World Bank

The International Bank for Reconstruction and Development (IBRD, in Romance languages: BIRD), better known as the World Bank, is an international organization created to fight poverty by means of financing states. Its operation is maintained through payments as regulated by member states.

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.

It came into existence on December 27, 1945 following international ratification of the agreements reached at the Bretton Woods Conference of July 1 - July 22, 1944.

Contents

Goals

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

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.

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 presently headed by president (1995-2005) James D. Wolfensohn, who is president of the IBRD as well as the four affiliated institutions. The Bank also serves as one of several Implementing Agencies for the UN Global Environment Facility (GEF).

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.

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.

History

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 causing environmental and social damage and for not achieving their intended goal of poverty reduction.

Criticism

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 its pursuit of economic liberalisation.

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 enteprises 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 U.S. and other member nations. What is clear is that the environmental abuse, both social and physical, the Bank, the IMF (and the World Trade Organization, for that matter) permit in regard to their rules and projects is unlikely to change until their decisions are open to public scrutiny and general transparency.

References

  • "The Elusive Quest for Growth," by William Easterly (ISBN 0262550423)
  • "Masters of Illusion," by Catherine Caufield
  • "Mortgaging the Earth," by Bruce Rich
  • "Dark Victory" by Walden Bello
  • "A Guide to the World Bank," by Paul McClure (editor) (ISBN 0821353446)
  • "The World Bank: Overview and Current Issues," by Elizabeth P. McLellan (ISBN 1590335503)
  • "The World Bank and the Environmental Challenge," Le Prestre, Phillipe, Associated University Presses: London, (1989).
  • "The World Bank Is Closed," by Ansel Webb

List of presidents

See also:

External link



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