Not every company that works with the World Bank is on equal footing. Multinationals from the United States and Japan are much more likely to have their contracts paid out than others. Due to their political power at the bank, these companies can get paid even when they might not deserve it.
That is the argument of a research paper by the political scientists Rabia Malik and Randall Stone recently published in The Journal of Politics . Malik and Stone, professors at New York University Abu Dhabi and the University of Rochester, analyzed 4,000 World Bank projects approved from 1981 to 2012 to see if disbursement for World Bank project payments was impacted by the type of company involved. Even after accounting for factors like the size and performance of the project, they found that projects with multinationals received higher disbursement rates.
The average project received a disbursement rate of 89.5%, but projects with multinationals did almost three percentage points better. There was an even larger effect on projects where a multinational took on management responsibilities. In those cases, their analysis shows that disbursement rates were about seven percentage points higher. The results are statistically significant, but even more importantly, they make sense. The effect is strongest for US and Japan multinationals, the two countries with the largest ownership stakes in the World Bank, and thus access to influence at the bank.
Randall Stone has spent his career studying the impact of corporations and powerful countries on multilateral institutions like the World Bank and International Monetary Fund. Stone’s 2011 book Controlling Institutions: International Organizations and the Global Economy is a seminal book on how influence is exerted at the World Bank. Based on his research into the inner working of the World Bank, Stone told Quartz that he thinks the most likely way the US and Japan affect disbursement is through companies indirectly putting pressure on their economic ministries.
For example, in the US, Stone says a firm will call the representative from their congressional district where they are headquartered and ask them for help making sure a loan is disbursed. That representative will pass it on to someone working at the US Treasury, who will pass it on to the World Bank. Given the large amount of funding the US provides, officials at the World Bank have an incentive to try to go along with US requests.
Though Stone is confident that influence peddling is going on at the World Bank, he acknowledges that it is possible there could be other explanations for the disbursement difference. “We don’t have a smoking gun,” Stone told Quartz. “What we have is a strong circumstantial case. We have done a lot of different analyses to try to account for other possible explanations, and haven’t found any.”
Quartz contacted the World Bank for comment on the research, but their response did not directly address whether multinationals held any sway over disbursement. They did point out that the majority of contracts go to local firms rather than multinational corporations, so this issue would be limited to a relatively small number of contracts.