The objective of the project shall be to analyze the development related policies of the three international organizations - the World Bank, the International Labour Office, and the European Union, and to formulate conclusions on whether and why their approach to the development of transitional economies, which these organizations apply, is or is not economically, politically, institutionally (and, as a result, socially) biased.

This project shall be focused on the previously under researched area, i.e. the impact of the policies of global governance institutions on transitional economies of Central and Eastern Europe. By looking at the results and the circumstances of the World Bank’s loans and the EU’s structural assistance, as well as by referring to policy advice provided by the International Labour Office, the essay shall be intended to answer the following questions:

1. Have the aid packages and policy advice been efficient in terms of their economic and/or social consequences.
2. Could the results of the aid and/or policy advice be more efficient if the presumed political, institutional or economic biases would not have been the base both in the international organizations concerned and in the domestic politics.
3. Is there an adequate balance between the political influence of international institutions and the ability of national authorities to argue for different solutions; if not – do international organizations have a monopoly in decision making (or in pushing for certain decisions) and whether they misuse this monopoly.
4. What stance should be taken by the governments of Central and Eastern European countries when they confront international institutions’ policy demands that are not favourable to national economies. What would be the consequences of rejection of policy demands? Negotiating these policy demands? Unconditional acceptance of these policy demands?

The research shall be based on the following hypothesis which will be tested during the project:

1. The CEE countries’ governments are vulnerable to policy advice of international organizations. Due to the both domestic and international reasons, they frequently accept their policy demands even if there is a room for and a possibility of negotiations. The case of the European Union – CEE relations is particularly explicit.
2. Even though hypothesis 1 is presumed to be true, it is also true that the national governments in Central and Eastern Europe are keen to corruption, do not have sufficient expertise; therefore the vulnerability to international organizations’ demands may also prove to be useful to these countries.
3. The ultimate result (impact) of the international orgnizations’ policies depends on how the very organizations are keen to address developmental issues in the CEE region, rather than on how the national governments accept or interpret the policy demands.

The issue of social consequences shall be addressed in the general economic and institutional context. The research shall not try to answer the question whether the international organizations, rightly or wrongly, target their assistance at poorest layers of the society within the countries; neither will it be an issue whether the principles of community development are observed when implementing the aid packages. The issue of social consequences shall be addressed in the light of whether the international organizations’ policies are economically useful to the transitional countries’ economic and social development as a whole. However, extreme cases of social inequality within the countries, that was caused or not reduced by the international organizations’ aid packages or policy advice, shall be researched. This approach shall prevail because targeting the poor or the poorest layers of the society may not necessarily be an economically efficient solution (although a lot of writings, such as those by Amartya Sen, tend to measure development in terms of targeting the poor). Moreover, it is not the international organizations’ business to provide a permanent aid for improving the social conditions in the assisted countries, but rather the aid packages and policy advice are expected to create the base for sound national governments’ policies (which do not NECESSARILY involve immediate provision for the poor). Consequently, a social responsibility in this research shall be understood as the willingness of the international organizations in question to pursue long-term policies aimed at the creation and the even distribution of welfare, via sound economic policies, improvement in the public administration and other appropriate measures. Since the research shall be focused on the CEE region primarily, and the issues of extreme inequality of income distribution are not as acute here as in some other countries of the world, the issues of creating preconditions for the general economic welfare shall take precedence in the project.

In answering the question what causes the international organizations to pursue economically and socially unsound policies, the presumption shall be made that the primary reason is related to institutional and psychological constraints and to possible impact of some more powerful donor countries – funding providers. Institutional and psychological constraints, as it shall be argued, do not allow the international organization to skip its ambitions for power or influence, as well as tendencies to generate profits. They also do not allow various units within these organizations to skip some of their inefficient claims for the sake of general policy efficiency. Thus even if in the case of the World Bank, resources are primarily received in the form of loans and then lended to the aid recipients (which means a certain degree of financial independence of the organization), internal institutional constraints still prevail. On the other hand, vulnerability of these organizations to the political pressures from the outside shall also be given separate attention.

The behaviour of the organizations in question shall thus be attempted to explain in the light of the new institutional approach and the bargaining power theories. This approach shall be helpful in identifying personal interests of various actors involved and the process of the formation of biased institutional interests, as a consequence. Bargaining power theories shall be helpful in testing the initial findings formulated in the light of the new institutionalist approach.

However, the policy outcome of the global governance institutions also depends on the ability of national governments to bargain, to accept or reject proposed solutions. The same theoretical framework shall help explain the rationale of domestic decision making and to answer the question why decision makers frequently surrender to allegedly unjustified policy demands. This explanation shall be particularly important in cases when a decision is not an outcome of purely economic considerations or threats to be denied aid which cannot be obtained elsewhere.

The research shall include the following stages:

1. Collection of data on policy approach and policy consequences of the chosen organizations’ development policies. Sources of information – international literature, author’s personal experience.
2. Collection of data on social and economic outcomes of the policies of the chosen international organizations. Sources of information – interviews in Lithuanian ministries, international institutions’ representations, overview of the media in Lithuania and other CEE countries. A lot of data shall be collected on the impact of EU regional policy on the CEE region, due to extensive connections and policy experience of the author.
3. Juxtaposition of the collected data; choice of theoretical framework. The theoretical framework shall include the New Institutional Economics, the Bargaining Power Theories and other theories that may be found appropriate during the research. The theories are expected to help explain why the policy outcomes are such as they are. For example, the New Institutional Economics is expected to demonstrate how international and national policy actors may sacrifice economic and/or social efficiency because of personal and/or institutional interests (institutional ones shall be viewed in the light of personal ones).
4. Formulation of conclusions and policy recommendations.

The efficiency of programs and/or policy advice shall be measured in the light of the chosen economic and social indicators (impact of amounts disbursed compared to alternatives). However, concrete indicators shall be chosen at a later stage, most likely when the data (stage 1 and 2) are already collected.

Since political actors in the most CEE countries are frequently changing, the newcomers are not always (in some cases – rarely) able to assess the situation. The cases, in which international organizations are involved, are particularly interesting, since they may often be considered by the politicians as very authoritative sources of advice and information. Thus the policy makers may be (and, indeed, are, as this research shall try to prove) keen to accept most of their policy demands while blaming national civil servants for the lack of result in their implementation. Moreover, national civil servants may be very reluctant even to formulate alternative policy solutions, since the desire to maintain jobs shall support a more secure possibility of fully supporting international organizations’ initiatives, in order to use these as shields in case of a policy failure.

While the situation outlined above varies depending on an organization and on a field of intervention (policy advice), the research shall distinguish between all possible types of interventions and national responses, thereby providing a valuable analysis for policy makers. A lot of mistakes, especially those related to the EU policy demands, could have been avoided if these circumstances were well known and realised by decision makers before.

Besides that, the work shall be useful academically, since it is targeted at the area which is under researched, but academically interesting.