The World Bank, Its Purpose, History, and Statistics
Some Say This Bank Secretly Controls the World
The World Bank is an international organization that helps emerging market countries to reduce poverty. Its first goal is to end extreme poverty. It wants to no more than 3 percent of people to live on $1.90 a day or less by 2030. Its second goal is to promote shared prosperity. It wants to improve the incomes of the bottom 40 percent of the population in each country. Since 1947, the World Bank has funded more than 12,000 projects.
The World Bank 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. It provides loans, credits, and grants.
The second is the International Development Association. It provides low- or no-interest loans to low-income countries.
The Bank works closely with three other organizations in the World Bank Group:
- The International Finance Corporation provides investment, advice, and asset management to companies and governments.
- The Multilateral Guarantee Agency insures lenders and investors against political risk such as war.
- The International Centre for the Settlement of Investment Disputes. It settles investment disputes between investors and countries.
The Bank's 189 member countries share ownership. The United States has a controlling voting interest.
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.
The Head of the World Bank
On February 6, 2019, the Trump administration nominated David Malpass, undersecretary of the U.S. Treasury Department for international affairs. He had criticized bank lending to China. Now he needs the support of China and Japan who are the top two World Bank shareholders after the United States. They will vote on his nomination between February 7 and March 14, 2019. The administration had also considered Indra Nooyi, former PepsiCo Inc chief executive, and Ray Washburne, CEO of Overseas Private Investment Corp.
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.
Jim Yong Kim, M.D., Ph.D., was president from 2012 to 2019. He resigned on February 1, 2019, three years before his term ends. He joined private equity fund Global Infrastructure Partners. Dr. Kim resigned over the Trump administration's opposition to stopping climate change. Dr. Kim had been the president of Dartmouth College. He advocated for improved health services for his entire career.
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 from 1993 to 1997 and the Office of Trade Representative from 2001 to 2005. From there, he went to the State Department in 2005 until 2006 and then on to Goldman Sachs from 2006 to 2007.
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.
The World Bank's Fight Against Climate Change
The World Bank has joined the fight against climate change because it could push another 100 million people into poverty by 2030. It's increased climate financing to 28 percent of its portfolio. That includes funding nations' plans to add 30 gigawatts of renewable energy by 2020. It also supports early warning systems for 100 million people. It's developing climate-smart agriculture for 40 countries. The Bank also uses the true cost of carbon in all its projects.
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.
- 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 their loans to prevent a 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, this usually caused a recession, making it difficult to repay the Bank's loans.