The World Bank is an international financial institution that provides loans[2] to developing countries for capital programmes.

The World Bank's official goal is the reduction of poverty. According to the World Bank's Articles of Agreement (As amended effective 16 February 1989) all of its decisions must be guided by a commitment to promote foreign investment, international trade and facilitate capital investment.[3] The World Bank differs from the World Bank Group, in that the World Bank comprises only two institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), whereas the latter incorporates these two in addition to three more: [4] International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), and International Centre for Settlement of Investment Disputes(ICSID).

[edit]History The World Bank is one of five institutions created at the Bretton Woods Conference in 1944. The International Monetary Fund, a related institution, is the second. Delegates from many countries attended the Bretton Woods Conference. The most powerful countries in attendance were the United States and United Kingdom, which dominated negotiations.[5] Although both are based in Washington, D.C., the World Bank is, by custom, headed by an American, while the IMF is led by a European. [edit]19441968 From its conception until 1965 the bank undertook a relatively low level of lending. Fiscal conservatism and careful screening of loan applications was common. Bank staff attempted to balance the priorities of providing loans for reconstruction and development with the need to instill confidence in the bank.[6] Bank president John McCloy selected France to be first recipient of World Bank aid; two other applications from Poland and Chile were rejected. The loan was for US$250 million, half the amount requested and came with strict conditions. Staff from the World Bank monitored the use of the funds, ensuring that the French government would present a balanced budget and give priority of debt repayment to the World Bank over other governments. The United States State Department told the French government that communist elements within the Cabinet needed to be removed. The French Government complied with this diktat and removed the Communist coalition government. Within hours the loan to France was approved.[7] The Marshall Plan of 1947 caused lending by the bank to change as many European countries received aid that competed with World Bank loans. Emphasis was shifted to non-European countries and until 1968, loans were earmarked for projects that would enable a borrower country to repay loans (such projects as ports, highway systems, and power plants). [edit]19681980

From 1968 to 1980, the bank concentrated on meeting the basic needs of people in the developing world. [citation needed] The size and number of loans to borrowers was greatly increased as loan targets expanded from infrastructure into social services and other sectors.[citation needed] These changes can be attributed to Robert McNamara who was appointed to the presidency in 1968 by Lyndon B. Johnson.[8] McNamara imported a technocratic managerial style to the Bank that he had used as United States Secretary of Defense and President of the Ford Motor Company.[9] McNamara shifted bank policy toward measures such as building schools and hospitals, improvingliteracy and agricultural reform. McNamara created a new system of gathering information from potential borrower nations that enabled the bank to process loan applications much faster. To finance more loans, McNamara told bank treasurer Eugene Rotberg to seek out new sources of capital outside of the northern banks that had been the primary sources of bank funding. Rotberg used the global bond market to increase the capital available to the bank.[10] One consequence of the period of poverty alleviation lending was the rapid rise of third world debt. From 1976 to 1980 developing world debt rose at an average annual rate of 20%.[11][12] In 1980, the World Bank Administrative Tribunal was established to decide on disputes between the World Bank Group and its staff where allegation of non-observance of contracts of employment or terms of appointment had not been honoured.[13] [edit]19801989 The neutrality of this article is disputed. Please see the discussion on the talk page. Please do not remove this message until the dispute is resolved. (May 2011) In 1980, A.W. Clausen replaced McNamara after being nominated by US President Jimmy Carter. Clausen replaced a large number of bank staffers from the McNamara era and instituted a new ideological focus in the bank. The replacement of Chief Economist Hollis B. Chenery by Anne Krueger in 1982 marked a notable policy shift at the bank. Krueger was known for her criticism of development funding, as well as of third world governments as rent-seeking states. Lending to service third world debt marked the period of 19801989. Structural adjustment policies aimed at streamlining the economies of developing nations were also a large part of World Bank policy during this period. UNICEF reported in the late 1980's that the structural adjustment programs of the World Bank were responsible for the "reduced health, nutritional and educational levels for tens of millions of children in Asia, Latin America, and Africa".[14] [edit]1989present From 1989, World Bank policy changed in response to criticism from many groups. Environmental groups and NGOs were incorporated in the lending of the bank in order to mitigate the effects of the past that prompted such harsh criticism.[15] [edit]Leadership The President of the Bank, currently Robert B. Zoellick, is responsible for chairing the meetings of the Boards of Directors and for overall management of the Bank. Traditionally, the Bank President has always been a US citizen nominated by the United States, the largest shareholder in the bank. The nominee is subject to confirmation by the Board of Executive Directors, to serve for a five-year, renewable term.[16]

The Executive Directors, representing the Bank's member countries, make up the Board of Directors, usually meeting twice a week to oversee activities such as the approval of loans and guarantees, new policies, the administrative budget, country assistance strategies and borrowing and financing decisions. The Vice Presidents of the Bank are its principal managers, in charge of regions, sectors, networks and functions. There are 24 Vice-Presidents, three Senior Vice Presidents and two Executive Vice Presidents. [edit]List

of Presidents

Not all World Bank Presidents have banking experience; some have been political appointments.

Robert B.

2007

United

Bank executive with Goldman Sachs, Deputy Secretary of

Zoellick

present

States

State and US Trade Representative

[edit]Members Main article: List of World Bank members The International Bank for Reconstruction and Development (IBRD) has 187 member countries, while the International Development Association (IDA) has 171 members.[17] Each member state of IBRD should be also a member of the International Monetary Fund (IMF) and only members of IBRD are allowed to join other institutions within the Bank (such as IDA).[18] [edit]Voting

power

In 2010, voting powers at the World Bank were revised to increase the voice of developing countries, notably China. The countries with most voting power are now the United States (15.85%), Japan (6.84%), China (4.42%), Germany (4.00%), the United Kingdom (3.75%), France (3.75%), and Italy (2.91%). Under the changes, known as 'Voice Reform Phase 2', countries other than China that saw significant gains included South Korea, Turkey, Mexico, Singapore, Greece, Brazil, India, and Spain. Most developed countries' voting power was reduced, along with a few poor countries such asNigeria. The voting powers of the United States, Russia and Saudi Arabia were unchanged.[19][20] The changes were brought about with the goal of making voting more universal in regards to standards, rule-based with objective indicators, and transparent among other things. Now, developing countries have an increased voice in the "Pool Model," backed especially by Europe. Additionally, voting power is based on economic size in addition to International Development Association contributions.[21] [edit]Poverty

reduction strategies

For the poorest developing countries in the world, the bank's assistance plans are based on poverty reduction strategies; by combining a cross-section of local groups with an extensive analysis of the country's financial and economic situation the World Bank develops a strategy pertaining uniquely to the country in question. The government then identifies the country's priorities and targets for the reduction of poverty, and the World Bank aligns its aid efforts correspondingly. Forty-five countries pledged US$25.1 billion in "aid for the world's poorest countries", aid that goes to the World Bank International Development Association (IDA) which distributes the loans to eighty poorer countries. While wealthier nations sometimes fund their own aid projects, including those for diseases, and although IDA is the recipient of criticism, Robert B. Zoellick, the president of the World Bank, said when the loans were announced on 15 December 2007, that IDA money "is the core funding that the poorest developing countries rely on".[22] [edit]Clean

Technology Fund management

The World Bank has been assigned temporary management responsibility of the Clean Technology Fund (CTF), focused on making renewable energy cost-competitive with coal-fired power as quickly as possible, but this may not continue after UN's Copenhagen climate change conference in December, 2009, because of the Bank's continued investment in coal-fired power plants.[23]

[edit]Clean

Air Initiative

Clean Air Initiative (CAI)[24] is a World Bank initiative to advance innovative ways to improve air quality in cities through partnerships in selected regions of the world by sharing knowledge and experiences. It includes electric vehicles. [edit]United

Nations Development Business

Based on an agreement between the United Nations and the World Bank in 1981, Development Business became the official source for World Bank Procurement Notices, Contract Awards, and Project Approvals.[25] In 1998, the agreement was re-negotiated, and included in this agreement was a joint venture to create an electronic version of the publication via the World Wide Web. Today,Development Business is the primary publication for all major multilateral development banks, United Nations agencies, and several national governments, many of whom have made the publication of their tenders and contracts in Development Business a mandatory requirement.[26] Currently, the subscription to "online version only" is not free, but costs US$ 550.[27] The World Bank or the World Bank Group is also a sitting observer in the United Nations Development Group.[28]

Criticisms and controversies

Organisations and activists continue to lament the World Banks human rights score card.

Many infrastructural projects financed by the World Bank Group have social and environmental implications for the populations in the affected areas and criticism has centred around the ethical issues of funding such projects. For example, World Bank-funded construction of hydroelectric dams in various countries have resulted in the displacement of indigenous peoples of the area. There are also concerns that the World Bank working in partnership with the private sector may undermine the role of the state as the primary provider of essential goods and services, such as healthcare and education, resulting in the shortfall of such services in countries badly in need of them.

In September 2008, The World Bank was indicted on 29 charges of human rights abuses and environmental damagesin India, according to a study. A 13-member panel of the Independent Peoples

Tribunal on the World Bank Group, consisting of prominent Indian and international jurists, economists, scientists, retired government officials, and social and religious leaders found the World Bank guilty of harming the environment and lowering the standard of living for most Indians.

The problem, some feel, is that just because the Bank addresses various human rights violations indirectly, by virtue of its other work, this does not mean its policies are human rights-based. Nor, more importantly, will such an approach sufficiently ensure that human rights are not breached as a result of its policies.

The Banks founding charter requires that it does not engage in any political activity, and this will help to explain its reluctance to be drawn into the human rights arena. However, Environmental Economist Korinna Horta argues such a policy would be inconsistent with modern theories of development, and that the Bank cannot continue to argue its purposes are solely economic.

She writes that: protecting the environment, promoting social justice and upholding human rights are inextricably linkedthe separation of development goals from politics is unrealistic. (Horta, K. Rhetoric and Reality: Human Rights and the World Bank (2002)).

For more specific project-related human rights concerns see the resources at the website of the Bank Information Center, a NGO that monitors Bank activities, at http://www.bicusa.org/en/Institution.Projects.5.aspx

Experts believe that the Banks organisational structure, and lack of accountability, also makes it harder for it to further human rights.

Environmental lawyer Dana L. Clark said. A significant disjuncture exists between the actual powers of international institutions and the legal and political options to hold them accountable, she argues, concluding that: Effective remedies must exist in situations where World Bank-financed projects have clearly violated international human rights law or the rights of local people as expressed in the Banks social and environmental policy framework. (Clark D. The World Bank and Human Rights: The Need for Greater Accountability (2002))

Criticisms

The World Bank has long been criticized by non-governmental organizations, such as the indigenous rights group Survival International, and academics, including its former Chief Economist Joseph Stiglitz who is equally critical of the International Monetary Fund, the US Treasury Department, US and other developed country trade negotiators.[29] Critics argue that the so-called free market reform policies which the Bank advocates are often harmful to economic development if implemented badly, too quickly ("shock therapy"), in the wrong sequence or in weak, uncompetitive economies.[29][30] In Masters of Illusion: The World Bank and the Poverty of Nations (1996), Catherine Caufield argued that the assumptions and structure of the World Bank harms southern nations. Caufield criticized its formulaic recipes of "development". To the World Bank, different nations and regions are indistinguishable and ready to receive the "uniform remedy of development". She argued that to attain even modest success, Western practices are adopted and traditional economic structures and values abandoned. A second assumption is that poor countries cannot modernize without money and advice from abroad. A number of intellectuals in developing countries have argued that the World Bank is deeply implicated in contemporary modes of donor and NGO imperialism, and that its intellectual contributions function to blame the poor for their condition.[31] One of the strongest criticisms of the World Bank has been the way in which it is governed. While the World Bank represents 186 countries, it is run by a small number of economically powerful countries. These countries choose the leadership and senior management of the World Bank, and so their interests dominate the bank.[32] The World Bank has dual roles that are contradictory: that of a political organization and that of a practical organization. As a political organization, the World Bank must meet the demands of donor and borrowing governments, private capital markets, and other international organizations. As an action-oriented organization, it must be neutral, specializing in development aid, technical assistance, and loans. The World Bank's obligations to donor countries and private capital markets have caused it to adopt policies which dictate that poverty is best alleviated by the implementation of "market" policies.[33] In the 1990s, the World Bank and the IMF forged the Washington Consensus, policies which included deregulation and liberalization of markets, privatization and the downscaling of government. Though the Washington Consensus was conceived as a policy that would best promote development, it was criticized for ignoring equity, employment and how reforms like privatization were carried out. Many now agree[citation needed] that the Washington Consensus placed too much emphasis on the growth of GDP, and not enough on the permanence of growth or on whether growth contributed to better living standards.
[34]

