World Bank Group

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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 eliminating poverty. The Bank came into formal existence on 27 December 1945 following international ratification of the Bretton Woods agreements, where the United Nations Monetary and Financial Conference that led to their establishment took place (1 July-22 July 1944). 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:

• International Bank for Reconstruction and Development (IBRD)
• International Finance Corporation (IFC)
• International Development Association (IDA)
• Multilateral Investment Guarantee Agency (MIGA)
• 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). The IBRD and IDA provide 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 activities of the IFC and MIGA include investment in the private sector and providing insurance respectively.

Contents 1 Organizational structure 1.1 World Bank Group agencies 1.2 Presidency 2 List of Presidents 3 List of chief economists 4 Reception 4.1 AIDS controversy 5 Evaluation at the World Bank 5.1 Social and environmental concerns 5.2 The Independent Evaluation Group 5.3 Extractive Industries Review 5.4 Impact evaluations 6 Other information 7 References 8 Notes 9 See also 10 External links 10.1 NGOs

[edit] 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. It is an international organization owned by member governments; although it makes profits, these profits are used to support continued efforts in poverty reduction.

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, 2006 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 such major change.

[edit] World Bank Group agencies

The World Bank Group consists of

• the International Bank for Reconstruction and Development (IBRD), established in 1945, which provides debt financing on the basis of sovereign guarantees;
• the International Finance Corporation (IFC), established in 1956, which provides various forms of financing without sovereign guarantees, primarily to the private sector;
• the International Development Association (IDA), established in 1960, which provides concessional financing (interest-free loans or grants), usually with sovereign guarantees;
• the Multilateral Investment Guarantee Agency (MIGA), established in 1988, which provides insurance against certain types of risk, including political risk, primarily to the private sector; and,
• the International Centre for Settlement of Investment Disputes (ICSID), established in 1966, which works with governments to reduce investment risk.

The term "World Bank" generally refers to the IBRD and IDA [1], whereas the World Bank Group is used to refer to the institutions collectively.

Governments can choose which of these agencies they sign up to individually. The IBRD has 185 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 Governors meeting once a year. [2] Each member country appoints a governor, generally its Minister of Finance. On a daily basis the World Bank Group is run by a Board of 24 Executive Directors to whom the governors have delegated certain powers. Each Director represents either one country (for the largest countries), or a group of countries. Executive Directors are appointed by their respective governments or the constituencies. [3]

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 [4].

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

[edit] 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.

[edit] List of Presidents

By tradition, the bank president is a national of and is nominated by the largest shareholder in the bank, the United States. The President is elected by the Board of Governors for a five-year, renewable term. [5] By the same tradition, the IMF's managing director is nominated by its European governors.

• Eugene Meyer (June 1946–December 1946)
• John J. McCloy (March 1947–June 1949)
• Eugene R. Black (1949–1963)
• George D. Woods (January 1963–March 1968)
• Robert S. McNamara (April 1968–June 1981)
• Alden W. Clausen (July 1981-June 1986)
• Barber B. Conable (July 1986-August 1991)
• Lewis T. Preston (September 1991–May 1995)
• James Wolfensohn (May 1995–June 2005)
• Paul Wolfowitz (June 2005-Present)

[edit] List of chief economists

Main Article World Bank Chief Economist

• Anne Krueger - 1982-1986
• Stanley Fischer - 1988-1990
• Lawrence Summers - 1991-1993
• Joseph E. Stiglitz - 1997–2000
• Nicholas Stern - 2000–2003
• François Bourguignon - 2003-current

[edit] Reception

The World Bank has long been criticized by a range of non-governmental organizations and academics. In addition the Bank's 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.^{[citation needed]} In Russia, for example, shock therapy has raised poverty from 2 million to 60 million, a 3000% increase. UNICEF noted that this resulted in 500,000 'extra' deaths per year.^{[citation needed]}

