World Bank

According to the World Bank website:

The World Bank is a vital source of financial and technical assistance to developing countries around the world. We are not a bank in the common sense. We are made up of two unique development institutions owned by 184 member countries; the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). Each institution plays a different but supportive role in our mission of global poverty reduction and the improvement of living standards. The IBRD focuses on middle income and creditworthy poor countries, while IDA focuses on the poorest countries in the world. Together we provide low-interest loans, interest-free credit and grants to developing countries for education, health, infrastructure, communications and many other purposes.

The Bank says it aims to help governments in developing countries to reduce poverty by providing them with money and the technical expertise they require for a wide range of projects, including education, health, infrastructure, communications, government reforms and many other purposes.

History

The origins of the World Bank can be traced back to the era of the Second World War as a consequence of the UN Monetary and Financial Conference at Bretton Woods, New Hampshire in 1944. According to the former World Bank chief economist Joseph Stiglitz, the World Bank evolved from the International Bank for Reconstruction and Development as "part of a concentrated effort to finance the rebuilding of Europe after the devastation of World War II and to save the World from future economic depressions".

The economist Robert Olivier writes, "their major objective was to provide a world within which competitive market forces would operate freely, unhampered by government interference, for they supposed that market forces would produce optimum results for the entire world".

According to an article for The Age:

Since its inception, the World Bank has lent and given grants and credits worth $400 billion which is spent on specific projects such as freeways and dams.

Structure

The World Bank is made up of the following 2 organisations:

The International Development Association (IDA):

This part of the World Bank sets out to help populations of the world's poorest countries. Established in 1960, IDA states its aims as "reducing poverty by providing interest-free credits and grants for programs that boost economic growth, reduce inequalities and improve people’s living conditions".

The International Bank for Reconstruction and Development (IBRD):

The IBRD was the founding institution of the World Bank. This part of the World Bank works to "reduce poverty in middle-income and creditworthy poorer countries by promoting sustainable development through loans, guarantees, risk management products, and analytical and advisory services". The World Bank states, "IBRD is structured like a cooperative that is owned and operated for the benefit of its 185 member countries".

America has always held a dominant role within the Bank due to the Bank's physical location in Washington and the fact that historically it has provided the highest amount of funding. This has led to the President of the World Bank always being an American citizen. During the Reagan and Thatcher era of the 1980s, major changes took place within the World Bank. Stiglitz writes, "The Bank went beyond just lending for projects (like roads and dams) to providing broad-based support in the form of 'Structural Adjustment Loans', in connection with the IMF".

Criticism

The World Bank has been heavily criticised about its operations in developing countries. Some critics believe that the World Bank was formed not to fight poverty but to provide a front to fund US business interests, and argue that since the bank's existence, worldwide poverty has increased.

An editorial in The Ecologist argues:

That this is so should come as little surprise. The World Bank, IMF and WTO were not created with poverty alleviation primarily in mind. They were designed at the United Nations Monetary and Financial Conference at Bretton Woods, New Hampshire, in July 1944, to fulfil quite another agenda. To cite Henry Morgenthau, then US Treasury Secretary and president of the conference, the purpose was, "the creation of a dynamic world economy," to sustain the domestic American economy's continuous expansion by ensuring it sufficient access to foreign markets and raw materials.

America's control over the appointment of the president of the World Bank has also drawn criticism. In recent years, developing nations have been highly critical of this process because they say it means the bank becomes the tool of developed countries, not those for whom it was set up to benefit. This criticism reached a head during the presidency of Paul Wolfowitz and in the wake of his resignation in 2007. Wolfowitz resigned his presidency after a row over his role in the promotion within the Bank of his companion Shaha Riza. Barbara Stocking, director of Oxfam, commented:

The US and other rich countries must now show that they are serious about good governance by reforming the recruitment process to allow the next head of the Bank to be appointed on merit and commitment to alleviate poverty, rather than being the choice of the American president.

The former Word Bank chief economist Joseph Stiglitz also reportedly believes the Wolfowitz drama shows that the mechanism is flawed and must be fixed.

Criticism from former insider

One of the most prominent and outspoken critics of the World Bank has been its former chief economist Joseph Stiglitz, who, according to his biography on the Global Policy Forum website, is one of "the many senior staff who have resigned in disgust from the World Bank over the years". The biography states that Stiglitz:

grew increasingly disillusioned with the failures of neo-liberal policy and began to voice his thinking in public speeches. Increasingly outspoken, he eventually was ousted from his World Bank post, allegedly on orders from US Treasury Secretary Larry Summers.

Stiglitz showed the journalist Greg Palast a confidential document (not leaked by Stiglitz) called a "Country Assistance Strategy". Palast writes in an article for The Observer:

There's an Assistance Strategy for every poorer nation, designed, says the World Bank, after careful in-country investigation. But according to insider Stiglitz, the Bank's staff "investigation" consists of close inspection of a nation's 5-star hotels. It concludes with the Bank staff meeting some begging, busted finance minister who is handed a "restructuring agreement" pre-drafted for his "voluntary" signature.

