World Bank operations and role in global development

World Bank

What role is played by the World Bank in international economic affairs?

The World Bank has played a critical role, in helping to fight poverty and allowing many people, to be able to develop sustainable lifestyles. Part of the reason for this, is because of the vast inequalities that took place in the decades before the World War II. Where, many governments and countries were only concerned about their own self-interest. This meant that huge income disparities would occur in a number of nations around the globe. After World War II, it became obvious that some kind of institution would need to address, the vast amounts of inequality that existed, in a number of developing countries. As result, the World Bank would begin to play a role, in helping to support the objectives of the international community by: working to eradicate poverty and support economic mobility. (Kupur 1997, pp. 1- 49) To achieve this objective the bank will offer governments: low interest loans, interest free credits and grants. These funds are spent in a number of different areas to include investments in: health care, education, infrastructure, public administration, agriculture, the environment, natural resource management and private / financial sector development. (About Us 2010) This is important, because it shows how the World Bank, has played a vital role in helping to support the activities of many developing countries. As their programs have allowed a number of governments, to create policies that can address the long-term issues, which are causing income disparities.

A good example of this can be seen in China, where the World Bank would begin to work consistently with the government to: eradicate poverty (when reforms were first introduced in 1978). The idea was that by helping the government effectively improve economic opportunity and reduce the vast income disparities, the country could become a part of the developed world. As the anti-poverty efforts, would help China be able to develop a middle class. This is a key for the World Bank, in being able to achieve its goals. The results were that, China would reduce the total number of people living in poverty by 400 million between: 1990 and 2005. (Fighting Poverty 2010) This is significant, because it shows how the World Bank's anti-poverty efforts, have been successful in achieving their goals before the intended deadline. Evidence of the most recent success can be seen with the China surpassing Japan, as the world's second largest economy. (China Overtakes Japan as World's Second Largest Economy 2010) This is important, because it highlights how various efforts to reduce poverty over the long-term, would improve economic opportunity in the country. As the different reforms and financial assistance provided by the World Bank, would help China to experience significant long-term growth.

What this shows, is how the World Bank is playing an important role, in helping a number of different countries, be able to successfully fight poverty. As the various programs and assistance is providing long-term support, in allowing countries to achieve this objective. China is just one of many examples, highlighting the long-term success of the World Bank, in a number of countries around the globe.

How valid are criticism of its role and procedures?

Despite the various successes of the World Bank, a number of criticisms have been leveled against it. At the heart of these negative arguments, are the various policies and procedures that the bank will force countries to follow. What happens is a number of different conditions are imposed on nations that would like to receive assistance from the World Bank. Where, they must follow what is known as the Washington Consensus. This is when the bank will impose a blanket set of conditions that all governments must follow, in order to qualify for any kind of assistance and continue to receive funding in the future. The most notable would include: liberalizing various sectors of the economy (trade / investments / finance), the deregulation of state owned industries and the privatization of various industries. The problem with utilizing this strategy is that the World Bank; is taking a one size fits all approach, when it comes to working with developing nations. Where, they are ignoring the various local, economic issues that could be unique to a certain area. At which point, the changes required by the government, could make the situation worse. This is because deregulation, will reduce the number of protections and barriers on a host of activities. Once this occurs, it can mean that many governments will have less control over the economy. (What are the Main Concerns and Criticisms 2007)

A good example of this occurred in many nations, where the World Bank would support the development of hydro electric dams. On paper, this looked like a great way to be able to help developing countries, address their various energy needs. Yet, the once this program was implemented it would mean that many indigenous people (who were poor) were forced to move. This is because there would be conflict between: the policies of the World Bank and its objectives. Where, the construction of dams and other projects would displace large numbers of poor people. This is problematic, because it is making the situation worse by taking away the livelihood of: various low income individuals and their families. As the land that they live on, is how they are able to sustain themselves and their way of life. Once you take this away, they are forced to relocate to urban areas, in an effort to find some kind of means to support themselves. However, because of the large amounts of unemployment and a lack of opportunity in many areas, this program is throwing these people into crowded urban slums. (What are the Main Concerns and Criticisms 2007) Evidence of this can be seen with the Chixoy Dam Project. What happened was; the Guatemalan government would receive a loan from the World Bank to build the Chixoy Dam. The objective was to improve the infrastructure of the area, by providing a safe way to increase electricity production. During the 1980's the government would engage in various human rights abuses (in an effort to scare the indigenous population to leave the area). Where, the government would send the army in to those areas; that local inhabitants were opposing such plans. At which point, they would massacre entire villages, to keep the indigenous population in line (as they would force, nearly 3,400 Mayans to move elsewhere). Despite this fact, the World Bank would continue to provide funding for the project, after these reports began to surface. (Aquire 2004) What this shows, is that the various policies implemented by the World Bank, can often harm the people they are trying to help. As their one size fits all approach, is ignoring various economic and social realities in an area, causing the situation to become worse.