Some analysis shows that the World Bank has increased poverty and been detrimental to the environment, public health and cultural diversity.[35] Some critics also claim that the World Bank has consistently pushed a neoliberal agenda, imposing policies on developing countries which have been damaging, destructive and anti-developmental.[36][37] It has also been suggested that the World Bank is an instrument for the promotion of US or Western interests in certain regions of the world. South American nations have even established the Bank of the South in order to reduce US influence in the region.[38] One criticism of the bank is that the President is always a citizen of the United States, nominated by the President of the United States (though subject to the "approval" of the other member countries). There have been accusations that the decision-making structure is undemocratic as the US has a veto on some constitutional decisions with just over 16% of the

shares in the bank;[39] Decisions can only be passed with votes from countries whose shares total more than 85% of the bank's shares.[40] A further criticism concerns internal management and the manner in which the World Bank is said to lack accountability.[41] Criticism of the World Bank often takes the form of protesting as seen in recent events such as the World Bank Oslo 2002 Protests,[42] the October Rebellion,[43] and the Battle of Seattle.[44] Such demonstrations have occurred all over the world, even amongst the Brazilian Kayapo people.[45] In 2008, a World Bank report which found that biofuels had driven food prices up 75% was not published. Officials confided that they believed it was suppressed to avoid embarrassing the then-President of the United States, George W. Bush.[46] [edit]Knowledge

production

The World Bank has been criticized[by whom?] for the manner in which it engages in "the production, accumulation, circulation and functioning" of knowledge. The Bank's production of knowledge has become integral to the funding and justification of large capital projects. The Bank relies on "a growing network of translocal scientists, technocrats, NGOs, and empowered citizens to help generate data and construct discursive strategies".[47] Its capacity to produce authoritative knowledge is a response to intense scrutiny of Bank projects resulting from the successes of growing anti-Bank and alternativedevelopment movements.[48] "Development has relied exclusively on one knowledge system, namely, the modern Western one. The dominance of this knowledge system has dictated the marginalization and disqualification of non-Western knowledge systems".[49] It has been remarked that in these alternative knowledge systems, researchers and activists might find alternative rationales to guide interventionist action away from Western (Bank-produced) ways of thinking. Knowledge production has become an asset to the Bank, and "it is generated and used in highly strategic ways"[50]to provide justifications for development. [edit]Structural

adjustment

The effect of structural adjustment policies on poor countries has been one of the most significant criticisms of the World Bank. The 1979 energy crisis plunged many countries into economic crises.[51]The World Bank responded with structural adjustment loans which distributed aid to struggling countries while enforcing policy changes in order to reduce inflation and fiscal imbalance. Some of these policies included encouraging production, investment and labour-intensive manufacturing, changing real exchange rates and altering the distribution of government resources.[52] Structural adjustment policies were most effective in countries with an institutional framework that allowed these policies to be implemented easily. [53] For some countries, particularly in Sub-Saharan Africa, economic growth regressed and inflation worsened.[54] The alleviation of poverty was not a goal of structural adjustment loans, and the circumstances of the poor often worsened, due to a reduction in social spending and an increase in the price of food, as subsidies were lifted.[55] By the late 1980s, international organizations began to admit that structural adjustment policies were worsening life for the world's poor. The World Bank changed structural adjustment loans, allowing for social spending to be maintained, and encouraging a slower change to policies such as transfer of subsidies and price rises.[56] In 1999, the World Bank and the IMF introduced the Poverty Reduction Strategy Paper approach to replace structural adjustment loans.[57] The Poverty Reduction Strategy Paper approach has been interpreted as an extension of structural adjustment policies as it continues to reinforce and legitimize global inequities.[58] Neither approach has addressed the inherent flaws within the

