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World Bank Group

2007 Schools Wikipedia Selection. Related subjects: Economics

   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:
     * 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). It provides 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.

Criticism

   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. Nevertheless 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. World Bank also engages in funding
   the education of promising young people from developing countries
   through its graduate scholarship programs.

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 ).

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 a non-profit-making international
   organisation owned by member governments.

   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, 2004 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
   change.

World Bank Group agencies

   The World Bank Group consists of
     * the International Bank for Reconstruction and Development (IBRD),
       established in 1945,
     * the International Finance Corporation (IFC), established in 1956,
     * the International Development Association (IDA), established in
       1960,
     * the Multilateral Investment Guarantee Agency (MIGA), established in
       1988 and
     * the International Centre for Settlement of Investment Disputes
       (ICSID), established in 1966.

   Governments can choose which of these agencies they sign up to
   individually. The IBRD has 184 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 24 Executive Directors, with
   each Director representing either one country (for the largest
   countries), or a group of countries. Directors are appointed by their
   respective governments or the constituencies.

   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 .

   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.

Opposition

   A young World Bank protester takes to the street in Jakarta, Indonesia.
   Enlarge
   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 favour 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 must back the Bank.

   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.

   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.

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 1974 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 .

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", . 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
   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 . 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'. . Following the EIR process, the World Bank issued a
   revised Policy on Indigenous Peoples .

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.

Other Information

   The World Bank also operates an AM radio station from its Washington,
   DC headquarters. It can be heard on the air with the call sign 4U1WB.

List of Presidents

   An unwritten rule establishes that the IMF's managing director must be
   European and that the president of the World Bank must be from the
   United States.
     * 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)

List of chief economists

     * Maddi Fairthorne- 1985-1988
     * Stanley Fischer - 1988-1990
     * Lawrence Summers - 1991-1993
     * Joseph E. Stiglitz - 1997–2000
     * Nicholas Stern - 2000–2003
     * François Bourguignon - 2003-current

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