The World Bank takes its cue from the politics of the big powers, but is still a force for good
An odd alliance ranging from anti-trade NGOs to US Republicans is united in its condemnation of the World Bank. Yet when I asked the finance minister of Rwanda, who steered his country through the early years of reconstruction and debt relief after the genocide, which donors were the most helpful, he named the World Bank as his best partner, and without hesitation. There is much spin and posturing in the aid and development debate, but in reality aid from individual countries is often inefficient, manipulative and expensive. World Bank interventions are usually of higher quality and effectiveness.
The bank was created in the aftermath of the Second World War to support the reconstruction of Europe. It was at Latin American insistence that it committed itself to development. The bank has a number of funding instruments. The International Bank for Reconstruction and Development (IBRD) borrows money very cheaply, because its funding is guaranteed by governments, and it lends to middle-income countries as well as providing technical assistance. Through the International Development Association (IDA), which is also supported by donor governments, part of the repayments is spent on helping poorer countries. Middle-income countries can choose to use the World Bank or not, and little criticism focuses on IBRD lending. The IDA plans to provide $33bn to the 81 poorest countries in the three-year period to 2008. Of this, $18bn came from new aid contributions from 40 countries, including £1.4bn from the UK. The money is provided in a mixture of grants - for the poorest - and interest-free, long-term loans over 40 years. No repayment is required in the first ten years.
The most virulent criticism of the bank is that it supported neoliberal structural adjustments in the late 1980s and early 1990s. This is true. The bank is funded and supervised by governments. In the 1980s the world voted repeatedly for Thatcherite, Reaganite, neoliberal governments. The bank's policies reflected this. In the latter 1990s, there was a social-democratic advance. The bank's lending to poor countries changed tack, focusing more on poverty reduction programmes by providing universal primary education, basic healthcare, water and sanitation for all.
Paul Wolfowitz's tenure as the bank's president coincides with the advance again of right-wing governments, including the end of this Labour government's claim to social democracy. There is now a danger that the bank's focus on poverty reduction may waver. But if the bank were closed down, or seriously weakened, the effects would be even worse. It is the world's leading development institution, employing many of the very brightest development experts.
It could be improved, but development would be a much less effective effort without it.
One of the great problems in the field of development is that there are too many players. Each developed country has its own programmes in the poorest countries, and so do a large number of UN agencies and NGOs. Each has a bank account, reporting requirements and missions that take up the time and energy of government ministers, who spend more time accounting to the donors than to their own electorates.
As we try to shift from unsustainable projects to an investment fund for helping countries improve their own institutions, it is the World Bank that makes the best long-term analysis and provides a framework around which other donors can co-ordinate. Considerable progress was made under James Wolfensohn. There is more to be done, but weakening the bank would reinvent development as a mere series of charitable projects to make donor governments popular with NGOs and the wider public.
Clare Short was UK secretary of state for international development (1997 to 2003)
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