While the debates about the World Bank are often starkly polarized, the reality is far more complex and nuanced. In many ways, both sides are correct. The actions of the World Bank have enabled resource-poor industrialized nations to access vast supplies of sought-after commodities, often at the expense of the countries they are ostensibly helping. It has also provided cheap loans and credit facilities and grants that have helped stabilize fragile governments, provide health, nutrition and educational resources in impoverished nations and finance infrastructure development that enables countries to begin building a sustainable economy.
The world has changed dramatically since the creation of the World Bank at the end of the Second World War. With their global reach and access to deep pools of capital, the big commercial banks are edging the World Bank out of some of its key lending roles. At the same time, non-governmental aid agencies are becoming increasingly sophisticated and proving they can fight poverty at least as effectively as the World Bank can.
While the bank has tried hard to adapt, as we find out in our cover story this month, it is struggling to remain relevant. In question is not just the way the bank fulfills its mission, but its very raison dtre. The bank itself has been mired in scandal, undermining its campaign to promote good governance around the world. Many of the countries to which the World Bank grants loans are perfectly able to access capital from other sources. Some recipients of World Bank loans, such as China, have their own substantial reserves of capital, some of which they are themselves deploying in World Bank-style development loans. Other long-time borrowers are repaying their loans early in an attempt to untangle themselves from the strings the bank customarily attaches to them.
Undeniably, the bank has reached a turning point. But if the arguments surrounding the World Bank are complex, the question that must be asked is simple: Who really needs the World Bank?
Until next month,