World Bank

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World Bank Group logo

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:

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.

The World Bank Institute is the capacity development branch of the World Bank, providing learning and other capacity-building programs to member countries.

Contents

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. The President of the World Bank is nominated by the President of the United States and elected by the Bank's Board of Governors. 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.

World Bank Group agencies

The World Bank Group consists of

The term "World Bank" generally refers to the IBRD and IDA <ref>World Bank self-description</ref>, 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. <ref>World Bank self-description</ref> 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. <ref>World Bank self-description </ref> 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 <ref>World Bank self-description</ref>. 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.

List of Presidents

By tradition, the bank president is a citizen 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. [1] By the same tradition, the IMF's managing director is nominated by its European governors.

List of chief economists

Main Article World Bank Chief Economist

List of World Bank Director-Generals of Evaluation

Main Article World Bank Director-General Evaluation

  • Christopher Willoughby, Successively Unit Chief, Division Chief, and Department Director for Operations Evaluation - 1970–1976
  • Mervyn L. Weiner, First Director-General, Operations Evaluation - 1975–1984
  • Yves Rovani, Director-General, Operations Evaluation - 1986–1992
  • Robert Picciotto, Director-General, Operations Evaluation - 1992–2002
  • Gregory K. Ingram, Director-General, Operations Evaluation - 2002–2005
  • Vinod Thomas Director-General, Evaluation - 2005-current

Reception

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The World Bank has long been criticized by a range of non-governmental organizations and academics, notably including its former Chief Economist Joseph Stiglitz, who is equally critical of the International Monetary Fund, the US Treasury Department, and US and other developed country trade negotiators.<ref>Joseph Stiglitz, The Roaring Nineties, Globalization and its Discontents, Making Globalization Work</ref> The Bank's own internal evaluations have drawn negative conclusions. Critics argue that the so-called 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.<ref>Stiglitz, opera cit.</ref> In Russia, for example, some have suggested that it was an apparent shock therapy policy that has raised poverty from 2 million to 60 million, a 3000% increase. UNICEF noted that this resulted in 500,000 'extra' deaths per year.

Following decolonization, many African countries were ruled by dictators. These corrupt dictators stole much of the financial support lent by the World Bank, IMF, and other lenders, leaving an enormous national debt to their successors.

However, World Bank standards and methods are highly valued by some, and have been adopted in areas such as transparent procedures for competitive procurement and environmental standards for project evaluation. World Bank also engages in funding the education of a few promising young people from developing countries through its graduate scholarship programs.

File:Worldbank protest jakarta.jpg
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 criticized, 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 that country.

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. 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.

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. This picture is vigorously disputed.

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.

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 Template:PDFlink).

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 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 [2].

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.

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",[3]. 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 Template:PDFlink 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 [4]. 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'.[5]. Following the EIR process, the World Bank issued a revised Policy on Indigenous Peoples [6].

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.

Allegations of Corruption

The World Bank is supposedly working against corruption both outside and within its organisation. Its website states:

"Recognizing that any program to assist in controlling corruption worldwide needs to start with the example of best practices at home, the Bank has taken initiatives to stamp out conflicts of interest and any possible corrupt practices among its own staff."

Beginning in 2005, it was alleged that Paul Wolfowitz, President of the World Bank, used his position to influence a pay and grade increase for his partner, Shaha Riza. When Wolfowitz was appointed, Shaha Riza had to leave the bank and was allocated to the State Department, working in the office of Liz Cheney, daughter of Dick Cheney. For more details see Wolfowitz Scandal.

The World Bank head of "Institutional Integrity" department is Suzanne Folsom. She is the wife of George Folsom who is the President of the International Republican Institute and a personal friend of Paul Wolfowitz. According to the Financial Times her appointment as "a person close to Mr Wolfowitz, and with a political background...to a unit that was seen as independent of the president’s office since it was set up in 2001" was met with concern by some senior staff. Wolfowitz's efforts are seen by some senior staff to have led to "a lack of consultation by Mr Wolfowitz’s advisers, and an atmosphere of suspicion."<ref><cite id="CITEREFBallsError: Invalid time.">Balls, Andrew (2006-01-23), Wolfowitz triggers graft storm at World Bank, Financial Times. Retrieved on 2007-04-18</cite></ref>

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.

References

Notes

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See also

External links

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NGOs


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