Some Tough Competition

The two articles from the Washington Post - this one by George Will, and especially this one by Marcela Sanchez - got me thinking about something. What would happen if the World Bank and the IMF were not alone? What if there was competition? More likely than not, Chavez's Banco del Sur will not be able to garner much importance on the world scale (though oil money can make magic happen). Still, even the threat of competition will encourage more efficient operations at the global institutions. Sanchez quotes Liliana Rojas-Suarez as stating that there is a "sense of complacency" right now at these organizations due to the comfort provided by the current international economic conditions. One of the benefits of competition would be to launch the IMF and World Bank into a state of almost perpetual crisis since even in the fattest times, they will be concerned with outpacing their rivals.

This competition would be good for the countries contributing to the fund since they can choose to work with a particular bank. Also, since the countries will be able to choose, it is more likely that a wider range of interests will be represented across the two banks than by the current single bank. That means that more countries will loan more money to the institutions. Some may argue that this competition will result in fewer loans to the poorest countries than the single non-competing bank. Still, countries are not value-blind when they make the decision regarding which institution to back. Also, multiple institutions will likely use different methods to foster economic growth, which will shed light on which methods are effective and which methods should be done away with.

Of course, rival banks will have its own share of problems. There are surely some benefits to having a single entity in charge of international finance, such as the view that the single non-competing firm is more stable because it is so large, and the benefits of having a good reputation. The reputation of the World Bank and the IMF is worsening every day because its actions clash with their mission and their actions don't always help to improve situations. The fact there is no competition could be partially responsible for this inefficiency.

Basically, a little competition would do the World Bank and IMF good.