© Kenneth A. Reinert, Cambridge University
Press 2012

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© Kenneth A. Reinert, Cambridge University
Press 2012

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The International Bank for Reconstruction and
Development (IBRD), what we now call the World Bank, emerged out of Bretton Woods conference in 1944
Its Articles of Agreement allowed for activities in both
(post-war) reconstruction and development
The IBRD was the first of five components of what was later to be called the World Bank Group (see Figure
23.1)
The World Bank’s organization and management are summarized in Table 23.1
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Note that the President has always been a US citizen appointed by the executive branch of the US government
© Kenneth A. Reinert, Cambridge University
Press 2012

© Kenneth A. Reinert, Cambridge University
Press 2012

Body Composition Function
Board of
Governors
One Governor and one
Alternate Governor for each member
Meets annually; highest decisionmaking body
Executive Board 25 Executive Directors plus President
President
Day-to-day operations; approve loans and bond issues
Traditionally U.S. citizen Chair of Executive Board; responsible for staffing and general business
Vice President Assists President
Advisor Council Appointed by Board of
Governors
Staff Citizens of members
Advises on general policy matters
Run departments of Bank
© Kenneth A. Reinert, Cambridge University
Press 2012

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The World Bank has a plethora of Vice Presidencies
These are structured around
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Regions (Africa, East Asia and Pacific, Europe and Central Asia,
Latin America and the Caribbean, Middle East and North Africa,
South Asia)
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Networks (financial and private sector development, human development, operations policy and country services, poverty reduction and economic management, and sustainable development)
Functions (external relations and development economics)
The World Bank has over 10,000 staff members who work both in the head office in Washington, DC as well as in over 100 country offices around the world
© Kenneth A. Reinert, Cambridge University
Press 2012

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The IBRD opened in 1946 with the balance between post-war reconstruction and development tilting quickly towards reconstruction
In 1956, the IBRD Executive Directors created the
International Finance Corporation (IFC) to promote private enterprise in developing countries
In 1960, the Executive Directors created the International
Development Association (IDA), a “soft loan” version of the IBRD
© Kenneth A. Reinert, Cambridge University
Press 2012

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In 1966, the International Center for Settlement of
Investment Disputes (ICSID) was introduced to provide arbitration between foreign investors and host country governments
In 1988, the Multilateral Investment Guarantee Agency
(MIGA) was introduced to encourage the flow of FDI to developing countries
With MIGA, the structure of the World Bank Group illustrated in Figure 23.1 was complete
© Kenneth A. Reinert, Cambridge University
Press 2012

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In its early years, the IBRD directed its efforts toward large-scale infrastructure projects
This could be called its infrastructure project lending phase
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The projects funded by the Bank included ports, railways, floodcontrol, power plants, roads, telecommunications facilities, and dams
Additionally, project lending was often accompanied by
“program lending” (or “non-project lending”), which helped to finance the importation of intermediate products necessary for infrastructure projects
© Kenneth A. Reinert, Cambridge University
Press 2012

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In 1968, Robert McNamara took over as World Bank
President, a position he held until 1981
The McNamara presidency coincided with a second phase for the World Bank, one we can call the poverty alleviation phase
The poverty alleviation phase was characterized by a focus on the eradication of absolute poverty (defined in terms of minimum incomes) through rural and urban development
Within the Bank, these new ideas were operationalized via the concept of redistribution with growth
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Redistribution with growth was subsequently replace with propoor growth
© Kenneth A. Reinert, Cambridge University
Press 2012

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The policy-based lending phase began in In 1981 with the appointment of A.W. Clausen as World Bank
President
This phase involved structural adjustment lending and policy conditionality
Structural adjustment lending involved non-project lending to support adjustment in the face of balance of payments and other macroeconomic difficulties
Policy conditionality ties Bank lending to prescribed policy changes on the part of the recipient government
© Kenneth A. Reinert, Cambridge University
Press 2012

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The Bank’s structural adjustment lending began to encroach on the work of the IMF
There were valid claims that the Bank demonstrated an inability to set priorities in its conditionality, with some loan agreements involving a hundred or more conditions
Structural adjustment lending took attention away from poverty alleviation and rural development
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Ironically, the 2008 World Development Report of the Bank concluded that the rural sector was crucial for poverty alleviation
Structural adjustment placed heavy burdens on the poor
© Kenneth A. Reinert, Cambridge University
Press 2012

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 fiscal discipline a redirection of government expenditures to primary health care, primary education, and infrastructure tax reform financial and interest rate liberalization competitive exchange rate trade liberalization liberalization of foreign direct investment privatization deregulation secure property rights
© Kenneth A. Reinert, Cambridge University
Press 2012

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In the 1990s, the World Bank came under increasing criticism
From the political left, there was ardent criticism of both for the Bank’s structural adjustment policies and its neglect of environmental issues
From the political right, members of the US Congress set up the International Financial Institutions Advisory
Commission (IFIAC) that became known as the Meltzer
Commission after its chair, Allan Meltzer
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The Meltzer Commission’s report was highly critical of the Bank, suggesting that it be substantially downsized, its lending to middle income countries be phased out, and that it shift away from loans to grants
© Kenneth A. Reinert, Cambridge University
Press 2012

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These challenges were addressed by World Bank
President Paul Wolfensohn
Wolfensohn ponsored what was known as the Strategic
Compact with the aim of making the Bank for efficient and less bureaucratic
To implement the Strategic Compact, he pushed through an internal reorganization of the Bank
He also proposed a Comprehensive Development
Framework (CDF) that emphasized
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Good governance and institutions
Social inclusion, participation and “ownership”
Attention to public goods and environmental sustainability
© Kenneth A. Reinert, Cambridge University
Press 2012

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As with the International Monetary Fund, voting shares at the World Bank have recently shifted in favor of some large emerging countries (e.g., Argentina, Brazil, China,
India, Russia and Vietnam)
There has also been an increase in proposed lending towards a set of middle-income countries and towards
IBRD lending rather than IDA loans and grants
This followed a long-term pattern illustrated in Figure
23.3
In response to this, some observers have questioned a
“neglect” of the poorest countries in the world
© Kenneth A. Reinert, Cambridge University
Press 2012

© Kenneth A. Reinert, Cambridge University
Press 2012