The bank is cooperating with Mexico and six Central American countries to protect the Mesoamerican Biological Corridor. It has funded biodiversity protection projects in Brazil, Bolivia, and Ecuador. Bank officials have also worked with local officials throughout the region to establish regulatory and institutional frameworks for sustainable environmental management. The World Bank has become heavily involved in the promotion of public sector reform in Latin America. This is another area in which the bank was faulted in the past. World Bank loans, critics charged, supported authoritarian governments in the region.
By strengthening these regimes, assistance from the bank only reinforced repressive political structures and economic inequalities. World Bank officials have acknowledged that project failure was often caused by political and administrative weaknesses in recipient countries.
Thus the World Bank has placed public sector reform and "good governance" near the top of its regional agenda. Bank officials now argue that the success of development assistance largely depends on the quality of governance in recipient countries. Social and economic progress is not possible without impartial, effective, and reliable public sector institutions. The World Bank placed particular emphasis on enhanced public sector management. It has supported projects to strengthen civil services, reform public enterprises, and upgrade financial management systems.
An Institutional Reform Project in Bolivia, for example, established performance-based incentives for the civil service. In Argentina, the bank supported ministerial reorganization that strengthened administrative capabilities and improved the management of information systems. The World Bank has also worked to reform judicial institutions in the region. Technical assistance was provided to reform courtroom management systems in Argentina, Ecuador, and El Salvador, increase administrative efficiency in Bolivia, Guatemala, and Honduras, streamline judicial procedures in Colombia and Venezuela, and train judges and court personnel in Peru.
The World Bank has also worked to enhance public sector accountability and transparency. It has supported a number of projects to improve auditing, budgeting, accounting, and internal oversight procedures. The bank has worked to improve access to information about government expenditures and ensure open bidding processes for all public contracts. This includes projects to modernize public auditing systems in Bolivia, enhance procurement and debt management in Guatemala, and establish integrated financial management systems in Argentina, Chile, Ecuador, and Honduras. The World Bank has long played a significant role in the economic and social progress of Latin America.
While the bank's early emphasis on infrastructural projects and private enterprise development remains an important component of its lending strategy, its agenda has expanded to include a much wider range of economic, social, and environmental programs. Expansion of the bank's lending portfolio reflects both in-house learning from past experience and a response to outside criticism.
It is placing greater emphasis on meeting the basic needs of poor communities, enhancing gender and ethnic equality, preserving natural environments, and reforming public administration. Given the bank's rapidly expanding development agenda for Latin America, and the considerable resources at its disposal, it will continue to play a major role in the region's social and economic development well into the twenty-first century. Baum, Warren C. Madrid: Tecnos, Caufield, Catherine. New York : Henry Holt , Gilbert, Christopher L.
The World Bank: Structure and Policies. Cambridge, U. Lewis, and Richard Webb. London: Routledge, Pincus, Jonathan R. Winters, eds. Reinventing the World Bank. Altruismo, mercado y poder: El Banco Mundial y la lucha contra la pobreza. Because of its promotion of economic development, the Bank is also an international institution involved to some extent with issues relevant to science, technology, and ethics. At its inception, the Bank's mission was to make long term capital loans to countries harmed by World War II and, more generally, to undeveloped countries worldwide.
Through an agreement signed in November , the Bank acts as a specialized UN agency. Surprisingly the Bank was largely irrelevant to the process of rebuilding Europe after World War II; the majority of the huge financial commitment came through the United States ' Marshall Plan.
In the first twenty-five years after its creation, the World Bank made only a handful of loans to European states albeit large ones , including loans for the reconstruction of the steel industry in France, Belgium, and Luxembourg McLellan With money in hand collected from its subscribing members, the Bank nevertheless felt an intense pressure to lend, and fell back to a secondary mission, that of lending to economically underdeveloped countries.
The Bank's charter contained language militating in favor of project-based lending, and in the early years most of its loans were for the finance of specific projects such as the development of mines or dams Skogly The Bank, which experienced a failure rate of as much as 70 percent of its loans in the poorest countries McLellan , soon noticed that local conditions did not support the success of these projects. Among the factors cited by the Bank for project failure in poor countries are ineffective government, corruption, and lack of transparency World Bank To respond to these problems, the Bank began a program of so-called structural adjustment loans or SALs, which represented a movement away from its original project-based lending.
