Why the World Bank?

The Bank is a critical case for the study of organized hypocrisy and change if only because its “talk” and “action” have a profound influence on the theory and practice of global development. Since its rather humble beginnings sixty years ago, the World Bank Group has grown from an original staff of seventy-two people, all located in Washington, D.C., to a current staff of over ten thousand located at the Washington headquarters and in over one hundred country offices. In its first six years of lending (1947–52), the Bank issued loans totaling less than $1.4 billion (approximately $12.6 billion in 2006 dollars), whereas in the last fifteen years the Bank has averaged nearly $22 billion per year. Furthermore, in the first ten years of its existence, the Bank issued loans almost exclusively for reconstruction in Europe and other infrastructure projects, including sector lending in electrical power, transportation, industry, and agricultural and forestry.

By the 1990s, the scope of the Bank’s lending had expanded tremendously. It now tackles development projects ranging from sweeping adjustment lending for macroeconomic restructuring to social, environmental, and political areas of development, including social protection and pensions, designated environmental protection programs, and public sector management. The Bank’s loan and grant commitments in 2005 approximately equaled the combined commitments of the four major regional development banks, nearing $22.5 billion in the same year that official development assistance totaled around $100 billion.

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