What Is the World Bank? Purpose, History, Statistics
The Bank That Secretly Controls the World
Definition: The World Bank is an international organization that helps emerging market countries reduce poverty. It is not a bank in the conventional sense of the word. Instead, it consists of two development institutions. One is the International Bank for Reconstruction and Development. The second is the International Development Association. The Bank's 189 member countries share ownership.
The Bank works closely with three other organizations:
- The International Finance Corporation
- The Multilateral Guarantee Agency
- The International Centre for the Settlement of Investment Disputes.
All five organizations make up the World Bank Group.
Purpose and Function
The World Bank provides low-interest loans, interest-free credit and grants. It focuses on improving education, health and infrastructure. It also uses funds to modernize a country's financial sector, agriculture and natural resources management.
The Bank's stated purpose is to "bridge the economic divide between poor and rich countries." It does this by turning "rich country resources into poor country growth." It has a long-term vision to "achieve sustainable poverty reduction."
To achieve this goal, the Bank focuses on six areas:
- Overcome poverty by spurring growth, especially in Africa.
- Help reconstruct countries emerging from war, the biggest cause of extreme poverty.
- Provide a customized solution to help middle-income countries remain out of poverty.
- Spur governments to prevent climate change. It helps them control communicable diseases, especially HIV/AIDS and malaria. It also manages international financial crises and promotes free trade.
- Work with the Arab League on three goals. They are to improve education, build infrastructure and provide micro-loans to small businesses.
- Share its expertise with developing countries. Publicize its knowledge via reports and its interactive online database.
Who Heads the World Bank?
Jim Yong Kim, M.D., Ph.D., is the president of the World Bank. Before his appointment in 2012, Dr. Kim was the president of Dartmouth College. He's advocated for improved health services his entire career. He's chaired departments at Harvard Medical School and Brigham and Women's Hospital in Boston. He co-founded the nonprofit Partners in Health. It provides health services to the poor on four continents.
Dr. Kim reports to a 25-member Board of Executive Directors. The most significant contributing countries are France, Germany, Japan, the United Kingdom and the United States. (Source: “Organization,” The World Bank.)
The President of the United States has selected the World Bank President since its founding. That's because it owns 16 percent of the bank's shares, making it the largest shareholder. This unofficial agreement with the other European board members is creating dissent. Many members complain that the Bank represents the interests of the developed world, and not the poor countries it assists. (Source: "Is America's Hold on the World Bank at an End?
" Devex, June 30, 2015.)
The Bank has more than 10,000 employees from over 160 countries. Two-thirds work in Washington, DC. The rest are in 100 country offices in the developing world.
Robert Zoellick was president from 2007 to 2012. Zoellick got his start working for President Ronald Reagan's Treasury Secretary, James Baker. Zoellick held executive positions in Fannie Mae (1993-1997) and the Office of Trade Representative (2001-2005). From there he went to the State Department (2005-2006) and Goldman Sachs (2006-2007).
Statistics and Reports
The World Bank provides a wealth of downloadable data for more than 200 countries. In 2010, the Bank launched a new Open Data website. It provides free access to 298 major indicators, including:
- Climate change, the environment and energy,
- Health, such as life expectancy,
- Urban development and infrastructure,
- Labor, income and education,
- Government, economic policy and sovereign debt,
- Demographics such as poverty, gender and aid effectiveness,
- And business, agriculture and financial areas.
The Bank analyzes development issues in depth, including the annual World Development Report. Its research reports examine global trends in trade, financial flows and commodity prices. It explains their impacts on developing countries. The Bank also publishes the World Development Indicators and Global Development Finance. It provides the Little Data Book, Little Green Data Book and The World Bank Atlas.
It was funded through the sale of World Bonds. Its first loans were to France and other European countries. In the 1970s, it lent money to Chile, Mexico and India to build power plants and railways. By 1975, its loans had helped with a wide variety of issues. They included family planning, pollution control and environmental protections.
World Bank lending became controversial. Many countries used its loans to prevent sovereign debt default. Their debt was often a result of overspending and extensive borrowing. Even with the World Bank’s help, many countries devalued their currencies. That caused hyperinflation.
To combat this, the Bank required austerity measures. The country had to agree to cut back on spending and support its currency. Unfortunately, that usually caused a recession, making it difficult to repay the Bank's loans.