The World Bank's role in global development

¶ … World Bank (also sometimes known as "The World Bank Group" [WBG]) and its major accomplishments. Created in 1944, the World Bank's goal was to aid Europe after the end of World War II. It proved to be extremely valuable during the post-war reconstruction as world trade struggled. Later the Bank sought a new financial role as global economic development transpired. The World Bank has struggled over the last few decades because the needs that necessitated the organization no longer exist. As the world's finances have grown more stable, many argue the organization's goals are obsolete and that the bank should close. However, the World Bank searches for a new role to serve today's world.

The World Bank is not a banking institution in the traditional sense of the word. It is actually made up of two organizations, the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). According to the bank's Web site, "Each institution plays a different but supportive role in our mission of global poverty reduction and the improvement of living standards. The IBRD focuses on middle income and creditworthy poor countries, while IDA focuses on the poorest countries in the world" ("About us," 2008). They provide low- or interest free-loans to developing countries to help them develop healthcare, education, communications, and much more, and provide assistance during reconstruction after disasters and other occurrences. It was established in July 1944 and is headquartered in Washington DC, with over 100 offices around the globe. When it was established, there was only one organization, the IBRD, but it has evolved into two, with close associations with three more, including the International Finance Commission (IFC).

Some of its major accomplishments include its first loan, made in 1946, to help rebuild France after the devastating effects of World War II. They were major sponsor and developer of the "East Asia Miracle," the economic development of East Asian countries throughout the 1990s (Michael, 2003), and as the world has changed they have grown and changed with it, developing detailed policies on HIV / AIDS and environmental concerns, including heavy development of renewable energy in many developing nations.

There are many controversies swirling around the World Bank today, and some critics have even called for its closure. Massive reports of corruption and fraud have plagued the Bank, forcing reforms in these areas. An accountability Web site states, "On January 14, the Wall Street Journal reported that the World Bank had uncovered 'serious incidents of fraud and corruption' in health projects it funded in India, on the order of U.S. $570 million" ("Accountability at the World Bank," 2008). The Bank at the request of member nations including the United States is addressing these problems, and a new head of the anti-corruption unit of the bank has been appointed, but there is a long road ahead for the Bank to regain its tarnished reputation.

Another problem with the Bank is how its information is disseminated and evaluated. Two writers note, "Historically, the World Bank itself has been the principal source of information about its operations and programs; inevitably, such internally generated information can be strongly suspected of being self-serving" (Friedrichs & Friedrichs, 2002). In addition, the Bank has been accused of supporting and creating globalization at a rapid rate and of spreading a U.S. inspired vision of democracy, religious beliefs, and capitalism around the world. One journal notes that it does not work with "real" people in the countries it serves, and it favors the rule of dictators over fledgling democracies because it feels dictators can strong-arm reforms necessary for massive redevelopment that is often necessary in developing countries. They note, "Borrowers of money from the World Bank typically are political elites of developing countries, and their cronies, although the repayment of the debt becomes the responsibility of people in these countries, most of whom do not benefit from the loans" (Friedrichs & Friedrichs, 2002). The Bank has come under criticism for pushing political agendas and western ideals, as well. The two authors continue, "[T]he new global economy is contributing to new forms of race, class, and gender inequality by widening economic disparities, displacing people from land which provided self-sufficiency and eroding accustomed ways of life that can't be addressed in a strictly domestic context" (Friedrichs & Friedrichs, 2002). Many feel the World Bank has a central role in creating this globalized and western way of life. In addition, many critics believe the World Bank has irreparably damaged human rights and created massive social injustices in many of its projects.

One example is the Pak Mun Dam Project in Thailand. The World Bank committed to the project in 1991, when Thailand was preparing to increase technologies in preparation for entering the world trade market. The main industries in the area of the dam were agriculture and fishing, and both were severely disrupted by the dam, leaving rural villagers without any means of survival or income. In addition, the dam created serious environmental impact on the surrounding area. The Environmental Impact Statements were flawed, and "the dam still flooded a portion of forestland (community forest), violating the bank's own policies on the destruction of cultural property" (Friedrichs & Friedrichs, 2002). The rivers feeding into Pak Mun have suffered from stagnation and loss of fish life, leading to the issues with the village fisheries along the rivers, and there were many problems with village resettlement for those people most affected by the dam's construction.