The World Bank has been criticized because of a perceived conflict between their stated goals, and their actual goals.^{[citation needed]} Critics argue that the adverse effects created by the World Bank are apparent when observing the numerous countries on the African continent which are in essence “owned” by the World Bank.^{[citation needed]} National debt is common in many African countries, especially those being “helped” by the World Bank. This is due in part to the economic ideals used to work in this extremely impoverished region.^{[citation needed]} Water and sanitation are needed, yet the companies that bring that to the poorest people in the world are large westernized companies out to make profit.^{[citation needed]} Because the World Bank supports these enterprises, critics cite that the organization makes the poor poorer and the rich richer.^{[citation needed]} Following decolonization, many African countries were ruled by dictators. These corrupt dictators took the financial support lent by the World Bank, and began to build an enormous national debt in their countries. Despite harsh criticisms, 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.^{[citation needed]} World Bank also engages in funding the education of a few promising young people from developing countries through its graduate scholarship programs.

Although relied upon by poor countries as a contributor of development finance, the World Bank is often criticized, primarily by opponents of corporate "neo-colonial" globalization.^{[citation needed]} 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.^{[citation needed]}

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.^{[citation needed]}

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 that country.^{[citation needed]}

Furthermore, it is frequently suggested that the Bank intervenes in order to salvage irresponsible loans from private institutions to governments in developing countries, and thus shifts the risk from the original risk-takers to the public of the rich countries, who ultimately back the Bank.^{[citation needed]} This may be referred to as a problem of moral hazard, if private lenders believe that public lenders will not allow the borrower to fail.

In her book Masters of Illusion: The World Bank and the Poverty of Nations (1996), author Catherine Caufield makes a sharp criticism of the assumptions and structure of the World Bank operation, arguing that at the end it harms southern nations rather than promoting them. In terms of assumption, Caufield first criticizes the highly homogenized and Western recipes of “development” held by the Bank. To the WB, different nations and regions are indistinguishable, and ready to receive the “uniform remedy of development”. The danger of this assumption is that to attain even small portions of success, western approaches to life are adopted and traditional economic structures and values are abandoned. A second assumption is that poor countries cannot modernize without money and advice from abroad. This generates a cycle of indebtedness that with the payment of interest means currently a net transfer from the poor to the rich nations of $1.7 billion yearly.^{[citation needed]}

In terms of the structure of the bank, Caufield criticizes two elements. First, the structure of repayment; the Bank is a lender of foreign currency and demands to be repaid in the same currency. The borrower countries, in order to obtain the currencies to repay the loans, must sell to the rich countries more than they buy from them. However, the rich countries want to be net exporters, not importers. This generates “the transfer problem”, often the only way of repaying loans is to engage in other loans, resulting in an accumulation of debts. Second, she criticizes the high influence of the bank over national sovereignty. As a condition of the credit, the Bank offers advice on how countries should manage their finances, make their laws, provide services, and conduct themselves in the international market. The Bank has great power of persuasion, because if it decides to ostracize a borrower, other major international powers will follow the lead. On top of this, by excessive lending, the Bank has added to its own power and depleted that of its borrowers, generating a blatant inconsistency with its stated mission.

John Perkins in Confessions of an Economic Hit Man sees the World Bank as an instrument of American imperial policy, providing loans to developing countries for projects that enormously benefit a ruling elite as well as American companies and making such countries subject to American influence and pressure.

Defenders of the World Bank contend 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, as well as to the legitimacy of its enormous influence and power.^{[citation needed]}

[edit] AIDS controversy

In debates about the World Bank's role, the arguments are complex and often rely as much upon political judgment 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 by limiting the funding allowed to health and education sectors. However, it should also be noted that, although finances hardly help stop the spread of the AIDS pandemic, the World Bank is a major source of funding for combating 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 [6]PDF (554 KiB)).

[edit] Evaluation at the World Bank

[edit] 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 1976 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 [7].

[edit] 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 ensuring accountability of World Bank management to the member countries (through the World Bank Board) in the achievement of its objectives.

[edit] 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",[8]. 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 [9]PDF (200 KiB) 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 [10]. 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'.[11]. Following the EIR process, the World Bank issued a revised Policy on Indigenous Peoples [12].