global economy that contribute to economic and social inequities within developing countries.[59] By reinforcing the relationship between lending and client states, many believe that the World Bank has usurped indebted countries' power to determine their own economic policy.[60] [edit]Sovereign

immunity

Despite claiming goals of "good governance and anti-corruption[61] the World Bank requires sovereign immunity from countries it deals with.[62][63][64][65][66] Sovereign immunity waives a holder from all legal liability for their actions. It is proposed that this immunity from responsibility is a "shield which [The World Bank] wants resort to, for escaping accountability and security by the people."[62] As the United States has veto power, it can prevent the World Bank from taking action against its interests.[62] [edit]Environmental

strategy

The World Bank's ongoing work to develop a strategy on climate change and environmental threats has been criticized for (i) lacking of a proper overall vision and purpose, (ii) having a limited focus on its own role in global and regional governance, and (iii) having limited recognition of specific regional issues, e.g. issues of rights to food and land, and sustainable land use. Critics have also commented that only 1% of the World Bank's lending goes to the environmental sector, narrowly defined.[67] Environmentalists are urging the Bank to stop worldwide support for the development of coal plants and other large emitters of greenhouse gas and operations that are proven to pollute or damage the environment. For instance, protesters in South Africa and abroad have criticized the 2010 decision of the World Bank's approval for a US$3.75 billion loan to build the world's 4th largest coal-fired power plant in South Africa. The plant will greatly increase the demand for coal mining and corresponding harmful environmental effects of coal.[68]

Broader concerns about both the IMF and World Bank

Critics of the World Bank and the IMF are concerned about the conditions imposed on borrower countries. The World Bank and the IMF often attach loan conditions based on what is termed the 'Washington Consensus', focusing on liberalisationof trade, investment and the financial sector, deregulation and privatisation of nationalised industries. Often the conditions are attached without due regard for the borrower countries' individual circumstances and the prescriptive recommendations by the World Bank and IMF fail to resolve the economic problems within the countries.

IMF conditions may additionally result in the loss of a state's authority to govern its own economy as national economic policies are predetermined under the structural adjustment packages. Issues of representation are raised as a consequence of the shift in the regulation of national economies from state governments to a Washington-based financial institution in which most developing countries hold little voting power.

Critics of the World Bank and the IMF are also apprehensive about the role of the Bretton Woods institutions in shaping the development discourse through their research, training and publishing activities. As the World Bank and the IMF are regarded as experts in the field of financial regulation

and economic development, their views and prescriptions may undermine or eliminate alternative perspectives on development.

There are also criticisms against the World Bank and IMF governance structures which are dominated by industrialised countries. Decisions are made and policies implemented by leading industrialised countriesthe G7because they represent the largest donors without much consultation with poor and developing countries.

B. The World Banks Response to Criticism

Like the IMF, the World Bank has also adopted the adjustment-with-a-human-face approach to its programs. However, unlike the Fund, the Bank has been more responsive to criticisms regarding its operations and accountability to the public. 1. In 1990, the World Bank Once Again Focused on Poverty Alleviation, but This Time in a Market-Friendly Framework. In 1990, after the debt crisis had subsided somewhat, the World Bank returned to a theme it embraced in the 1960s and 1970spoverty alleviation. This time, however, it took a market-friendly approach to its mission. It published a well-known report laying out its views on development. The report stressed market-based development policies based on labor-intensive growth, investment in human capital (e.g., education and health), and targeted spending on the poor during adjustmenti.e., safety nets. Today, the Banks lending activities and policy advice cover a broad range of topics relating to social development, such as community participation in development, gender issues, family issues, environmental

