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What is the World Bank?

If you are the slightest interested in global development, international relations, or humanitarian work, you have heard of it.  The World Bank is one of the world’s absolutely strongest institutions when it comes to combatting poverty and advance development and progress. It is a giant when it comes to lending money to  However, if one is to be completely honest – who of you know what it does and how it works? I will try to research and present the World Bank to you here, as shortly and neatly as I can, so that we in general get a bit of a better picture of this powerful institution.

Created out of the anticipated economic and fiscal disorder after the Second World War, the World Bank and the International Monetary Fund (IMF) quickly grew into United Nations-backed strongholds. By custom, the World Bank has had an American leader and the IMF a European, although this changed now in 2012 as South Korean Jim Yong Kim was elected World Bank head. Okey, Kim actually moved to the US at five years of age, but still… Well, the World Bank works mainly by these methods:

  • lending money
  • offers advice and training

It does this to both the public and private sectors of middle- and low-income countries. The aim is, obviously, to attack global poverty.

Countries must first join the IMF in order to join the World Bank. The member states (184 today) are seen as shareholders, where their investment to the IMF decides the cost of joining the Bank. The largest shareholders will have executive directors in the Bank, and the largest shareholder (the US) will traditionally appoint the head. It also funds its activities by bond actions on the capital market.

The World Bank is mainly a US-influenced organisation, here with Hillary Clinton speaking.

The Bank lends money to poor but credit-worthy states and private institutions. It does so using two certain institutions which actually make up the Bank to begin with:

  • The International Finance Corporation (IFC): gives loans to middle-income countries and the capital market
  • The International Bank for Reconstruction and Development (IBRD): solely support for the poorest countries
Here is a simplified map for you to see approximately which countries and parts of the world are in what sort of economic status:

The grace period for the IBRD (before repayment starts) is 10 years and the loan has a maturity (from signature of loan until full repayment) is 35 years, and come in the form of interest-free (!) credits, which is invaluable for developing countries. Interest, as you know, can otherwise truly disrupt repayment and planning. However, some countries have to lend so much money that the sums are in reality impossible to pay back – then there is a certain scheme, the Heavily Indebted Poor Countries scheme, that reduces the debt payments.

The Bank enourages its clients to ”promote sustainable growth, health, education, social development programs focusing on governance and poverty reduction mechanisms, the environment, private business and macroeconomic reform.

Some criticism of the bank is:

  • the rich dominate the poor – since only the major shareholders of the Bank have executive directors and elect the head of the Bank, and in addition there are cases where the Bank has been criticised for forcing its policies – such as austerity measures and privatisation – of countries in order to bring about change;
  • it spurs pure market capitalism – as an investment institution, the Bank inherently encourages entrepreneurship and innovation, and with its bonds at the international market it can be seen as a major international business.
For further questions, check this out: http://web.worldbank.org/WBSITE/EXTERNAL/EXTSITETOOLS/0,,contentMDK:20147466~menuPK:344189~pagePK:98400~piPK:98424~theSitePK:95474,00.html#12

Overall, I have to say that I have always regarded the World Bank as something that has a slightly positive ring to it. I still do. It is such a poweful method of mending the rich countries’ economies to those of the poorer countries in the world, and with neatly balanced interests for middle-income countries, the Bank seems to grow for each year and hence increase its capacity to lend. However, and this is a big but, I am very much afraid that increased privatisation will cause more chaos in countries that barely are able to handle their state finances at the moment. I will not say too much here, because I know no specifics, but is it not hybris to try to enforce increased privatisation in countries that barely can hold on to that little stability that they have? I do think that the Bank does weigh carefully what sort of businesses it support, and hence I will not end on a negative note. The Bank has done much good and will do more, and to some extent even I have to say that extreme measures are justifiable if we actually can bring those 2 billion living in poverty up to at least a middle-income economic status. With Kim elected head on Monday, we will hopefully see an efficient bank. But keep in mind – we are watching you.

Jim Yong Kim - new World Bank head. Of course, of American nationality (although born in Seoul, South Korea).

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This entry was posted on 19 april, 2012 by in Global hälsa/Global Health and tagged , , , , .

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