Cato Institute Policy Analysis No . 92 : The World Bank vs . the World ' s Poor September 28 , 1987 (original) (raw)
The World Bank was founded to address what we would today call imperfections in international capital markets. Its founders thought that countries would borrow from the Bank temporarily, until they grew enough to borrow commercially (NAC 1946, p. 312; Black 1952). The Bank could arguably address capital market failures if private banks would not lend to truly creditworthy projects in developing countries out of fear that they would not be repaid. In that case, a multilateral institution backed by the world's governments might be able to secure repayment. Some critiques and analyses of the Bank are based on the assumption that this continues to be its role. For example, some argue that the growth of private capital flows to the developing world has rendered the Bank irrelevant. We will argue that modern analyses should proceed from the premise that the Bank's central goal is and should be to reduce extreme poverty, and that addressing failures in global capital markets is now of subsidiary importance. The overwhelming majority of Bank subsidies from its shareholder countries go to the International Development Association (IDA), its arm for making grants and highly concessional loans to the lowest-income countries, and other funding vehicles for the same countries. The Bank's greatest impact comes from its role in the dramatic policy changes many developing countries have undertaken in multiple sectors that most economists would consider likely to reduce poverty, either by increasing growth or promoting equity. The Bank's stated goal is reducing poverty. Why might donor countries choose to work through an international organization to advance the goal of reducing poverty? Developing country government policy is a key factor influencing poverty, with an importance far greater than the direct impact of aid. Effective aid therefore often involves negotiating agreements with recipient country governments that include policy reforms. There are economies of scale in negotiating such agreements that can be realized by an entity such as the Bank, and pooling funds into such an entity may also improve donors' collective bargaining position in negotiations with governments. Moreover, we argue that the World Bank's status as a multilateral organization and its technocratic staff enhances its credibility and legitimacy in policy discussions with developing-country governments. This has allowed it tremendous policy influence relative to the explicit and implicit subsidies it receives, making it a bargain for those who value its mission of reducing extreme poverty and share its mainstream economic views on what policies best advance that goal. Below we discuss what the Bank does: how it spends money, how it influences policy, and how it presents its mission. Based on this, we argue that the role of the Bank is now best understood as facilitating international agreements to reduce poverty, rather than more narrowly addressing international capital market failures. Finally, we examine implications of this perspective for the Bank and for assessing the performance of the Bank. For example, the Bank should not conceptualize its principal activity as capital investment, but instead should consider a broader range of activities and instruments. Moreover, attempts to measure the Bank's success by regressions that use economic growth rates as the dependent variable and disbursements ofaid as an explanatory variable will be misleading.
The World Bank's Lending Approaches: A Special World Bank News Report
World Bank News, 1986
The World Bank, operating in a complex, diverse, and changing environment, provides financial advice and support to developing nations that range from macroeconomic management to project design. Major changes in management systems have occurred during the 1980s and are reflected in the bank's assistance in: (1) analytical support of policy implementation; (2) mobilization and coordination of external resources; and (3) lending and institutional support. Financial support is the most visible and tangible aspect of the World Bank's assistance, and this document describes how it is provided and how time frames and staff costs are measured. Key stages in the bank's lending cycle include: (1) identification of a country's specific investment proposals and programs; (2) preparation of materials needed for pre-financing decision making; (3) technical, financial, economic, and institutional viability appraisals in relation to suitability for World Bank financing; (4) negotiations concerning the scope, terms, and conditions involved in financing an operation; (5) the implementation period; and (6) the evaluation of a completed project. Case studies and graphs are included. (JHP)
For decades since its inception in 1944, the World Bank dominated as the world’s leading financial institution. In recent years, however, the global financial market has expanded and more emerging aid donors now offer capital to developing countries. These new aid donors offer alternatives to the dominance of the World Bank and provide a fresh source of financing for developing countries whose development needs are not being met by the World Bank. In this essay, the relevance of the World Bank will be assessed by the extent to which the Word Bank remains appropriate to the evolving current global economic world in light of the new aid donors. This essay will be organised in three sec.ons. The first sec.on will argue that the World Bank’s relevance has declined mainly because it has failed to adapt to the changing world economic order, and fails to meet all the financial needs of the developing world. This essay aims to validate this hypothesis by analysing three new aid donors- China (a bilateral aid donor), the Asian Development Bank (ADB), and the BRICS’ New Development Bank (NDB), in relation to the World Bank. However, the second section of this essay will argue that although the new aid donors offer a wider and better choice of aid to developing countries, they do not promote development because although aid may increase economic growth, it inhibits social development, and rather increases poverty. Lastly, I will propose a number of alternative policies that may be adopted to enhance development and reduce aid dependency.
The indomitable position that the World Bank has acquired in the nineties and the new millennium is something that is well understood and largely indisputable. The christening of the term ‘Washington Consensus’ by the English economist John Williamson, in the late eighties is a tribute to the power the Bank, (along with the International Monetary Fund) commands in the development aid delivery system . The World Bank however was not always this powerful. A look into its past workings (before 1969) and the frail position the Bank held in relation to the United States administration during the nineteen fifties and sixties brings to light how this newly acquired prominent role was carved out of a phenomenon called ‘the crisis of development’. This enquiry will also lead us further back into answering the following sub questions: what was the substantive meaning of the term ‘development’ and why was the West, especially the US administration so keen to usher it and how did ‘development’ come into a crisis (the recovery process to which brought to fore the emboldened World Bank).
The World Bank has more than 60 years of experience in aiding developing countries and is a primary institution in governing the globalization process. In 2007 the World Bank provided US$23.6 billion for 279 projects in developing countries all over the world. The bank is currently involved in more than 1,800 projects in virtually every sector and developing country. The projects cover a very wide spectrum such as providing microcredit in Bosnia and
American Politics, the Presidency of the World Bank, and Development Policy
2013
The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.