World Bank History

The World Bank is one of two major financial institutions created as a result of the Bretton Woods Conference in 1944. The International Monetary Fund, a related but separate institution, is the second. Delegates from a wide variety of countries attended the Bretton Woods Conference, but the most powerful countries in attendance, the United States and Britain, mainly shaped negotiations.[4]

[edit] 1945–1968
From its conception until 1967 the bank undertook a relatively low level on lending. Fiscal conservatism and careful screening of loan applications was generally accepted practice at the World Bank during this early period. Bank staff attempted to balance the priorities of providing loans for reconstruction and development with the need to instill confidence in the bank as a reliable institution suitable for investment.[5] Bank president John McCloy selected France to be the first recipient of World Bank aid; two other applications presented at this time from Poland and Chile were rejected. The loan was for $ 987 million, half the amount requested, and came with strict conditions. Staff from the World Bank would monitor the end use of the funds, ensuring that the French government would present a balanced budget, and give priority of debt repayment to the World Bank over other foreign governments. The United States State Department also acted at this time to inform the French Government that Communist elements within the Cabinet needed to be removed. The French Government complied with this request and removed the Communist elements from the 1947 coalition government. Within hours of this event the loan to France was approved.[6] The Marshall Plan of 1947 caused lending practices at the bank to be altered, as many European countries received aid that competed directly with World Bank loans. Emphasis was shifted to non-European countries and up until 1968 loans were primarily earmarked for projects that would directly enable a borrower country to repay loans (such projects as ports, highway systems, and power plants).

[edit] 1968–1980
From 1968–1980 the bank focused on poverty alleviation and meeting the basic needs of people in the developing world. During this period the size and number of loans to borrower nations was greatly increased as the spectrum of loan targets expanded from infrastructure into social services and other sectors. These changes can to a large extent be attributed to Robert McNamara who assumed the Presidency in 1968 after being appointed by US president Lyndon B. Johnson.[7] McNamara imported a technocratic managerial style to the bank that he had employed during periods he had spent serving as United States Secretary of Defense, and President of the Ford Motor Company.[8] McNamara shifted the focus of bank policy towards measures such as building schools and hospitals, improving literacy rates and conducting large-scale agricultural reform. McNamara created a new system of gathering information from potential borrower nations that enabled the bank to process loan applications at a much faster rate. In order to finance the increased loan volume, McNamara tasked bank treasurer Eugene Rotberg to seek out new sources of capital outside of the northern banks that had previously been the primary sources of bank funding. Rotberg utilized the global bond market to greatly increase the amount of capital available to the bank.[9] One consequence of the period of poverty alleviation lending was the rapid rise of third world debt. From 1976–1980 third world debt rose at an average annual rate of 20%.[10][11]

[edit] 1980–1989
In 1980 A.W. Clausen replaced Robert McNamara as World Bank president after being nominated by US President Ronald Reagan. Clausen replaced a large number of bank staffers who had been active during the McNamara era and instituted a new ideological focus in the bank. The replacement of Chief Economist Hollis B. Chenery by Anne Krueger in 1982 marked a notable policy shift at the bank. Krueger was known for her criticism of development funding as well as third world governments as rent-seeking states. Lending for the purposes of servicing third world debt largely marked the period of 1980–1989. Structural adjustment policies aimed at streamlining the economies of developing nations (largely at the expense of health and social services reductions) were also a large part of World Bank policy during this period. UNICEF reported in the late 1980s that the structural adjustment programs of the World Bank were responsible for the “reduced health, nutritional, and educational levels for tens of millions of children in Asia, Latin America, and Africa”.[12]

[edit] 1989–Present
From 1989 to present, World Bank policy has shifted greatly, largely in response to criticism from a plurality of groups. Environmental groups and NGOs are often now integrated into the lending practices of the bank in order to mitigate the negative results of the previous era that prompted such harsh criticism.[13] Bank projects now explicitly embrace a "green" focus.