World Bank

The genesis of the World Bank lies in the creation of the International Bank for Reconstruction and Development (IBRD), following a conference at Bretton Woods in 1944 (which also led to the creation of the International Monetary Fund). Today the World Bank Group comprises in addition to the IBRD, the International Development Association (IDA), International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), and International Centre for Settlement of Investment Disputes (ICSID). Since their inception through 2009, the institutions comprising the World Bank group have been involved in lending nearly three fourths of a trillion dollars (Table 1).

There are two key questions about the World Bank: (1) how is power and influence brought to bear on the institution and (2) how does the institution itself exercise power and influence on others, especially its borrowers?

International organizations in general are plagued by severe agency problems, and the World Bank is no exception. Long chains of delegation and multiple stakeholders make this inevitable. Larger shareholders obviously have greater influence, with the United States being the most dominant. Nonetheless, even the United States is a distinct minority shareholder, which places considerable limits on how much it can directly influence the institution. The key mechanisms that have shaped the World Bank's governance have been senior personnel appointments (especially the President, who has been a U.S. national since inception) and importantly, the nature of the institution's finances. The financial design of the Bank, relying as it did on Wall Street initially and global financial markets in later years, was critical in establishing a degree of political autonomy for the [Page 2756]institution, although this came at the expense of greater reliance on the preferences of financial markets.

This began to change with the advent of IDA as the market-based autonomy (from governments) that the IBRD built for itself was slowly eroded by the public resources that funded IDA. The replenishment procedures of IDA—its periodicity and burden-sharing procedures—made it susceptible to the goodwill of major shareholders. In any burden-sharing scheme, the largest contributor sets the tone. From the late 1960s onward, as the United States began a long process of reducing its financial share, other donors began to link their contributions to that of the United States—which paradoxically increased the bargaining power of the United States even as its contributions declined. The periodicity meant that every 3 to 4 years, new demands could be made on the institution. The peculiarities of the U.S. budgetary process with annual authorizations ensured that the exercise became perennial and further enhanced U.S. influence. Thus, over time, the Bank's overall strategic direction was set not by its own board but by the IDA deputies—the personnel representing donor countries who were charged with completing the IDA replenishment process.

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