let's now consider the role of the World
Bank in the global economy
the World Bank was conceived of during
World War two
by Great Britain in the United States
working together during a series of
meetings at Bretton Woods from the
beginning the vision was of a bank
dedicated to the idea of economic
development for the poorer nations of
the world some of the concrete goals
stated by the bank itself are fighting
poverty and hunger educating gender
equality health environmental
sustainability and overall all of those
goals under a general rubric of economic
development of those goals two of them
gender equality and environmental
sustainability are relatively recent
there are several quite distinct
institutions associated with the World
Bank the first is the International
Development Association or eye-dea as it
is known for short the ID a works with
the very poorest nations and offers zero
interest loans and also grants and aid
you can think of this as very much a
kind of traditional aid agency the
International Bank for Reconstruction
and Development also known as IBRD is
much more like a bank as the name World
Bank would suggest so the IBRD borrows
money from private capital markets and
then invests this money in projects in
developing nations the IBRD works with
developing nations but unlike the ID a
it does not in general focus its
activity on the very poorest of those
nations to get a sense of scope in a
typical year ID a expenditures might run
around 15 billion dollars and the amount
of money raised in private capital
markets by the IBRD might run in the
range of 10 to 15 billion dollars there
is also the IFC or the International
Finance Corporation which is part of the
broader World Bank Group and this also
serves Bank like functions trying to
support private sector investment in
developing nations if you're looking at
the governance of the World Bank you
could start with the president of the
World Bank by convention this person is
a citizen of the United States and the
United States has a
significant role in choosing the person
the World Bank has executive directors
coming from many nations but the most
fundamental form of government
governance in the World Bank are the
voting rights of particular nations and
here the United States the major
European nations and Japan really have
very significant influence over the
World Bank through their ultimate voting
rights it has been a matter of real
controversy whether developing nations
should be given greater voting rights in
the World Bank many poor individuals and
developing nations have benefited a
great deal from projects supported by
the World Bank but let's look at a few
of the major criticisms of the World
Bank one set of criticisms has been
directed at the banks programs for what
is called structural adjustment under
structural adjustment the bank lends
money to a country but it also asks that
country to make policy changes typically
in the direction of economic
liberalisation this of course has proven
very controversial
I'm not going to survey these debates
here in this unit but if you look at the
other video units as part of this course
you will find many particular details on
whether various sectors should be seeing
more economic liberalisation or not
there's a second approach to
understanding the World Bank and
probably it's more of an observation
than a criticism but the size of the
World Bank has now become really quite
small relative to the size of private
capital markets to developing nations so
if we think of the idea in a typical
year is spending 15 billion dollars and
if we think of the IBRD as being in a
typical year in the range of ten to
fifteen billion dollars and there's the
broader world bank group but we're
getting a total impact in the range of
several tens of billions of dollars and
then imagine that in a typical year
private capital flows or say 600 billion
dollars to developing nations well then
the World Bank looks quite small these
private capital flows are a good thing
and it was part of the original vision
of the World Bank that private capital
would step in and do a lot of what the
World Bank did it first but nonetheless
what you hear often is exaggerated
rhetoric about the World Bank
for good or for evil and the notion that
the World Bank is somehow pulling the
strings on the global economy and
manipulating capital markets and keeping
poor countries under its boot or or
whatever is alleged about the World Bank
typically those claims are serious
exaggerations the World Bank is one
player in economic development but in
relative terms it's becoming smaller and
indeed much smaller with the passage of
time another criticism of the World Bank
is that it's too much under the control
of its own boards of directors for
instance those boards tend to represent
the United States and the wealthier
European nations in Japan and in part
they view the World Bank is a useful way
of generating construction and
infrastructure contracts for
corporations back in their home
countries and what they're interested in
seeing the World Bank do is lend a lot
of money and give a lot of aid but in a
form that will involve these contracts
for their own corporations that's where
a lot of the political support for the
World Bank comes from but sometimes this
leads to harmful incentives because the
incentives within the World Bank or to
get contracts out the door and of course
the developing nations working with the
World Bank they know this so sometimes
they're able to manipulate the World
Bank and get a contract when ideally
perhaps the World Bank should take more
time or impose greater conditionality or
maybe cut off aid or cut off the loan
but in fact the incentive is sometimes
to keep that stream of contracts running
and the overall result of this
equilibrium game between the developing
nation the World Bank and the
individuals on the World Bank boards of
directors who want a lot of construction
contracts often from that mix you end up
with a fair amount of inefficiency and
not necessarily the most effective
projects for development date of course
there's an enormous amount and on the
World Bank for a very simple start use
Google but also consider googling the
news so go to new stock Google and enter
World Bank or enter World Bank and the
names of particular nations and that's
one way to start getting a handle on
what the World Bank is up to right now
I also recommend digging very much into
specific project areas whether it be
health or education or water policy
whatever
you can do that by looking at the other
video units and following their
suggestions for further research that's
one very good way to get a handle on the
specifics of what the World Bank has
been up to