What is the World Bank?
The World Bank Group is the largest provider of long-term development finance to poor countries. It provides loans at market rates to middle-income countries through the International Bank for Reconstruction and Development (IBRD) and concessional loans at low interest rates to low-income countries through the International Development Association (IDA). It also provides a small amount of grants, mainly to post-conflict countries.
Loans to middle-income countries are financed by the Bank’s borrowing on commercial markets, and those to low-income countries by contributions from (mostly high-income) member governments’ aid budgets. Grants are financed from profits on IBRD loans. Last year, the Bank provided $8.7bn in concessional loans to developing countries – about one-tenth of all aid worldwide. In addition to being a large-volume aid donor, the World Bank dominates international development policy research and analysis.
What are some of the problems with the World Bank?
The Word Bank has been criticised by development groups for many decades for several reasons. A short introduction to these issues, written by the Bretton Woods Project, can be accessed here. Among the key issues are:
- It is not governed democratically and it lacks transparency: The World Bank is made up of 185 countries; but they do not have an equal share of power. Votes are economically weighted according to the financial contribution of the member country. Developing countries have a minority of the votes, and thus have very little say in decisions made by the Bank, even though they represent a large majority of the membership and the world population, and these decisions affect them far more than developed countries. The President of the World Bank is effectively chosen by the US government.
- Economic policy conditions are often attached to aid, loans and debt relief: Much of the World Bank’s lending is subject to policy conditions, as is its debt relief; and total Bank lending to each country is determined largely by its economic policies. Many of these policy conditions are widely seen as inappropriate or harmful. Policies promoted by the World Bank group have also been implicated in the current financial crisis.
- Failing to perform: During the 1990s, the World Bank declared its primary goal to be poverty reduction. By this criterion, it is a failing institution. Since the early 1980s, the number of people in poverty has increased worldwide, and inequity has grown. At the same time, the prospects for poverty reduction have worsened as a consequence of environmental damage and climate change. While these problems are not the Bank’s sole fault, it is clear that the Bank has failed to deliver on its mandate.
- Neoliberal policy reforms in the health sector: For much of the last 20 years, the World Bank has actively promoted market-based policies in the health sector, which have been widely condemned for their adverse effects on access to health care. While it has recently taken a more positive position towards the strengthening of government health services, it is still instinctively pro-private and pro-market in a way that is inappropriate to the needs of developing countries. One part of the World Bank Group, the International Finance Corporation (IFC), is actively promoting for-profit private health services in Africa, threatening to increase health care inequities.
What reforms are needed?
- Democratisation of the governance of the Bank to give developing countries a fair and representative share of the vote and to ensure transparency and accountability.
- Removal of unfair and politically intrusive conditions from aid, loans and debt relief.
- An end to promotion of private for-profit health care services and market-based health sector policies, and a shift towards strengthening of public health services.
- Acceptance by the World Bank of WHO’s constitutional role of leadership in global health.