The World Bank is an international bank that lends money and other help to developing nations for infrastructure. The World Bank has the goal of reducing poverty.
The World Bank is part of the World Bank Group. The World Bank is made up of only two institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The World Bank Group has these two, but also three more: International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), and International Centre for Settlement of Investment Disputes (ICSID).
History
The World Bank is one of five institutions started as the Bretton Woods system in July 1944. The International Monetary Fund is another one. Many countries sent people to attend the Bretton Woods Conference. The most powerful countries with people there were the United States and United Kingdom, which controlled most of the negotiations.
The World Bank and the International Monetary Fund are both based in Washington DC, but the World Bank is headed by an American, while the IMF is led by a European.
1945–1968
From the start until 1967 the bank did not lend as much money as it does now. Careful screening of loan applications was common. The bank wanted to provide loans for reconstruction and development, but if they lent out too much, there would be less trust in the bank.
Bank president John McCloy chose France to be the first country to receive a loan from the World Bank; Poland and Chile applied but did not receive one. The loan was for $987 million, half the amount that France actually asked for. There were very strict rules about the use of the funds. Bank staff made sure that the French government would have a balanced budget and pay back what it owed to the World Bank first before it paid back other countries. The United States State Department told the French government that the Cabinet should not have any communists. To get the loan, the French government removed the Communist coalition government. The loan to France was given very quickly after that.
The Marshall Plan of 1947 meant that many European countries already got help, so the World Bank began to lend to non-European countries. Until 1968, loans were used mainly to pay for projects that would help the country pay it back (such projects as ports, highway systems, and power plants).
1968–1980
From 1968 to 1980 the bank worked mostly on meeting the basic needs of people in poor countries. The amount of money being loaned out grew bigger, and more loans were given. This was because the loans were not just given for infrastructure, but also for social services and other things.
These changes were made by Robert McNamara who became the president in 1968. McNamara managed the Bank in the same way he had worked when he was United States Secretary of Defense and President of the Ford Motor Company. McNamara changed the focus toward things such as building schools and hospitals, improving literacy and farming. McNamara started a new system of gathering information from nations applying for loans. This helped the bank to process loan applications much faster. To give out more loans, McNamara told bank treasurer Eugene Rotberg to find new sources of money, because the northern banks that had lent out the money did not have enough. Rotberg used the bond market to increase the amount of money that the bank could lend. One result of lending so much to help poor countries was that the countries in the Third World started owing a lot more money. From 1976 to 1980 developing world debt rose at an average of 20% a year.
1989–Present
From 1989 World Bank policy changed, because many people were complaining. Environmental groups and NGOs were also lent money, to help fix the things that the people were complaining about. Now bank projects include caring for the environment.
Millennium Development Goals
The World Bank's current focus is on meeting the Millennium Development Goals (MDGs). This means lending mainly to countries that are not very poor, at interest rates which are a little bit higher than the ones it borrows at. The IDA provides low or no interest loans and grants to the poorest countries. The Bank’s mission is to help developing countries to develop more and become less poor. They will also meet the MDGs by helping countries to become good places for investment, jobs and sustainable growth. This (it is postulated) will help the country's economic growth through investment and help the poor to share the results of economic growth.
Key Factors
The World Bank says that there are five key factors necessary for economic growth: