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World Bank

The International Bank for Reconstruction and Development (IBRD, in Romance languages: BIRD), better known as the World Bank, is an international organization whose original mission was to finance the reconstruction of nations devastated by WWII. Now, its mission has expanded to fight poverty by means of financing states. Its operation is maintained through payments as regulated by member states. It came into existence on December 27, 1945 following international ratification of the agreements reached at the Bretton Woods Conference of July 1July 22, 1944.

The World Bank's activities are currently focused on developing countries, (since 2000, the preferred term is Less Developed Country (LDC)), 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 NGOs 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, despite evidence that free market reform policies in practice are often harmful to development if implemented badly, too quickly, in the wrong sequence, or in an inappropriate environment (eg very weak, uncompetitive economies).



The World Bank provides long term loans, grants, and technical assistance, to help developing countries implement their poverty 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.

The IBRD provides loans to governments and public enterprises, always with a government (or "sovereign") guarantee. The funds for this lending come from a combination of the repayment of past loans and the issuing of bonds on the global capital markets. The IBRD is one of the highest rated borrowers on the international markets, and is thus able to borrow at relatively low interest rates. It lends to countries at interest rates that are usually still quite attractive to them, by adding a small margin (about 1%) to its borrowing costs to cover administrative overheads.

In addition to financing, the World Bank Group provides advice and assistance to developing countries on almost every aspect of economic development.

Private Sector Development (PSD) is one strategy to promote privatisation in developing countries, it is universally valid for all parts of the World Bank, and all other strategies must be coordinated with PSD.

The International Monetary Fund is a quite separate institution, founded at the same time as the World Bank in the Bretton Woods Agreement. The differences are explained in International Monetary Fund: The difference between the World Bank and IMF..

Organizational structure

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..

The World Bank Group is headed by the out-going president (19952005) James D. Wolfensohn, who is president of the IBRD as well as the four affiliated institutions and whose second term concludes May 31, 2005. George W. Bush has nominated Paul Wolfowitz, a well-known neo-conservative and current United States Deputy Secretary of Defense to replace Mr. Wolfensohn. By convention, the Bank president has always been a US citizen, while the Managing Director of the IMF has been a European with the exception of US citizen Anne Krueger, who held the position until a new director was found. There is no requirement that a nomination by the United States government must be accepted by European and other partners. The United States hold 16.39 per cent of the voting rights while members of the European Union hold about 30 per cent. [1] As Michel Barnier, French Foreign Minister has commented: "It's a proposal. We shall examine it in the context of the personality of the person you mention and perhaps in view of other candidates."

The IBRD's four affiliated agencies are:

  • the International Finance Corporation (IFC), established in 1956,
  • the International Development Association (IDA), established in 1960,
  • the Multilateral Investment Guarantee Agency (MIGA), established in 1988 and
  • the International Centre for Settlement of Investment Disputes (ICSID), established in 1966.

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

IDA provides "soft" loans, with repayment periods of some 30 years and no interest, to the poorest countries (generally with per capita incomes below $500 per year). IFC provides financing to the private sector, while MIGA provides political risk insurance for private companies making investments in developing countries. IDA lending is funded by direct contributions from rich country governments, while IBRD, IFC and MIGA get their funds through bonds issued on the global capital markets.

Each institution in the World Bank Group is owned by its member governments, which subscribe to its basic share capital. 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 World Bank and the IMF were conceived by the US economist Harry Dexter White. Appointed by the US Treasury to lead the negotiations on post-war economic reconstruction, White spent most of 1943 banging the heads of the other allied nations together.(3) They were appalled by his proposals. He insisted that his institutions would place the burden of stabilising the world economy on the countries suffering from debt and trade deficits rather than on the creditors. He insisted that “the more money you put in, the more votes you have”.(4) He decided, before the meeting at Bretton Woods in 1944, that “the US should have enough votes to block any decision”.(5)

Both the undemocratic voting arrangement and the US veto remain to this day. The result is that the body which works mostly in poor countries is entirely controlled by rich ones. White demanded that national debts be redeemable for gold, that gold be convertible into dollars, and that all exchange rates be fixed against the dollar. The result was to lay the ground for what was to become the dollar’s global hegemony. White also decided that both the Fund and the Bank would be sited in Washington.