[edit] 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 possibility of learning from current poverty reduction efforts and provide insights for midcourse correction, as necessary.

[edit] Other information

The World Bank provides summer internships to local DC students at its headquarters every year. This youth development program is a large investment in the city's youth and the World Bank partners with a local nonprofit, Urban Alliance Foundation, to provide this opportunity.

[edit] References

• Presidential and other quotes on Money and Banking
• Axel Dreher (2002). The Development and Implementation of IMF and World Bank Conditionality. HWWA. ISSN 1616-4814. 
• William Easterly (2001). The Elusive Quest for Growth. MIT Press. ISBN 0-262-55042-3. 
• Catherine Caufield (1997). Masters of Illusion. Henry Holt & Company, New York. ISBN 0-8050-2875-7 (hardcover) ISBN 0-330-35321-7 (paperback, 1998). 
• Bruce Rich (1994). Mortgaging the Earth. Beacon Press. ISBN 0-8070-4704-X (hardcover), ISBN 0-8070-4707-4 (paperback). 
• Walden Bello, et al (1999). Dark Victory. Pluto Press. ISBN 0-7453-1466-X (hardcover) ISBN 0-935028-61-7 (paperback). 
• Paul McClure (editor) (2003). A Guide to the World Bank. World Bank Publications. ISBN 0-8213-5344-6. 
• Elizabeth P. McLellan (editor) (2003). The World Bank: Overview and Current Issues. Nova Science Publishers. ISBN 1-59033-550-3. 
• Phillipe Le Prestre (1989). The World Bank and the Environmental Challenge. Susquehanna University Press. ISBN 0-941664-98-8. 
• 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 1-59420-023-8. 
• Zoe Young (2002). A New Green Order? The World Bank and the Politics of the Global Environment Facility. Pluto Press. ISBN 0-7453-1553-4. 

[edit] Notes

1. Marquette, Heather, 2004. 'The Creeping Politicisation of the World Bank: The Case of Corruption', Political Studies Vol, 52/3 p.413-430.

[edit] See also

• World Bank Scholarship
• conditionality
• Anti-globalization movement
• Annual Meetings of the International Monetary Fund and the World Bank Group
• Asian Development Bank
• Ease of Doing Business Index

[edit] External links

• World Bank Group (website)
• World Bank (website)
• World Bank Group Members
• World Bank independent evaluation group (website)
• Eldis resources on the World Bank and IMF
• Bank of International Settlements
• World Bank: Whose Bank and for Which World? by Dr. Mohammad Omar Farooq
• World Bank Group Presidents (website)
• World Bank and the Privatization of Public Education
• Bretton Woods 60th Anniversary Exhibition (website)
• Foundations of the World Bank: 1944-1948
• "Firsts" in World Bank History
• Affiliates of the World Bank
• Buildings of the World Bank
• World Bank Topics
• World Bank Books
• EssayCompetition.org, an essay competition for youth aged 18-25 organized by the World Bank
• The Annual Bank Conference on Development Economics (ABCDE), organized by the World Bank in Tokyo, Japan, on May 29-30, 2006
• World Bank Group Private Sector Development Unit
• World Bank Group Poverty & Growth Blog
• World Bank Group PSD Blog
• "I’m With Wolfowitz" Article by George Monbiot, April 2005
• "It is time to free the World Bank" Article by Jeffrey Sachs, March 2005
• Center for International Finance & Development University of Iowa research center, includes a 300 page E-book on the IMF and World Bank.

[edit] NGOs

• The Bank Information Center
• Mexican Council for Economic and Social Development
• The Scorecard on Development: 25 Years of Diminished Progress (CEPR)PDF (281 KiB)
• The Bretton Woods Project, monitoring the World Bank and IMF
• IFIwatchnet, monitoring the World Bank and IMF
• World Bank Bonds Boycott
• Bonds boycott campaign in Europe
• World Bank President
• Wolfowitz Watch

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