The World Bank is an international financial institution that provides loans and grants to the governments of low and middle income countries for the purpose of pursuing capital projects.....
It comprises two institutions: the International Bank for Reconstruction and Development (IBRD), and the International Development Association (IDA). The World Bank is a component of the World Bank Group.
The World Bank's most recently stated goal is the reduction of poverty.
World Bank Group
The World Bank Group is an extended family of five international organizations, and the parent organization of the World Bank, the collective name given to the first two listed organizations, the IBRD and the IDA:
- International Bank for Reconstruction and Development (IBRD)
- International Development Association (IDA)
- International Finance Corporation (IFC)
- Multilateral Investment Guarantee Agency (MIGA)
- International Centre for Settlement of Investment Disputes (ICSID)
History
The World Bank was created at the 1944 Bretton Woods Conference, along with the International Monetary Fund (IMF). The president of the World Bank is, traditionally, an American. The World Bank and the IMF are both based in Washington, D.C., and work closely with each other.
Although many countries were represented at the Bretton Woods Conference, the United States and United Kingdom were the most powerful in attendance and dominated the negotiations. The intention behind the founding of the World Bank was to provide temporary loans to low-income countries which were unable to obtain loans commercially. The Bank may also make loans and demand policy reforms from recipients.
1944–1974
In its early years the Bank made a slow start for two reasons: it was underfunded, and there were leadership struggles between the US Executive Director and the President of the organization. When the Marshall Plan went into effect in 1947, many European countries began receiving aid from other sources. Faced with this competition, the World Bank shifted its focus to non-European countries. Until 1968, its loans were earmarked for the construction of infrastructure works, such as seaports, highway systems, and power plants, that would generate enough income to enable a borrower country to repay the loan. In 1960, the International Development Association was formed (as opposed to a UN fund named SUNFED), providing soft loans to developing countries.
Before 1974, the reconstruction and development loans provided by the World Bank were relatively small. The Bank's staff were aware of the need to instill confidence in the bank. Fiscal conservatism ruled, and loan applications had to meet strict criteria.
The first country to receive a World Bank loan was France. The Bank's president at the time, John McCloy, chose France over two other applicants, Poland and Chile. The loan was for US$250 million, half the amount requested, and it came with strict conditions. France had to agree to produce a balanced budget and give priority of debt repayment to the World Bank over other governments. World Bank staff closely monitored the use of the funds to ensure that the French government met the conditions. In addition, before the loan was approved, the United States State Department told the French government that its members associated with the Communist Party would first have to be removed. The French government complied and removed the Communist coalition government - the so-called tripartite. Within hours, the loan to France was approved.
1974–1980
From 1974 to 1980 the bank concentrated on meeting the basic needs of people in the developing world. The size and number of loans to borrowers was greatly increased, as loan targets expanded from infrastructure into social services and other sectors.
These changes can be attributed to Robert McNamara, who was appointed to the presidency in 1968 by Lyndon B. Johnson.McNamara implored bank treasurer Eugene Rotberg to seek out new sources of capital outside of the northern banks that had been the primary sources of funding. Rotberg used the global bond market to increase the capital available to the bank. 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%.
The World Bank Administrative Tribunal was established in 1980, 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 honored.
1980–1989
McNamara was succeeded by US President Jimmy Carter's nominee, Alden W. Clausen, in 1980. Clausen replaced many members of McNamara's staff and crafted a different mission emphasis. His 1982 decision to replace the bank's Chief Economist, Hollis B. Chenery, with Anne Krueger was an example of this new focus. Krueger was known for her criticism of development funding and for describing Third World governments as "rent-seeking states".
During the 1980s the bank emphasized lending to service Third-World debt, and structural adjustment policies designed to streamline the economies of developing nations. UNICEF reported in the late 1980s that the structural adjustment programs of the World Bank had been responsible for "reduced health, nutritional and educational levels for tens of millions of children in Asia, Latin America, and Africa".
1989–present
Beginning in 1989, in response to harsh criticism from many groups, the bank began including environmental groups and NGOs in its loans to mitigate the past effects of its development policies that had prompted the criticism. It also formed an implementing agency, in accordance with the Montreal Protocols, to stop ozone-depletion damage to the Earth's atmosphere by phasing out the use of 95% of ozone-depleting chemicals, with a target date of 2015. Since then, in accordance with its so-called "Six Strategic Themes", the bank has put various additional policies into effect to preserve the environment while promoting development. For example, in 1991 the bank announced that to protect against deforestation, especially in the Amazon, it would not finance any commercial logging or infrastructure projects that harm the environment.
In order to promote global public goods, the World Bank tries to control communicable diseases such as malaria, delivering vaccines to several parts of the world, and joining combat forces. In 2000 the bank announced a "war on AIDS" and in 2011 the Bank joined the Stop Tuberculosis Partnership.
Traditionally, based on a tacit understanding between the United States and Europe, the president of the World Bank has always been selected from candidates nominated by the United States. In 2012, for the first time, two non-US citizens were nominated.
On 23 March 2012, U.S. President Barack Obama announced that the United States would nominate Jim Yong Kim as the next president of the Bank. Jim Yong Kim was elected on 27 April 2012 and re-elected for a second five-year term in 2017. He announced that he would resign effective 1 February 2019. He was replaced on an interim basis by now-former World Bank CEO, Kristalina Georgieva, then by David Malpass on 9 April 2019.
Amid the global fight with the COVID-19 pandemic, in September 2020, the World Bank announced a plan worth $12 billion in order to supply "low and middle income countries" with a vaccine once it is approved. The plan is set to affect over two billion people worldwide.
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