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Logo of the World Bank Group
The World Bank Group is a group of five international organizations responsible for providing finance and advice to countries for the purposes of economic development and poverty reduction, and for encouraging and safeguarding international investment. The group and its affiliates have their headquarters in Washington, D.C., with local offices in 124 member countries.
Together with the separate International Monetary Fund, the World Bank organizations are often 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). Its five agencies are the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC), International Development Association (IDA), Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID).
The World Bank's activities are focused on developing countries, in fields such as human development (e.g. education, health), agriculture and rural development (e.g. irrigation, rural services), environmental protection (e.g. pollution reduction, establishing and enforcing regulations), infrastructure (e.g. roads, urban regeneration, electricity), and governance (e.g. anti-corruption, legal institutions development). It provides loans at preferential rates to member countries, as well as grants to the poorest countries. Loans or grants for specific projects are often linked to wider policy changes in the sector or the economy. For example, a loan to improve coastal environmental management may be linked to development of new environmental institutions at national and local levels and to implementation of new regulations to limit pollution.
The work of the Bank is subject to long-standing and strong criticism from a range of non-governmental organizations and from some academics. In some cases the Bank's own internal evaluations can produce negative conclusions. 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 many cases - in practice are often harmful to economic development if implemented badly, too quickly ("shock therapy"), in the wrong sequence, or in very weak, uncompetitive economies. Nevertheless the World Bank is one of the most highly-regarded financial institutions in the world, especially in the field of development economics and related research. In addition, World Bank standards and methods have been adopted in many areas such as transparent procedures for competitive procurement and environmental standards for project evaluation.
In debates about the World Bank's role, the arguments and counter-arguments are complex, and often rely as much upon political judgement as economic proof. For example, in the 2005 Massey Lecture, entitled "Race Against Time", Stephen Lewis argued that the structural adjustment policies of the World Bank and the International Monetary Fund have aggravated and aided the spread of the AIDS pandemic through the limiting of allowed funding to health and education sectors. However, it should also be noted that the World Bank is a major source of funding for combatting AIDS in poor countries, and in the past six years it has committed about US$ 2 billion through grants, loans and credits for programs to fight HIV/AIDS [1]).
Organizational structure
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 the United Kingdom 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 agencies of the World Bank are each governed by their Articles of Agreement that serve as the legal and institutional foundation for all of their work [2].
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. Although nominated by the US Government, the World Bank President is subject to confirmation by the Board of Directors. The President serves a term of five years, which may be renewed.
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 reduction strategies. As such, World Bank financing is used in many different areas, from reforms in health and education 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, the World Bank Group has been focused on combatting corruption in the countries that it works in. This is outlined in the World Bank report 'Helping countries combat corruption: progress at the World Bank since 1997'[3]. This has been seen by some observers as a potential conflict with Article 10 Section 10 of the World Bank's Articles of Agreement which outlines the 'non-political' mandate of the Bank1. The World Bank's view is that reduced corruption and improved governance are not so much political as economic goals and are crucial for sustainable developement and poverty reduction ("Governance Matters IV: Governance Indicators for 1996–2004", D. Kaufmann, A. Kraay, M. Mastruzzi (World Bank 2005)[4])
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.
Criticism
A young World Bank protester takes to the street in Jakarta, Indonesia.
Although relied upon by poor countries as a contributor of development finance, the World Bank is often criticised, primarily 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 concessional 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). This project was funded 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.
More recent authors have pointed out that the World Bank learned from the mistakes of projects such as Transmigration V and greatly improved its social and environmental controls, especially during the 1990s. It has established a set of "Safeguard Policies" that set out wide ranging basic criteria that projects must meet to be acceptable. The policies are demanding, and as Mallaby (reference below) observes: "Because of the combined pressures from Northern NGOs and shareholders, the Bank's project managers labor under "safeguard" rules covering ten sensitives issues...no other development lender is hamstrung in this way" (page 389). The ten policies cover: Environmental Assessment, Natural Habitats, Forests, Pest Management, Cultural Property, Involuntary Resettlement, Indigenous Peoples, Safety of Dams, Disputed Areas, and International Waterways [5].
The Independent Evaluation Group
The Independent Evaluation Group (IEG) (formerly known as the Operations Evaluation Department (OED)) plays an important check and balance role in the World Bank. Similar in its role to the US Government's Government Accountability Office (GAO), it is an independent unit of the World Bank that reports evaluation findings directly to the Bank's Board of Executive Directors. IEG evaluations provide an objective basis for assessing the results of the Bank's work, and accountability of World Bank management to the member countries (through the World Bank Board) in the achievement of its objectives.
Extractive Industries Review
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 (EIR - not to be confused with Environmental Impact Report). The review was headed by an "Eminent Person", Dr. Emil Salim (former Environment Minister of Indonesia). Dr. Salim held consultations with a wide range of stakeholders in 2002 and 2003. The EIR recommendations were published in January 2004 in a final report entitled "Striking a Better Balance",[6]. The report concluded that fossil fuel and mining projects do not alleviate poverty, and recommended that World Bank involvement with these sectors be phased out by 2008 to be replaced by investment in renewable energy and clean energy. The World Bank published its Management Response to the EIR in September 2004 [7] following extensive discussions with the Board of Directors. The Management Response did not accept many of the EIR report's conclusions. However, the EIR served to alter the World Bank's policies on oil, gas and mining in important ways, as has been documented by the World Bank in a recent follow-up report [8]. One area of particular controversy concerned the rights of indigenous peoples. Critics point out that the Management Response weakened a key recommendation that indigenous peoples and affected communities should have to provide 'consent' for projects to proceed - instead, there would be 'consultation'.[9]. Following the EIR process, the World Bank issued a revised Policy on Indigenous Peoples [10].
Impact Evaluations
In recent years there has been an 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
- Axel Dreher (2002). The Development and Implementation of IMF and World Bank Conditionality, HWWA. ISSN 16164814.
- William Easterly (2001). The Elusive Quest for Growth, MIT Press. ISBN 0262550423.
- 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 (1994). The World Bank Is Closed, NCSU Term Paper. ISBN none.
- Sebastian Mallaby (2004). The World's Banker: a story of failed states, financial crises, and the wealth and poverty of nations, Penguin Press HC. ISBN 1594200238.
- Zoe Young (2002). A New Green Order? The World Bank and the Politics of the Global Environment Facility, Pluto Press. ISBN 0745315534.
http://www.factnet.org/discus/messages/1/13667.html?1138185101
Notes
- 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