Even more disturbing is the fact that the dam was supposed to increase the fishery supplies downstream, but it has had just the opposite effect, and it is not generating the power it was designed to generate. The two authors continue, "Classified as a large dam, it was originally slated to produce 150 megawatts of energy; since its completion in 1994, however, it has not generated more than 40 megawatts over a given peak period" (Friedrichs & Friedrichs, 2002). Finally, the construction costs of the dam were incredibly over budget. Originally, the costs were estimated at approximately U.S. $135 million, but they cam in at an actual cost of U.S. $233 million (Friedrichs & Friedrichs, 2002). Unfortunately, this is not an isolated incident, and it is one reason there are so many critics of Bank policies and procedures.

One of the greatest controversies facing the Bank occurred in 2007, when then president Paul Wolfowitz was discovered to have engineered a large salary increase for a World Bank employee who happened to be his girlfriend. Wolfowitz subsequently stepped down, and his anti-corruption policies at the Bank were severely criticized after his actions. One critic stated, "Wolfowitz had made the bank 'a place synonymous with hypocrisy'" ("Resigned Wolfowitz," 2007). The Bank has brought on a new president, and is attempting to overcome objections and criticisms by building its reputation again, but it is proving difficult.

The World Bank, even though many have harshly criticized it, seems to serve a viable and important place in the global community, today. It provides low- or no-interest loans for a variety of reasons to some of the poorest countries on Earth, and it often provides loans to countries that would not be able to gain them through any other means. It also is dedicated to working on many important environmental issues, especially sustainable and renewable energy in emerging countries that certainly would not be able to afford this technology on their own. They have an excellent credit rating, and they provide important research into many important areas of study, from finance to the environment and redevelopment, as well. That is not to say that there are not areas where the bank could improve, and areas of great controversy surrounding the bank.

In any global organization that has survived for over 50 years, reform is a key ingredient of survival, and that certainly applies to the World Bank. As the charges against the Bank indicate, reforms are necessary, and they should occur as soon as possible. One of the reasons the Bank needs a new image is the fact that so many people feel it does not take society or individuals into account in many cases, and they have little ability to challenge the system. An accountability Web site notes, "As a multinational institution, the Bank claims immunity from most laws that are binding on its member states. Formally, the World Bank Group is accountable only to its owners, i.e. governments that are the Bank's shareholders" ("Accountability at the World Bank," 2008). Obviously, this has to alter for the Bank to remain credible. Discussion of some of the faulty projects it has supported indicate there is trouble at the World Bank on many levels, and that they are allowing member countries to manage many aspects of construction, development, and finance that go directly against World Bank official policies and procedures (such as the Pak Mun Project).

It seems that most people do not understand the role of the World Bank, or the influence it wields in developing countries. One way to reform the Bank would be to make it more accountable to an outside body of independent examiners, so that information it generates is not so self-serving and internally generated. In addition, since there have been so many charges of corruption and mismanagement, it is clear divisions such as the "anti-corruption" division are not working, and these areas need to undergo major reform. Perhaps a total reorganization of the Bank is in order, with a goal of replacing long-term Bank staff with new members, and undergoing serious organizational training and goals. If the Bank cannot remain corruption free, how can they possibly expect member nations and projects to maintain anti-corruption in their own areas? The Bank needs to take a hard look at itself and its goals, assess where it is meeting them, and where it is not, and make those changes, accordingly. They have enacted at least some of the measures in an independent assessment titled "The Volcker Panel," since the charges of corruption originated, but it is quite clear more needs to be done, and that there should be many different levels of outside independent examination that takes a hard look at the Bank and its many projects.

The national and international press has been sharply critical of the World Bank, especially because of its practice of forgiving loans to many poor countries, and for lining the pockets of rich dictators, rather than the people who really need the income and reforms. In addition, the World Bank is funded by member nations such as the U.S. And Great Britain, along with private funding and investment, and that means that U.S. taxpayers are ultimately the victims of many of these unpaid loans (Rahn, 2005, p. A18). Nevertheless, of course, there are always those who will support the Bank. One reporter notes, "For many years, the World Bank was the only source of financing available on reasonable terms for the roads, ports, irrigation, and public utilities desperately needed by the developing countries to modernize their economies" (Smith, 2006, p. A18). Others defend the Bank's plans in Asia, India, and now in Africa as creating real inroads in health, education, and infrastructure.