issues, judicial/legal reform, private sector development, and good governance. 2. The World Bank Uses Conditionality to Address Poverty Alleviation. Observers have also noted that the World Bank has used conditionality to address poverty alleviation in developing countries. As weve noted above, countries facing rigorous market-based adjustment programs have sometimes chosen expenditure reductions that hurt the poor. Increasingly, the Bank has relied on charter provisions (relating to raising the productivity and living standards of labor) to include loan conditionalities. The conditions protect and even increase spending benefiting the poor, such as for primary education, basic health care, nutrition, water supply, and sanitation. The Bank also helps countries implement anti-poverty measures and poverty monitoring systems via various loan programs. 3. The World Bank Has Instituted Internal Changes to Become More Responsive and Efficient. In addition to responding to criticisms regarding the content of adjustment policies in developing countries, the World Bank is responding to criticisms of its operations and procedures. In many cases, the problems relate to Bank practices that began well before the 1990s. Many observers, such as Andrew Kamark, claimed that the World Bank lost its focus during and after the McNamara eraRobert McNamara was the Banks President from 1968 to 1981due to the shift in focus from outcome-oriented projects to an output/volume approach. Under that approach, the Bank measured its success by the

number and size of Bank loans to developing countries. The Bank leadership paid little attention to whether the projects were implemented successfully; in fact, most were failures. After the pressures of the 1980s debt crisis had subsided, the World Bank conducted an intensive review of its own procedures, projects, and personnel by the Portfolio Management Task Force. Its 1992 report, better known as the Wapenhans Report (after Willie Wapenhans, who led the group), identified the counterproductive "loan approval" culture of the World Bank. The quality of projects and their success had fallen, employees were unhappy, and member countries as well as communities within the countries claimed the project cycle (the way the project is designed and implemented) was not responsive to their needs. The Bank has responded to the criticisms in a number of ways. First, it has tried to adopt a "smaller is better" lending philosophy by refocusing on quality or outcomeoriented analysis, which stresses project viability and includes funding loans for smaller projects, including very small businesses run by individuals or small groups in localities throughout the world (known as "microenterprise lending"). Second, it has begun to encourage "participatory" development by seeking information and feedback from the people the project is intended to benefitthe stakeholders. Moreover, it has begun to assess more closely the social impact of its operations. And through "country assistance strategies," the Bank has tried to broaden its focus to the national level (as opposed to the region in which the project is located) in order

to help the Bank and its members implement development strategies more effectively. Third, todays emphasis on participatory development has prompted the Bank to become more accessible to the public. It now releases information to the public regarding its projects. It has also developed formal ties with non-governmental organizations, as described elsewhere in the E-Book. The Bank has also established an Inspection Panel that allows private groups to monitor whether it is abiding by its own policies and procedures. Many of these initiatives have been rolled into the Strategic Compact, an administrative plan intended to streamline the Bank and improve its effectiveness and efficiency. The Compacts goals include cost reductions at the Bank, increased technical staff, expanded partnerships with other institutions, more openness and release of materials, decentralization of staff, and an increased emphasis on the social impact of development. 4. The World Banks Charter Limits the Extent of Its Responsiveness. The Banks responsiveness has required it to walk a fine line with respect to its charter, which prohibits the Bank from interfering with domestic politics. Specifically, according to Article IV, section 10, the Bank and its officers cannot "interfere in the political affairs of any member, nor shall they be influenced in their decisions by the political character of the member. . .[o]nly economic considerations shall be relevant to their decisions, and these considerations shall be weighed impartially." The Bank has formulated a test to distinguish between "economic" factors, which it can take into account, and "political" factors, which it cannot.

However, the test, which focuses on whether a factor has a "direct and obvious economic effect" relating to the Banks work, is hard to apply. This has made some human rights observers wonder how the Bank can conclude that genital mutilation is an economic issue while at the same time refusing to extend that interpretation to freedom of press issues. Although expanding the factors included under the "economic" realm may seem just from a human rights point of view, continued expansion of the Banks operations into other areas would eventually lead to a situation where any matter would fall within the Banks jurisdiction. The question then becomes whether the World Bank can be everything to everybody. The experience of the 1960s and 1970s suggest that it cannot do so successfully