Organizational change ‘from within’: Exploring the World Bank's early lending practices

ABSTRACT

The World Bank is delegated the authority to provide long-term stabilization and general purpose balance of payments loans, what the Bank once described as ‘program loans’. Yet after a brief period in its early years, the Bank stopped disbursing these loans for an extended period. Why? This paper shows that changes to the Bank's early lending practices can be understood largely as a product of intra-organizational dynamics and change that facilitated the construction of a ‘project-oriented culture’ that delegitimized the disbursement of program loans. Though providing a number of compelling reasons to expect autonomous behavior from international organizations (IOs), such dynamics present a blind spot for rationalist approaches, which offer little insight into the processes that shape preference formation ‘from within’ IOs. The paper augments constructivist approaches by going beyond structuralist and static conceptions of IO staff as simply reacting to initiatives ‘from above’ or ‘from below’ and offering a more dynamic explanation of organizational change that describes how internal norm entrepreneurs emerge and proactively and strategically reconstruct an IO's culture. Emphasis is placed on the role of personnel and internal institutional configurations.

KEYWORDS:

• Organizational culture
• constructivism
• World Bank
• norm entrepreneurs
• balance of payments financing
• institutions

Notes

1 The inability of PA to offer general propositions about agent preferences is a recurring theme in PA analysis; see Lake and McCubbins (2006: 343n1, 344).

2 The Bank's authority to issue general purpose balance of payments loans thus overlapped with the Fund's authority to disburse short-term stabilization loans, a jurisdictional issue that generated often intense friction between the two sister institutions. The Bank often sought to maintain the fiction that such loans did not encroach on the Fund's authority to facilitate adjustment; instead, such loans were aimed at preventing the disruption of development in countries faced with the need to correct short-term payments imbalances.

3 Article III, Section 4, Clause VII.

4 Article I, Section III.

5 Bretton Woods Agreements Act. Public Law 171, 79 Congress 1 session (21 July 1945), Section 12.

6 For an overview of the complexity involved in crafting a Bank loan, see Baum (1970).

7 Of course, the staff's refusal to submit a loan to the Board in anticipation of a negative decision also indicates that member states retain a degree of control over loan decisions.

8 See also Ascher (1992); Woods (2000).

9 For an overview, see Campbell (2002).

10 This argument is consistent with constructivist arguments about the need for an organizational platform; see Finnemore and Sikkink (1998).

11 See also Mason and Asher (1973: 51–2).

12 See Baum (1970).

13 See, for instance, World Bank (1955: 35).

14 Author calculations based on World Bank (various years).

15 See also Oliver (1975: 291).

16 See also Nielson et al. (2006).

17 The infancy of the IMF suggests a similar conclusion.