The World Bank: Its First Half Century (review)

The 50^th anniversary of the World Bank and the International Monetary Fund - collectively, the Bretton Woods Institutions - was marked by a crescendo of criticism of those institutions and their effects on the poor and the environment. The World Bank has turned its attention sharply to issues of participation, gender equity, environmental sustainability, and poverty alleviation. Ironically this direction has been simultaneous with the increasingly prominent, and quantitatively significant, role of the private sector in Bank lending. These two trends stand in tension with the goals of equitable, participatory, sustainable development carried out in a transparent and accountable manner, which many Bank watchers advocate. The massive two-volume history, The World Bank: Its First Half Century, reveals the deep roots of these tensions.

As the book demonstrates, these pressures are rooted in the Bank’s dual character as both bank and development institution, and in the Bank’s voting structure, which reflects the real-world balance of power. The volumes chronicle and analyze a number of themes in the Bank’s history reflecting those strains. This review will focus on three: the creation of the Bank’s concessional lending window, the International Development Association (IDA) in 1960; the Bank’s war on poverty during the McNamara years, 1968–1981; and the debt crisis and structural adjustment policies of the 1980s and 1990s. These three themes are treated systematically in “Volume One: History,” the principal focus of this review. The second volume, “Perspectives,” provides opportunities for the reader to focus on subjects not easily captured in a chronology.

Richard Webb chronicles how at its creation in Bretton Woods, New Hampshire in 1944, the International Bank for Reconstruction and Development (IBRD, the World Bank’s official name), was set up to be a bank, not a development organization. The IBRD’s purpose was for the reconstruction of Europe. After that role was taken over by the Marshall Plan, the Bank became the premier multilateral institution for development. Yet, despite being a public institution, the Bank was funded by raising money in the private capital markets using government guarantees, thereby avoiding the constraints of relying on government contributions. The funds were then offered at near-market rates. The Bank’s first three Presidents had close connections to Wall Street, and in fact the Bank’s identification with Wall Street was an important component of the Bank’s identity as a bank (for an extensive treatment of the financing of the World Bank, readers are directed to Devesh Kapur’s chapters on “The Bank in the World Bank”). Today, the IBRD window of what is now called the World Bank Group still provides near-market rate loans to medium-income countries.

From its creation the Bank, like the IMF, was structured to reflect the real-world balance of power: voting in both organizations is based upon a member’s financial contribution. Moreover, the intervening decades of unequal development have only served to exacerbate an inequality that was structured in from the beginning, a point that is not sufficiently emphasized in this volume. As the leading lender, the United States has the prerogative of naming the Bank’s president (by tradition, a European is appointed Managing Director of the IMF). It also has effective veto power over Bank lending decisions thanks to its large voting share. As a result, “from 1960 onward, American governments of whatever party and presidency would have a burden-sharing’ bias, seeking, when feasible, to scale down relative U.S. financial inputs to Bank activities, without diminishing the U.S. voice.”

The centrality of the Bank’s identity as a bank was complicated by the postwar emergence of the concept of “underdevelopment.” This view was institutionalized by the bilateral and multilateral organizations proliferating in the late 1950s and early 1960s. For the Bank this was a period of gradual approach to poverty alleviation, culminating in...