# from [[GHM101 Session 04 The Global Economy Actors]] ## History World Bank was created in July 1944 at the Bretton Woods conference in which the allies, foreseeing the end of WW2, sought to put in place a set of institutions which would govern the world economy and manage the process of reconstruction in the post-war era. The member states of the WB are also the Bank's shareholders, with the size of shareholding linked to the level of financial contribution made by each state in the form of subscriptions to the Bank. This in turn affects the political influence enjoyed by each state over the governance of the Bank. WB is made up of two separate development institutions: 1. The International Bank for Reconstruction and Development (IBRD), which aims to reduce poverty in middle-income and credit-worthy poorer countries 2. The International Development Assistance (IDA), which focuses on the world's poorest countries. The work of the IBRD and IDA is complemented by a number of specialist agencies which are crucial to the implementation of its policies and objectives in different settings: 1. [[International Finance Corporation]] 2. Multilateral Investment Guarantee Agency 3. International Centre for the Settlemen of Investment Disputes The work of these institutions consists in ==providing low-interest loans, interest-free credits and grants== to LMIC for a wide array of purposes that include investments in education, health, public administration, infrastructure, financial and private sector development, agriculture and environmental and natural resource management. ## 2.1 Organisational structure The balance of power within the organisation remains strongly skewed in favour of Western Europe and North America who, as the allies victorious in World War 2, were responsible for creating the WB. This may be compared with the “index of power” shown at the following link: https://economicsofimperialism.blogspot.com/2018/02/index-of-power.html The highest authority in the Bank is the Board of Governors, which meets annually in tandem with the IMF. Each member-state nominates a Governor, who is often a national finance or economics minister. The day-to-day running of the Bank, however, falls to the Board of Directors which consists of 25 Executive Directors and is chaired by the WB President. It is here that the [[Power asymmetry|power inequalities]] inherent in the WB governance structures become apparent. Whereas all member-states have formally equal representation on the Board of Governors – with each nominating a single delegate – not all states can be represented on the much smaller Board of Directors. The USA, the UK, Japan, Germany and France – the five states with the largest voting share within the organisation – each appoint their own Executive Directors. China, Russian and Saudi Arabia also enjoy permanent representation on the Board of Directors. The remaining 18 positions are elected from the rest of the membership in certain clusters. While officially separate, convention dictates that the boards of the IBRD and IDA are staffed by the same personnel. ## 2.2 The role of the World Bank President The process of nominating the WB President is another example of the [[Power asymmetry|power asymmetries]] in the WB governance structures. Traditionally the President of the Bank is a US citizen. This is the result of a ‘gentleman’s agreement’ between the USA and the main European shareholders in the Bank, that it is America’s prerogative to nominate the WB President while a European nominee traditionally serves as the Managing Director of the IMF. This again reflects the fact that at their inception Europe and America were the dominant economic and political powers in the world and continue to enjoy the sort of political influence in the global economic institutions which reflects their standing at the time. The specific duties of the Bank President are many, but their role is principally to act as a figurehead for the Bank, offering strategic leadership and co-ordinating the activities of the Bank internally as well as acting as a spokesperson on development issues for the Bank. Further details about the President and about the function of the presidency more generally can be found at the WB website. ## 2.3 Decision-making in the World Bank That said, the modus operandi of the Bank is to seek consensus on all decisions. On first sight it may seem that the norm of consensus-based decision-making offsets the power inequalities enshrined by unequal voting powers. However, it can be argued that this is not the case. Since the negotiations take place in an institutional setting in which the most powerful members can, if necessary, call for a vote to be held and force through measures in their interest, there is arguably a greater incentive for the less powerful members to compromise and accommodate the interests of the most powerful members in the hope of achieving at least some of their objectives. As we shall see also when we examine the WTO in Session 5, consensus-based decision-making often works to the advantage of the most powerful states whose political and economic resources mean their views must be accommodated. We shall return to the question of unequal voting weights and arguments for reform when we examine the IMF below. ## 2.4 Early aims of the World Bank >The focus of its lending was on particular public sector projects focusing on infrastructure development. Great emphasis was placed also on the need for a project-based, co-ordinated approach to the process of reconstruction, which saw money lent within the framework of broader, longer term development programmes as opposed to individual, ad hoc development projects. It is also important to highlight that the financial assistance provided by the Bank came overwhelmingly in the form of ==loans rather than grants==. As well as highlighting the reconstruction in the title of the organisation, we must also emphasise that the organisation was a Bank, no matter how untypical, and that the officers of the Bank saw their role in these terms, to provide loans which would ultimately be repaid with interest. ## 2.5 From reconstruction to development Soon after its inception, the role foreseen for the Bank in the realm of post-war reconstruction in Europe was effectively usurped by the Marshall