SALs involve money advanced for a variety of projects and efforts, and are explicitly conditioned on the implementation of structural and economic changes by the borrowing country, including decentralization, privatization, cost-cutting, and discontinuance of tariffs and supports for its own currency. It currently has a total of about 1, projects in almost every developing country McLellan The main charge leveled against the Bank is that its ideological approach to lending actually creates the poverty it is intended to combat.
Most critics focus on the SALs with their attendant mandatory conditions. Vikas Nath says that the Bank reduced many Third World nations to even greater poverty and dependence on Western aid. Countries often have to borrow from other sources to repay the Bank. Borrowing countries "gradually lost their ability to shape their own future. In the poorest countries, government employment arguably provides a social safety net when jobs in private industry are unavailable.
Critics argue that, by forcing cuts in government employment, the Bank throws people into poverty, since the predicted growth in private employment does not materialize soon enough, or with salaries high enough, to pick up the slack. For many years, the Bank rarely assessed the environmental or social impact of projects it funded.
The Sardor Sarovar dam project in India, projected to displace 1 million people, was canceled because of local protests. The Bank admits that under its current portfolio of projects, some 26 million people have been evicted, lost land, or lost livelihoods. As a result, in the early-twenty-first century the Bank conducts environmental reviews of all projects, and lending for environmentally beneficial projects makes up 10 percent of its portfolio. McLellan Critics also question whether a for-profit institution can carry out a not-for-profit mission in the Third World.
The World Bank tries to adapt itself to these considerations without giving up its basic goal" Danaher , p. Such critics contend that the SALs in particular lead to the repression of democratic rights in poor countries, without reducing poverty. Shakrukh Rafi Kahn studied the impact of Bank lending in Pakistan over a twenty-year period. Though some initiatives, such as privatization of state-owned banks, were somewhat successful, he noted the greatly disproportionate impact of the Bank's SAL policies on the nation's poor: "They have been hurt many times over.
Not only have they borne a disproportionate burden of the cuts in employment, cuts in subsidies and the rise in prices, but they also have started bearing more of the tax burden" Kahn , p. The Bank, in more guarded language, seems to be aware of the problems with its programs. In a publication on governance in developing countries, the Bank notes that the form of government democratic or autocratic is not one of its concerns.
In reviewing its SALs around the world, the Bank concedes that things have not gone well in Africa: "Bank assistance to Africa is dominated by the collapse of public sector capacity in many countries, brought about by a combination of state over-extension, delayed adjustment to changed external economic circumstances, natural events, and poor governance" World Bank , p.
It recognizes that Western solutions to problems cannot always be transferred wholesale to countries with very different traditions. In a more overtly self-critical document, water expert George Keith Pitman argues that the Bank is poorly organized to implement its own water resources management strategy. Knowledge and leadership on water issues is seriously fragmented within the Bank's management structure, while budget cuts have eroded the knowledge function.
Pitman also quotes certain nongovernmental organizations NGOs that believe "the pressure to lend The Poverty Action Lab, a Massachusetts Institute of Technology project, has begun randomized evaluations of the impact of Bank projects. Its researchers agree that success cannot be measured only by concrete achievements; assessments must include the impact of Bank projects on the lives of the poor Dugger Economists at the Poverty Action Lab say that the Bank's culture led to a certain complacency in the past, preventing the Bank from rigorously evaluating its own projects.
The Bank is beginning to pay attention, organizing its own randomized studies. Columbia professor Joseph Stiglitz believes that the Bank has been more successful than the international monetary fund in undertaking sweeping reforms of its own structure and approach: "the bank has always been less hierarchical than the IMF and more accepting of alternative views. The Bank is a well-funded, powerful Western institution with the mission of aiding developing countries. Many of its good intentions may be wasted due to its attempt to apply free market solutions in countries with very different traditions, or that are simply not ready for these approaches.
Danaher, Kevin, ed. Boston: South End Press. A collection of essays from a left-wing and critical perspective. Dugger, Celia. Kahn, Shakrukh Rafi. Do World Bank and I. Policies Work?
Communication Error Occurred.
New York : St. Martin's Press. A study of the impact of twenty years of structural adjustment loans in Pakistan. McLellan, Elisabeth P. New York: Nova Science Publishers. An overview of the Bank's history and impact on the third world. Pitman, George Keith. Washington, DC: World Bank. A World Bank analyst argues that the Bank's strategy on water resources is flawed. Skogly, Sigrun. London: Cavendish Publishing. Stiglitz, Joseph. A defense of the World Bank as an institution responsive to its critics. World Bank. Governance: The World Bank's Experience. The Bank's critique of the impact of its structural adjustment loans, placing some of the blame on local corruption and conditions.
