Market-friendly reforms, Microeconomics

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Market-Friendly Reforms:

One main shortcoming of present development cooperation is that recipients of development cooperation is that recipients of development finance are denied any form of protection usual in all other cases. This shows in cases of violation of membership rights as well as regarding professional best practice. Damage done by grave negligence must always be compensated unless done the contest of development cooperation. Donors and multilateral institutions are totally exempt from any liability. 

The increased role of the BW institutions in international capital markets since 1982 contrasts sharply with a total lack of financial accountability. They may and often do gain institutionally and financially from crisis or from their own errors and failures, even if they cause damages by grave negligence. Another loan may be granted to repair damages done by he first loan, increasing the institutions income stream - a severe moral hazard problem and an economically totally perverted incentive system. 

International financial institutions should be held financially accountable, differentiating between programmes and projects. To increase BW institutions efficiency and to improve their role in capital markets, market incentives must be brought to bear. The international public sector must become financially accountable for their own errors in the same way as consultants are liable to pay damage compensation if / when negligence on their part causes damage.


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