World Bank

A multilateral development institution for poverty reduction and promotion of sustainable economic development worldwide, also known as the International Bank for Reconstruction and Development. Ironically, the development aspect of the World Bank, which is now its main mandate, was possibly an afterthought, emphasized only later by the developing country delegations present at a conference in Bretton Woods, New Hampshire, in 1944. It was from there that the bank was created—along with its sister organization, the International Monetary Fund (IMF) and the third pillar of the newly proposed multilateral Bretton Woods system, the General Agreement on Tariffs and Trade (GATT). The World Bank finally came into official existence in 1946 when the United Nations was established.

Historical Context

The creation of the World Bank was a result of the geostrategic and global economic conditions present in Europe and America just before World War II. In 1942, both the American and British governments were planning innovations that would prevent the international economy from sinking back into the economic disasters of the 1930s after World War II was over. In Britain, noted economist John Maynard Keynes and his associates were advocating full employment policies, emphasizing the need for government action to redress the shortfalls of the market and building new multilateral institutions to manage an increasingly interdependent global economy and provide a counterbalance for any single rising force in Europe.

In America, Harry Dexter White of the U.S. Treasury, along with Keynes, was also concerned with forming an institution or international bank to supplement financing a depression, the war-shocked private financial markets, reconstruction of the economies of Europe, and finally to advance the economies of less-developed countries.

Organizational Structure and Policies

Since its birth in 1946, the World Bank has expanded into a large organization employing nearly 10,000 people. It comprises an amalgam of five organizations—collectively called the World Bank Group—that operate under a common governing board but with different functions. These include the International Bank for Reconstruction and Development (IBRD), the International Development Agency (IDA), the International Finance Corporation (IFC), the Multinational Investment Guarantee Agency (MIGA), and the International Center for Settlement of Investment Disputes (ICSID).

The World Bank is headed by a president, appointed for a five-year term by the United States, the institution's single largest shareholder and financier. An executive board, composed of representatives from various member countries, oversees and approves the day-to-day operational and lending activities of the World Bank.

Over time, the World Bank has had to adapt its role to changing economic challenges and the perceptions of the contribution that a multilateral public sector institution can make to development. Postwar reconstruction dominated the first 15 years of the institution's life. As this role became redundant over time, there was a widening of the bank's mandate, emphasized in shifts through its different decades of existence. This broader mandate included poverty reduction, economic growth, debt restructuring, developmental research, structural adjustment policies, and other program-based lending forms to the bank's clients: mainly poor and developing countries of Asia, Africa, and Latin America.

There has been extensive and complex analysis of the World Bank's past five decades of existence in terms of its projects, lending policies, and overall developmental impact. There have been both successes and failures, and the lessons learned from them provide critical feedback for yet another role the institution has recently adopted—that of a knowledge bank, or the repository of best practice in developmental assistance. How this relatively recent role shapes the bank's future direction, policies, and indeed its effectiveness remains to be seen.

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