In the years before World War II the major colonial powers undertook development of their possessions, mainly on a piecemeal basis. In general, this took the form of specific projects aimed at expanding their output of domestic products, such as agriculture and mining, or improving transport facilities to bring these products to ports to be shipped mainly to the developed world. For example, the railroads in Africa ran from the interior to the coastal ports, but intra-African roads were virtually nonexistent. World War II revolutionized attitudes on both sides.
Objectives were broadened to include overall development in European colonies to benefit more of the local inhabitants. But meanwhile, the local people wanted to end the dominance of the colonial governments. Although political control shifted to many of the local populations, change came much more slowly in the economic and financial spheres because the emergence of globalization made it difficult to face down the large multinational banks and corporations, which were no longer offshoots of the ruling country.
In brief, local populations felt that they had only changed masters. Economic development by locals was also hindered by the lack of entrepreneurship, a maldistribution of income, and inadequate local markets. These obstacles were blamed by the locals on the developed world's high tariffs on native raw materials, which, they claimed, cost them more income than they received from direct-aid programs.
Hence, other sources of help were needed. A major part of the hoped-for assistance came from the World Bank, or, more formally, the International Bank for Reconstruction and Development, which, along with the International Monetary Fund, was set up by the Bretton Woods meeting in Emphasis was to be on low-cost loans, whereas gifts or grants were still on a country-by-country basis.
This changed later with the setting up of two more international multicountry agencies, the International Development Agency and the International Finance Corporation, although the World Bank remained the main source of international funds. Despite its name, the World Bank is not the ordinary commercial organization, accepting deposits from the public and financing private firms.
Rather, it is a multilateral institution owned and governed by national governments. It is unique in that economic assistance in the form of loans below market rates of interest are extended on a multicountry basis, rather than aid being an obligation of a ruling country to a dependency. The bank is not an activist free-market advocate, although top management, originally drawn mainly from the United States and Great Britain , does favor the efficiency of self-adjusting markets.
The bank's emphasis gradually shifted from the immediate postwar recovery of war-torn Europe to the need of the poorer members—denoted as "less-developed"—once the main reconstruction was accomplished. This changeover was hindered by the poorer areas' inferior administrative abilities and financial probity. As a result, the bank had to give both technical assistance and help in establishing the necessary administrative authorities.
This was followed in by the addition of the International Finance Corporation to help would-be borrowers whose creditworthiness was not up to World Bank standards. This called for a careful assessment, because if land reform were initiated with a shocking maldistribution of income and wealth, it would threaten the country's ruling government, which would likely sabotage the reforms.
In the s the bank tried to speed up the agriculture programs, concentrating on loans for irrigation and drainage, and hoping that the peasant farmers would respond to economic incentives. Later, the efforts went more to growth and equity, such as improving rice yields for the poor. This raised the problem of whether to focus on specific projects, such as rice production, or on developing an entire country. Considering the magnitude of the World Bank's resources, it would appear that as a major creditor the bank could dictate terms to any borrower.
Yet, this has not always been the case. For example, having already committed large sums to Brazil over several years, exiting was an impracticality. As the bank's then-president Robert McNamara b. After extensive aid requirements in various parts of the world drained the bank's resources. In famine-struck Africa, the bank had to make emergency loans to avert social instability. Meanwhile, a new group of competitors for bank finance came on the scene following the fall of the Berlin Wall and the splintering of the Soviet Union.
Eastern Europe started to press for assistance, asking for 50 percent or more than had been allocated to sub-Saharan Africa. And then there were the debt crises, which were so widespread that they shook even the U. Possible widespread defaults by debtor nations threaten even the solvency of the hitherto invincible U. While the winds of political change were gathering force after , the economic aspects reached hurricane power after Before then, and especially before to , the nations of the developing world were either poverty-stricken or else somewhat better-off, but still poor.
But then a new dynamic entered the picture.
In effect, the West discovered the developing areas, and since then we can categorize the countries into three groups: the very poor who continued to be very poor, that is, the so-called "basket cases"; the middle group, which had made some economic progress, but still had far to go to reach reasonable well-being; and the "tigers"—mainly East Asian countries whose economies had been among the poorest but now rivaled and in some sectors even surpassed Western nations.
