World Bank

The World Bank is a truly global institution that aspires to lead action and dialogue across the international development arena, working with the world's poorer countries on virtually every facet of their development challenges. Its bold ambition is captured by the motto above the Washington, D.C., headquarters entrance: “Our dream is a world free of poverty.”

The World Bank is a specialized agency of the United Nations, created at the Bretton Woods conference of 1944, a year before the United Nations was established, in conjunction with the International Monetary Fund (with which it is “twinned”). The International Monetary Fund focuses on short-term crises and the international monetary system, whereas the World Bank has a broader mission of reconstruction and development.

The World Bank comprises several distinct institutions, which collectively constitute the World Bank Group. The largest are the International Bank for Reconstruction and Development, created in 1944 and sometimes also called “the World Bank”; the International Development Association, created in 1960 as an arm offering concessional financing; and the International Finance Corporation, which lends to private companies for private-sector projects. The International Bank for Reconstruction and Development and the International Development Association are tightly integrated, although their financial operations are very different. The International Finance Corporation, with its own executive vice president and a staff that views itself as comparatively entrepreneurial, operates more separately. Two smaller legal entities complete the group: the Multilateral Investment Guarantee Agency, which insures private companies against political risk, and the International Center for the Settlement of Investment Disputes. Other institutions housed within or physically nearby the World Bank include the Global Environment Facility and the Consultative Group for Assistance to the Poorest, which support micro-finance development. The relationships with these organizations are worked out on a case-by-case basis, with some formal, some informal.

In 2011, the World Bank was owned by 187 member countries, each of which appoints one governor. Countries subscribe through financial contribution and exercise voting rights and authority over policies and operations relative to capital share. Consequently, voting shares reflect economic strength, and wealthier countries exercise greater power. Although the World Bank's efforts extend beyond public authorities, its ultimate responsibility is to governments; thus, it is neither a private bank nor a private charity or foundation, but a public-sector institution whose shareholders have strong influence.

The World Bank has been shaped by the changing nature of international relations and economic thought since its creation. When the Marshall Plan took over its primary initial role (financing Europe's postwar reconstruction), the bank's core mission evolved into development, focusing increasingly on human development, environment, and participation. The bank responds also to financial and social crises, natural disasters, and postconflict reconstruction. Shaped by Cold War politics for decades, the World Bank became a truly global institution when former Soviet Union nations joined after 1989.

The World Bank is a major source of development financing, with annual loans and grants of US$30 billion to US$60 billion. It has roles in intellectual leadership and aid coordination, and it works with a wide range of institutions to promote aid harmonization. The bank's financial independence gives it a flexibility that many other development institutions lack. The World Bank offers concessional credits, grants, or loans, with the expectation of repayment. Financial discipline, at the heart of the bank's strong reputation for probity and responsibility, carries both benefits and drawbacks; among the latter were rigidities that rendered it difficult to address poor countries' overindebtedness until a global citizens' movement (Jubilee 2000) pressed G-8 action and opened the door to new debt-relief mechanisms.

...