Stiglitz told Palast that the Bank hands every minister the same exact four-step programme:

Step One is Privatization - which Stiglitz said could more accurately be called, "Briberization". Rather than object to the sell-offs of state industries, he said national leaders - using the World Bank's demands to silence local critics - happily flogged their electricity and water companies. "You could see their eyes widen" at the prospect of 10% commissions paid to Swiss bank accounts for simply shaving a few billion off the sale price of national assets.

Stiglitz told Palast that the biggest "briberization" of all was the 1995 Russian sell-off. Stiglitz said:

The US Treasury view was this was great as we wanted [Boris] Yeltsin re-elected. We don't care if it's a corrupt election. We want the money to go to Yeltsin via kick-backs for his campaign.

Palast adds:

Most ill-making for Stiglitz is that the US-backed oligarchs stripped Russia's industrial assets, with the effect that the corruption scheme cut national output nearly in half causing depression and starvation.

Stiglitz told Palast that Step Two of the IMF (International Monetary Fund)/World Bank one-size-fits-all rescue-your-economy plan is "Capital Market Liberalization":

In theory, capital market deregulation allows investment capital to flow in and out. Unfortunately, as in Indonesia and Brazil, the money simply flowed out and out....

"The result was predictable," said Stiglitz of the Hot Money tidal waves in Asia and Latin America. Higher interest rates demolished property values, savaged industrial production and drained national treasuries.

At this point, the IMF drags the gasping nation to Step Three: Market-Based Pricing, a fancy term for raising prices on food, water and cooking gas. This leads, predictably, to Step-Three-and-a-Half: what Stiglitz calls, "The IMF riot".

The IMF riot is painfully predictable. When a nation is, "down and out, [the IMF] takes advantage and squeezes the last pound of blood out of them. They turn up the heat until, finally, the whole cauldron blows up," as when the IMF eliminated food and fuel subsidies for the poor in Indonesia in 1998. Indonesia exploded into riots, but there are other examples - the Bolivian riots over water prices last year and this February, the riots in Ecuador over the rise in cooking gas prices imposed by the World Bank. You'd almost get the impression that the riot is written into the plan.

Inspection Panel

In 1993 the World Bank created an Inspection Panel to certify that its operations remained true to its outlined operational polices and procedures. In an article for the Cornell International Law Journal, Enrique R. Carrasco and Alison K. Guernsey provide a critique of this panel. The authors state, "The creation of the Panel was, at the time, an unprecedented effort to increase the Bank’s accountability." The need for such a move, they write, arose because:

Prior to the establishment of the Panel, the Bank had engaged in a number of projects that devastated local populations and caused significant environmental damage. One highly visible project involved the Sardar Sarovar Dam on the Narmada River in India. In the late 1980s, the Bank advanced India a loan to build a dam that would supply water to 30 million people and irrigate crops to feed another 20 million. The project was deeply flawed, however, requiring the unanticipated relocation of thousands of people and threatening to cause widespread soil erosion.

The then president of the World Bank, Lewis Preston, had commissioned an independent review of the project, known as the Morse Commission. According to Carrasco and Guernsey:

The Commission’s report revealed that the Bank had pervasively failed to follow its own social and environmental policies in project lending. Another internal review of the Bank, known as the Wapenhans Report, described a “culture of approval” at the Bank — an attitude that emphasized increasing the Bank’s loan portfolio without adequately taking into account the social and environmental consequences of the project lending. After unrelenting pressure from environmental and human rights non-governmental organizations (NGOs), the World Bank established the Inspection Panel with the hope of bringing transparency to the Bank’s project lending.

The Panel is charged with investigating complaints filed by parties in borrower countries who believe that the Bank is violating its policies or procedures in the design, preparation, or implementation of a Bank-funded project.

However, Carrasco and Guernsey point out that there is a fundamental problem with the Inspection Panel: it is supposed to be independent from the World Bank, but it is comprised of three members who are appointed by the World Bank.

People

• President: Robert B. Zoellick (appointed 2007)
• Former president: Paul Wolfowitz (resigned 2007 after a row over his role in the promotion of his companion Shaha Riza, an expert at the World Bank)

Affiliates

• Economic Development Institute (EDI)
• International Finance Corporation (IFC)
• International Development Association (IDA)
• International Centre for the Settlement of Investment Disputes (ICSID)
• Operations Evaluation Unit
• Consultative Group on International Agricultural Research (CGIAR)
• World Bank Staff Association
• World Bank Administrative Tribunal
• Multilateral Investment Guarantee Agency
• Inspection Panel

Contact

Website: http://www.worldbank.org