The boom in the tiger nations was fed by foreign loans and investments, thanks in part to the low-interest environments in the lending countries. By the early twenty-first century the tigers—Taiwan, South Korea , Thailand, Hong Kong , and Malaysia—had apparently escaped the poverty trap, and India and mainland China, each with over a billion people, managed to improve economic conditions for a significant minority of their population. Their unspeakable poverty was now beginning to disappear. By global liquidity increased enough to make for easy monetary conditions.
International investors were now willing to take the risks associated with the less-developed countries, and memories of the recent adverse monetary experiences were fading. Net capital flows to the Asian tigers rose to about U. Stocks, bonds, and bank loans all recovered. It was mainly the Asian economies that attracted these funds. The slower progress of privatization, however, was a stumbling block, as was the slowing of the economies of Brazil and Mexico, and the economic crisis in Argentina. Aided by low interest rates in the developed countries, foreign investors in search of better yields moved in, especially to those countries with faster growth.
Dollar reserves rose, and the developing world became a major player in Western financial markets. However, this inflow was towards more volatile investments in the developing countries, with the ever-present threat of a reversal if the economic climate deteriorated. Credit to individuals mortgages and credit cards was especially risky. A new world of hope had apparently opened up, and the rush to participate was on. No longer was economic assistance needed for the tiger countries. Their living standards approached those of some of European countries, as did the more prosperous sectors of India and China.
Some tigers, such as South Korea , Taiwan, and Singapore, had accumulated sizeable foreign-exchange reserves, and thus were able to withstand economic adversity. All of their economies were characterized by booms—until a large-scale economic crisis erupted. In mid trouble started with the Thai currency, which then triggered adverse reactions for other hitherto prospering countries such as Brazil and Argentina. Once the threat of a downturn appeared, foreign lenders started pulling out their funds, aggravating the difficulties.
Some currencies lost half their values. Many of the once prosperous, who had relied on borrowed funds, suddenly found that they could not pay, and bankruptcies spread. It took some five years, or even longer in some cases, for a reasonable growth rate to reappear. Meanwhile, widespread poverty again became the norm, dashing the hopes of many who had just tasted affluence.
Medium-poor countries, such as those in Latin America , felt the effects of the Asian difficulties too, as foreigners withdrew funds. There, too, borrowed money became flight capital, thereby threatening wholesale insolvency.
- ROBERT E. BALDWIN.
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Some help came from the Federal Reserve Bank of New York , although critics said that the help extended was mainly to avert default of U. This feeling caused controversy on both sides, although the idea of default was not abhorrent to the Latins—Brazil had defaulted seven times, Argentina five, and Venezuela nine.
The fear that default would close a defaulting nation's access to world credit was belied by history—even the wholesale repudiation of debt in the s did not stop lending in the s and s.
The more conservative Anglo-Americans, who were still wedded to free-market beliefs, feared that safety nets to alleviate the adverse turn of the financial sector would make the international agencies into soup kitchens. Fortunately for the debtor countries, the poverty advocates pressured for the rapid disbursement of funds, thereby mitigating the balance-of-payments and debt-repayment problems.
But the accompanying agony built up a backlash that exploded in violence. The barricades went up as activists stormed the World Bank's international meetings in an attempt to disrupt them and get a hearing of their complaints. This reaction was reinforced by the spreading threat of increasingly complex globalism, which would replace centuries of stable, traditional work habits by the "cash nexus" demanded by modernism, accompanied by the migration of businesses to other, foreign locations.
Yet, opposing these shifts threatens to end the climb from poverty. As bank supporters point out, a Luddite mentality does not make for economic growth; the required transition will be painful. Kapur, Devesh; Lewis, John P. Marcus, Edward. Print this article Print all entries for this topic Cite this article. Learn more about citation styles Citation styles Encyclopedia.
Two million children die each year from vaccine-preventable diseases, and over half of the child mortality in low-income countries is linked to malnutrition. Cancer, heart disease , and injuries represent a growing proportion of the disease burden in many countries, and tobacco-related illness and death threaten more people, particularly women and young people. More than , maternal deaths occur each year, and more than one-third of all pregnancies are believed to be unwanted or mistimed. Environmental degradation poses a serious threat to health in much of the world, and the ability of populations to fight poverty and improve well-being.
WORLD BANK The International Bank for Reconstruction and Development, commonly referred to as the World Bank, is an international financial institution whose purposes include assisting the development of its member nations' territories, promoting and supplementing private foreign investment, and promoting long-range balanced growth in international trade. Georg Schild. The Columbia Encyclopedia, 6th ed.
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The World Bank, state reform, and the adjustment of social policies in Latin America
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