No one was in any doubt at the time that these two bodies were designed as instruments of US economic policy. But somehow all this has been airbrushed from history. Even the admirable Joe Stiglitz believes that the World Bank was the brainchild of the British economist John Maynard Keynes (Keynes was, in fact, its most prominent opponent).(6) When the development writer Noreena Hertz claimed in the Guardian March 2005 that “the Bush administration is a very long way from the Bank’s espoused goals and mandate”, she couldn’t have been more wrong. (7)

Commencing operations on June 25, 1946, it approved its first loan on May 9, 1947 ($250m to France for postwar reconstruction, in real terms the largest loan issued by the Bank to date).

The IBRD was established mainly as a vehicle for reconstruction of Europe and Japan after World War II, with an additional mandate to foster economic growth in developing countries in Africa, Asia and Latin America. Originally the bank focused mainly on large-scale infrastructure projects, building highways, airports, and powerplants. As Japan and its European client countries "graduated" (achieved certain levels of income per capita), the IBRD became focused entirely on developing countries. Since the early 1990s the IBRD has also provided financing to the post-Socialist states of Eastern Europe and the former Soviet Union.

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.


Though repeatedly 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 liberalisation and de-emphasize the role of the state.

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.

Another critique is that the Bank operates under essentially "neo-liberal" principles, under the belief that the market can solely, and by its own nature, bring prosperity to nations that practice free competition. 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 colonization) and do not have stable, democratic political systems. In this point of view, the World Bank would favor the installation of foreign enterprises to the detriment of the development of a local economy.

On the other hand, liberals criticize the Bank as a purely political organization. In this perspective, the Bank represents the rejection of the belief in the ability of the market to regulate the economy. Liberal critics see it as a state-owned tool, of international economic use, that works to mask the blemishes of currently-practiced policies. In this point of view, the World Bank assumes the responsibility of a liberal economy, rather than leaving governmental polices in their proper place.

Other criticism regarding the World Bank Group relates to the physical and social environment:

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.

The World Bank (and its sister organization, the International Monetary Fund) is a closed system; that is, the decision-making processes are shielded from those who, in fact, fund the projects: primarily the taxpayers in the member nations. The number of votes allocated to member countries are linked to the size of its shareholding. Membership in itself gives certain voting rights that are the same for all countries but there are also additional votes. The additional votes depend on financial contributions to the organisation implying undemocratic decisionmaking. As of November 1, 2004 USA held 16.4% of total votes, Japan 7.9%, Germany 4.5% and UK and France each held 4.3%.


  • Catherine Caufield (1997). Masters of Illusion. Henry Holt & Company, New York. ISBN 0805028757 (hardcover) ISBN 0330353217 (paperback, 1998).
  • Bruce Rich (1994). Mortgaging the Earth. Beacon Press. ISBN 080704704X (hardcover), ISBN 0807047074 (paperback).
  • Walden Bello, et al (1999). Dark Victory. Pluto Press. ISBN 074531466X (hardcover) ISBN 0935028617 (paperback).
  • Paul McClure (editor) (2003). A Guide to the World Bank. World Bank Publications. ISBN 0821353446.
  • Elizabeth P. McLellan (editor) (2003). The World Bank: Overview and Current Issues. Nova Science Publishers. ISBN 1590335503.
  • Phillipe Le Prestre (1989). The World Bank and the Environmental Challenge. Susquehanna University Press. ISBN 0941664988.
  • Ansel Webb (unknown year). The World Bank Is Closed. Unknown publisher. ISBN unknown.
  • Sebastian Mallaby (2004). The World's Banker. Penguin Press HC. ISBN 1594200238.


3. See for eg Armand van Dormael (1978). Bretton Woods: Birth of a Monetary System. Palgrave Macmillan, London. ISBN 0333233697.; Robert Skidelsky (2000). John Maynard Keynes: Fighting for Britain 1937-1946. Macmillan, London. ISBN 0333604563.; and Michael Rowbotham (2000). Goodbye America! Globalisation, Debt and the Dollar Empire. Jon Carpenter Publishing. ISBN 1897766564.

4. Harry Dexter White, quoted in New Economics Foundation, 2000. It’s Democracy, Stupid: the trouble with the global economy – the United Nations’ lost role and democratic reform of the IMF, World Bank and the World Trade Organisation.[2] NEF, World Vision and Charter 99.

5. Harry Dexter White, quoted in Armand van Dormael, 1978. Bretton Woods: Birth of a Monetary System. Macmillan, London.

6. Joseph Stiglitz (2002). Globalization and its Discontents. Allen Lane, London. ISBN 0713996641.

7. Noreena Hertz, 19th March 2005. The Poodle and the Wolf[3]. The Guardian.

List of presidents

List of chief economists

See also

External links

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