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MDB ARCHITECTURE Deglobalizing multilateralism to future-proof development financing The future of the MDB system will depend on structural adaptation to a world in which balance sheets will be exposed to high volatility.
By Benedict Okey Oramah Former President and Chairman of the Board of Directors of Afreximbank
The dizzying speed at which globalization evolved under negotiated multilateral frameworks, especially following the collapse of the Berlin Wall in 1989 and the demise of the Soviet Union in 1991, led many to assume that multilateralism and globalization were synonymous. There was a strong push to bring plurilateral and even bilateral initiatives — such as the Bretton Woods institutions — firmly into the global space. In turn, that strengthened the policy influence of capital-rich owners over newly independent developing countries. When African economies started to set up their own regional development bank — the African Development Bank (AfDB) — in 1972, capital constraints forced them to accept equity capital from rich non-regional states, a move that inevitably brought the AfDB in operational and governance alignment with the Bretton Woods institutions. From the 1980s onwards, these institutions began to shape macroeconomic policy, as well as debt restructurings and management, in developing countries. Multilateral development banks (MDBs) became deeply embedded in the then-emerging global order, underpinned by the progress in multilateral trade negotiations that saw the emergence of the World Trade Organization in 1995. These institutions became vehicles for an accelerated adoption of globalization policies in developing economies, based on openness, harmonization and standardization. While globalization helped pull 800 million people out of poverty within three decades, it also sparked discontent across developed economies due to the loss of manufacturing and blue-collar jobs. This ushered in a systematic attack on globalization and the instruments that underpin it. While the “Global MDB” system is not a direct product of globalization, it is generally perceived as its agent and thus part of the problem — thereby threatening the main pillar upon which the global financial architecture rests today. By losing faith in the message, many see no further need for the messenger.
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