Plan, which provided funds from the USA government to European states for that very purpose. ==The Marshall plan==, named after George Marshall, was officially known as the ==European Recovery Program==. It was intended to rebuild the economies of Western Europe after World War 2. European nations received nearly $13 billion in aid, resulting in the initial provision of food, staples, fuel and machinery from the USA and later in investment in industrial capacity in Europe. Marshall Plan funding ended in 1951. >Given that the WB was a new organisation faced with the prospects of much of its expected role becoming redundant, it was necessary to refocus its efforts on areas which would complement rather than replicate the work of the Marshall Plan. ==Consequently, the focus of the WB shifted from a reconstruction to a development role and with this its geographical focus shifted from Western Europe to other parts of the world==. In the first instance its lending focused on Latin America. The Bank made its first development loan to Chile in 1948, followed by further loans to Mexico and Brazil in 1949. The shift in emphasis was accompanied over time by a broadening in the Bank’s understanding of development and the role which the Bank played in the genesis and the implementation of the development programmes it funded. While at the outset the focus of the Bank’s lending was on infrastructure projects, there was a shift over time toward a more inclusive conception of development which encompassed other factors, such as poor health and low levels of education which, it began to recognise, were often as responsible for stunting the economic development of a country as poor roads and energy supplies. This was reflected in the decision to include education as an official development goal in 1963. ## 2.6 The changing role of the World Bank Factors within lender countries and within the world economy more generally saw the role of the WB changing and developing over time. ==One of the barriers to gaining WB funding experienced by countries with fewer resources was the lack of technical expertise required to develop the type of project-based development strategies which the Bank sought to fund==. This led to a realisation within the Bank that it needed to provide not just financial resources but technical assistance to countries to assist in the process of both developing and implementing projects which it was able to fund. ## 2.7 The Wolfensohn era The period between 1995 and 2005 under the Presidency of James Wolfensohn saw a number of developments in the focus of WB lending and the practices which surrounded the development and implementation of Bank lending programmes. These had a particular relevance for global health as the Wolfensohn era saw the crucial role which health issues play in preventing development becoming more fully recognised by the Bank. In particular, it was during this period that the devastating effects of HIV/AIDS on the social and economic fabric of many LMICs, particularly in sub-Saharan Africa, came onto the Bank’s agenda in a more meaningful way. >This period also saw the adoption by the Bank of the Comprehensive Development Framework (CDF). Wolfensohn was concerned by the narrow focus of much of the Bank’s work on economic analysis. A further important development under the Presidency of Wolfensohn was the development of a more multi-lateralist approach by the Bank, which began to reach out to civil society organisations, charities and private sector organisations that had previously been ignored by the Bank. The traditional approach of the Bank had been to see its ‘clients’ principally as the governments of debtor states. The new approach, however, saw the emergence of new types of governance structure such as global partnerships in which the Bank and state governments would work with a coalition of other, interested parties in an attempt to address the development needs of particular states. As you will see elsewhere on the course (Module GHM102), global partnerships have been an important development for global health, for example in the field of HIV/AIDS. The WB is also involved in providing funding to states affected by unforeseen economic dislocation. For example, following the East Asian financial crisis of 1997 to 1999, which began in Thailand and spread to other economies in the region, the WB provided large financial packages aimed at stabilising the economies affected. Similarly, as noted above financial assistance was provided to countries affected by the 2008 global financial crisis. The WB also intervened to offset the effects of the Asian tsunami of 2004, leading to a renewed focus on the role to be played by the Bank in reconstruction after natural disasters and war. ## 2.8 The World Bank Sustainable Development Goals Having only one health goal does not underplay the importance of health in the global development agenda but reflects instead the shifting aims and focus between the MDGs and the SDGs. The MDGs were designed for a specific purpose: the achievement of better human development outcomes (primarily in terms of poverty, education and health) in less wealthy countries and were framed as a compact between countries at different income levels. The SDGs, meanwhile, are intended to be “integrated and indivisible, global in nature and universally applicable”. They seek to be relevant to all countries. They are therefore about development, but do not just concern low-income countries. In fact, all of the SDGs are designed to be cross-cutting, and the inter-linkages and networks within them are just as important as the individual goals themselves. Since the MDGs reflected a relatively narrow range of human development outcomes, it was logical that health should feature so prominently within them. The SDGs, by contrast, reflect a far wider range of environmental, economic and societal concerns. Given their ambition, ==the SDGs require substantial financial investments in order to achieve them and the WB plays a key role in their financing==. To help generate the needed flows, both in domestic public resources and private finance, it has been argued that the WB (and other multi-lateral development banks and the IMF) should provide countries with the necessary financial leverage, policy guidance and financial support.