World Bank

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The World Bank Group is a group of five international organizations responsible for providing finance to countries for purposes of development and poverty reduction, and for encouraging and safeguarding international investment. The group and its affiliates are headquartered in Washington, D.C.

Together with the separate International Monetary Fund, the World Bank organizations are sometimes called the Bretton Woods institutions, after Bretton Woods, New Hampshire, where the United Nations Monetary and Financial Conference that led to their establishment took place (1 July–22 July 1944).

The Bank came into formal existence on 27 December 1945 following international ratification of the Bretton Woods agreements. Commencing operations on 25 June 1946, it approved its first loan on 9 May 1947 ($250m to France for postwar reconstruction, in real terms the largest loan issued by the Bank to date). The International Finance Corporation (IFC) was created on 20 July 1956, the IDA on 24 September 1960, the ICSID on 14 October 1966 and the MIGA on 12 April 1988.

Though repeatedly relied upon by impoverished governments around the world as a contributor of development finance, the Bank and its affiliates have been criticised for undermining the national sovereignty of recipient countries through its pursuit of economic liberalisation and guarantees for private international investment.

The World Bank’s activities are currently focused on less economically developed countries in fields such as education, agriculture and industry. It provides loans at preferential rates to member countries who are in difficulty. In counterpart, it also asks that political measures be taken to, for example, limit corruption or foster democracy.

The work of the Bank is subject to long-standing and strong criticism from a range of non-governmental organizations and academics, and in some cases from the Bank’s own internal evaluations. It has been accused of being a US or western tool for imposing economic policies that support western interests. Critics argue that the free market reform policies – which the Bank advocates – in practice are often harmful to economic development if implemented badly, too quickly, in the wrong sequence, or in very weak, uncompetitive economies.

Organizational structure

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Inside the main hall of the headquarters of the World Bank Group in Washington D.C.

Together with four affiliated agencies created between 1956 and 1988, the IBRD is part of the World Bank Group. The Group’s headquarters are in Washington, D.C.. It is a non-profit-making international organisation owned by member governments.

Technically the World Bank is part of the United Nations system, but its governance structure is different: each institution in the World Bank Group is owned by its member governments, which subscribe to its basic share capital, with votes proportional to shareholding. Membership gives certain voting rights that are the same for all countries but there are also additional votes which depend on financial contributions to the organization.

As a result, the World Bank is controlled primarily by developed countries, while clients have almost exclusively been developing countries. Some critics argue that a different governance structure would take greater account of developing countries’ needs. As of November 1, 2004 the United States held 16.4% of total votes, Japan 7.9%, Germany 4.5% and UK and France each held 4.3%. As major decisions require an 85% super-majority, the US can block any change.

World Bank Group agencies

The World Bank Group consists of

Governments can choose which of these agencies they sign up to individually. The IBRD has 184 member governments, and the other institutions have between 140 and 176 members. The institutions of the World Bank Group are all run by a Board of 24 Executive Directors, with each Director representing either one country (for the largest countries), or a group of countries. Directors are appointed by their respective governments or the constituencies.

The Bank also serves as one of several Implementing Agencies for the UN Global Environment Facility (GEF).

Presidency

The World Bank Group is headed by Paul Wolfowitz, appointed on June 1 2005. Wolfowitz, a former United States Deputy Secretary of Defense and well-known neo-conservative, was nominated by George W. Bush to replace James D. Wolfensohn. By convention, the Bank president has always been a US citizen, while the Managing Director of the IMF has been a European.

Goals

The World Bank Group’s mission is to fight poverty and improve the living standards of people in the developing world. It provides long term loans, grants, and technical assistance, to help developing countries implement their poverty by reduction strategies. As such, World Bank financing is used in many different areas, from reform of health and education sector, to environmental and infrastructure projects, including dams, roads, and national parks. In addition to financing, the World Bank Group provides advice and assistance to developing countries on almost every aspect of economic development.

Since 1996, with the appointment of James Wolfensohn as Bank President, and consequently, the World Bank Report ‘Helping countries combat corruption: progress at the World Bank since 1997’[1], the World Bank Group has been focused on combatting corruption in the countries that it works in. This has been seen as a move away from Article 10 Section 10 of the World Bank’s Articles of Agreement which outlines the ‘non-political’ mandate of the Bank1. Although the move has been couched in socio-economic terms it has seen World Bank involvement in state reform, including elections.

In recent years the World Bank Group has been moving from targeting economic growth in aggregate, to aiming specifically at poverty reduction. It has also become more focused on support for small scale local enterprises. It has embraced the idea that clean water, education, and sustainable development are essential to economic growth and has begun investing heavily in such projects. In response to external critics, the World Bank Group’s institutions have adopted a wide range of environmental and social safeguard policies, designed to ensure that their projects do not harm individuals or groups in client countries. Despite these policies, World Bank Group projects are frequently criticized by non-governmental organizations (NGOs) for alleged environmental and social damage and for not achieving their intended goal of poverty reduction.

Private Sector Development is one universally valid strategy for all parts of the World Bank to promote privatisation in developing countries.

Criticism

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A young World Bank protester takes to the street in Jakarta, Indonesia.

