Whereas the global governance of development was historically guided by Bretton Woods Institutions, and the World Bank in particular, development governance is increasingly taking place through a growing number and variety of institutions at multiple levels – each with their own sets of aims and methods, as discussed in a previous GLOBE blog post. Like the trade regime complex, the development governance regime has begun to flatten out – a process we have dubbed “de-nesting”. As the regime becomes de-nested, authority becomes less hierarchically concentrated in a single (set of) institution(s) and becomes more evenly distributed horizontally. The resulting fragmentation further opens the field up to new players and increases opportunities for interactions between different institutions and rules.

To better understand the degree and nature of the development regime complex, we will next look at several examples of interactions between different institutions of each regime and the challenges (or opportunities) that result from these interactions. In an extensive mapping of the development regime completed in December 2019 for the GLOBE project, we identified five primary categories under which the challenges facing the institutions seem to fall: three internal challenges – institutional structure, legitimacy and effectiveness – and two external challenges – institutional complexity and the geopolitical and economic context.

Internal Challenges

Institutional Structure

Decision making

Decision-making challenges are commonplace throughout the development regime. Institutions frequently struggle to strike a balance between representativeness and effectiveness. When decisions are made by vote and votes are weighted based on member size or monetary contribution (such as the World Bank or the Asian Infrastructure and Investment Bank), the voting mechanism is seen as unrepresentative, giving unfair precedence to the will of more powerful members at the expense of developing and emerging economies. Alternately, where votes are more fairly distributed or where decisions are determined via negotiation or consensus, every member has a de facto veto and decisions may not be made at all – for instance, the Association of Southeast Asian Nations (ASEAN) has been attempting and failing to reach an agreement on the protection of migrant workers in the region for over a decade.

Organizational Dynamics

Another challenge of institutional structure results an institution’s internal organization. Many institutions have complex bureaucratic structures, often with field offices in more than one country, which can lead to confusion and inefficiencies. For instance, in the case of the United States Agency for International Development (USAID), other US governmental offices make decisions that have an impact on development aid strategy, causing conflicting agendas and creating competition for resources.

Lack of central authority

Another challenge of institutional structure, is the opposite of the previous one, namely the lack of a centralized ‘bureaucracy’. In this case the institution(s) lack any kind of permanent secretariat or central authority able to coordinate activities. This is often the case for the wide range of private development initiatives, which, typically formed individually and voluntarily by private actors, tend to focus autonomously on a specific governance area without a central body to coordinate or regulate these initiatives.

Legitimacy

An institution must be perceived as a legitimate rule-maker in order to ensure that the rule-takers comply with the rules, standards and guidelines it sets out. Its legitimacy is also critical for the institution to maintain and gain membership, funding, and support.  An institution’s legitimacy can be undermined by the perception that it is not inclusive or representative or that it lacks transparency.

Perceptions of exclusivity

Developing and emerging economies, as well as some policymakers, activists and scholars, contend that decisions of global or regional importance are made by a small group of elite states with neither input from nor attention to non-member states. This perception has, at least in part, resulted in the formation of new institutions in which developing and emerging economies have more voice (such as the Asian Infrastructure and the Investment Bank) or in contestation within existing institutions, like the WTO.

Transparency

Similarly, opaque governance structures or non-inclusive voting mechanisms can result in a lack of trust in an institution’s intentions and motivations, ultimately leading to the perception that the institution is illegitimate. This perception has emerged as a challenge for the development banks, including the World Bank, the Asian Development Bank, and the Inter-American Development Bank.

Effectiveness / Outcomes

Enforceability

A challenge inherent to global governance is that of enforceability, or the authority to compel rule-takers to comply with rules. In order to protect their sovereignty, states may limit the scope or mandate of an institution or the bindingness of rules by making decisions harder to reach (by, for instance, requiring consensus), by building in exit mechanisms or by making rules non-binding in the first place.

Engagement of local institutions

Another frequent challenge is that rules set at the global level may not be sufficient or appropriate for the particulars of a local context, or the rules may not be adequately implemented on the ground due to a failure to engage local actors and institutions. For example, the US ODA strategy failed in Bolivia because it attempted to bypass local government institutions and attempted to work directly with the farmers in an effort to stop coca farming, thereby losing the trust of the Bolivian government and ultimately being forced to shut down its mission in the country.

Expanding Agendas

Institutions frequently engage in activities outside of their original mandate – often for good reasons – but this can sometimes lead to complications in achieving the original objectives. For example, when one institution attempts to expand its normative agenda but competing institutions do not, it may find that it loses ground vis-à-vis the competing institutions: This is most clearly embodied in the dynamic between the World Bank’s development approach, which requires borrowers to meet certain good governance conditions, and the Chinese ODA strategy, which has been criticized for its “no strings attached” approach to foreign aid. States may opt for less-demanding Chinese funding, thereby undermining the World Bank’s ability to meet its development objectives.

External Challenges

Institutional Complexity

Our fourth category contains challenges that have developed due to increasing regime complexity, resulting from the proliferation of institutions engaged in the governance regime. Increasing complexity results in more frequent interactions between institutions, which can be contradictory, complementary or substitutable.

We saw an example of a contradictory interaction in the conflicting approaches to development pursued by the World Bank and China described above: By providing prospective borrowers the alternative of condition-free funding, China’s foreign aid policy undermines the World Bank’s ability to use conditionality to achieve its objectives of socially-inclusive and sustainable development. On the other hand, the World Bank’s commitment to funding projects related to attaining the UN’s Sustainable Development goals is an example of complementarity. Finally, the presence of multiple institutions that provide similar functions increases competition for investors and for clients – this is seen as a growing challenge for the regional development banks and the World Bank, especially when new ones – like the Asian Infrastructure and Investment Bank – are established. 

Global Political and Economic Context

Shifts in economic weight and global power influence the conditions under which institutions set and implement rules and also change the nature and scope of the global governance problems to be solved. In recent years, for instance, there has been a shift from states attempting to resolve problems of a global nature at a multilateral level to states increasingly using unilateral or plurilateral measures.

Another challenge relates to the immense and increasing power of private actors in global governance. In a global economy distinguished by complex and interconnected cross-border production networks and the pervasive belief among states and institutions that markets and, by extension, private actors work best with minimal state oversight, more and more governance functions are relegated to the private sector. Although private actors such as NGOs and public-private partnerships have made valuable contributions to solving development problems and have considerable potential, they may also at times lack legitimacy and credibility.

Conclusion

The changing architecture of the development governance regime is both a cause of and a response to challenges faced by the regime. While many institutions have entered the field to make up for perceived governance deficits of existing institutions or to fill gaps caused by changing development conditions, the increased regime complexity has created new governance challenges. Understanding the underlying deficits and the causes of regime fragmentation is a first step toward addressing existing challenges and meeting future challenges..

Kari Otteburn is a researcher in political economy, corporate accountability, and labour rights at the Leuven Centre for Global Governance Studies at KU Leuven. She is GLOBE Research Fellow at KU Leuven.