Although relied upon by impoverished governments around the world as a contributor of development finance, the World Bank is often and primarily criticised by opponents of corporate “neo-colonial” globalization. These advocates of alter-globalization fault the bank for undermining the national sovereignty of recipient countries through various structural adjustment programs that pursue economic liberalization and de-emphasize the role of the state.

A related critique is that the Bank operates under essentially “neo-liberal” principles. In this perspective, reforms born of “neo-liberal” inspiration are not always suitable for nations experiencing conflicts (ethnic wars, border conflicts, etc.), or that are long-oppressed (dictatorship or colonialism) and do not have stable, democratic political systems.

One general critique is that the Bank is under the marked political influence of certain countries (notably, the United States) that would profit from advancing their interests. In this point of view, the World Bank would favor the installation of foreign enterprises, to the detriment of the development of the local economy and the people living in this country.

Furthermore, it is frequently suggested that the Bank intervenes in order to salvage irresponsible loans from private institutions to third world governments (and which are also often corrupt and non-representative), and thus shifts the risk from the original risk-takers to the public of the rich countries, who ultimately must back the Bank.

Defenders of the World Bank point out that no country is forced to borrow its money. The Bank provides both loans and grants. Even the loans are charitable since they are given to countries that have no access to international capital markets. Furthermore, the loans, both to poor and middle-income countries, are at below market-value interest rates. The World Bank argues that it can help development more through loans than grants, because money repaid on the loans can then be lent for other projects. Finally, it has made a major effort in recent years to address criticism, particularly regarding the environment and corruption.

Evaluation at the World Bank

Social and environmental concerns

Throughout the period from 1972 to 1989, the Bank did not conduct its own environmental assessments and did not require assessments for every project that was proposed. Assessments were required only for a varying, small percentage of projects, with the environmental staff, in the early 1970s, sending check-off forms to the borrowers and, in the latter part of the period, sending more detailed documentation and suggestions for analysis.

During this same period, the Bank’s failure to adequately consider social environmental factors was most evident in the 1974 Indonesian Transmigration program (Transmigration V). Please note that this project was funded after President McNamara’s pledge noted above and after the establishment of the Bank’s OESA (environmental) office in 1971. According to the Bank critic Le Prestre, Transmigration V was the “largest resettlement program ever attempted… designed ultimately to transfer, over a period of twenty years, 65 million of the nation’s 165 million inhabitants from the overcrowded islands of Java, Bali, Madura, and Lombok…” (175). The objectives were: relief of the economic and social problems of the inner islands, reduction of unemployment on Java, relocation of manpower to the outer islands, the “strengthen[ing of] national unity through ethnic integration, and improve[ment of] the living standard of the poor” (ibid, 175).

Putting aside the possibly Machiavellian politics of such a project, it otherwise failed as the new settlements went out of control; local populations fought with the migrators and the tropical forest was devastated (destroying the lives of indigenous peoples). Also, “[s]ome settlements were established in inhospitable sites, and failures were common;” these concerns were noted by the Bank’s environmental unit whose recommendations (to Bank management) and analyses were ignored (Le Prestre, 176). Funding continued through 1987, despite the problems noted and despite the Bank’s published stipulations (1982) concerning the treatment of groups to be resettled.

OED and EIR

The World Bank’s Operations Evaluation Department (OED) plays an important check and balance role in the organization. Similar in its role to the US Government’s Government Accountability Office (GAO), it is an independent unit within the World Bank that reports evaluation findings directly to the Bank’s Board of Executive Directors. The goals of OED evaluations are to learn from experience, to provide an objective basis for assessing the results of the Bank’s work, and to provide accountability in the achievement of its objectives.

After longstanding criticisms from civil society of the Bank’s involvement in the oil, gas, and mining sectors, the World Bank in July 2001 launched an independent review called the Extractive Industries Review (not to be confused with Environmental Impact Report). The review was to take into account the World Bank Group’s overall mission of poverty reduction and the promotion of sustainable development. The EIR recommendations were published in January 2004 in a final report entitled “Striking a Better Balance”,[2] and, concluding that fossil fuel and mining projects simply do not alleviate poverty, recommended that World Bank involvement with these sectors be phased out altogether by 2008, and replaced by investment in renewable energy and clean energy. The final response of the World Bank was to brush aside most of the EIR conclusions, and to weaken a key recommendation that indigenous peoples and affected communities should have to provide ‘consent’ for projects to proceed – instead, there would be ‘consultation’.[3]

Impact Evaluations

In recent years there has been a increased focus on measuring results of World Bank development assistance through impact evaluations. An impact evaluation assesses the changes in the well-being of individuals that can be attributed to a particular project, program or policy. Impact evaluations demand a substantial amount of information, time and resources. Therefore, it is important to select carefully the public actions that will be evaluated. One of the important considerations that could govern the selection of interventions (whether they be projects, programs or policies) for impact evaluation is the potential of evaluation results for learning. In general, it is best to evaluate interventions that maximize the learning from current poverty reduction efforts and provide insights for midcourse correction, as necessary.

 

References

 

 

Notes

  1. Marquette, Heather, 2004. ‘The Creeping Politicisation of the World Bank: The Case of Corruption’, Political Studies Vol, 32 p.413-430.

List of Presidents

An unwritten rule establishes that the IMF’s managing director must be European and that the president of the World Bank must be from the United States.

List of chief economists

See also

External links

NGOs

 

 

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