During the middle of World War II – from July 1st to July 22nd 1944 – 44 Allied countries met, not to discuss the war, but to hold the United Nations Monetary and Financial Conference. Over those three weeks in the Mount Washington Hotel of Bretton Woods, New Hampshire, delegates agreed to sign the Bretton Woods Agreement. In doing so, they created a new international monetary system – and more importantly, one of the largest anti-poverty institutions ever.

This so-called ‘Bretton Woods’ organization was the International Bank for Reconstruction and Development (IBRD). Now, along with four other institutions, it has become the World Bank Group – or ‘World Bank’ for short. While the World Bank’s primary task was to help Europe recover from the devastation of World War II (its first loan was to France, for $250 million, in 1947). Now, however, the World Bank’s mission has changed drastically. Its goal, as stated on its website, “is simple – to help reduce poverty.”

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Currently, Paul Wolfowitz is the President of the World Bank. Traditionally, the President is always an American.

The World Bank’s primary task today is to give loans to poor countries to help them pursue poverty-reduction programs that they would otherwise not be able to finance. Annually, the World Bank loans more than $22 billion to developing countries through the IBRD and International Development Association (IDA; see below). The Latin American region receives the largest share of World Bank loans – $5.2 billion, or 24% of the total amount loaned. South Asia is close behind, with $5 billion in loans (22%).

The World Bank involves itself in many different types of projects (in 2005 alone, the World Bank took part in 278 projects in almost 100 countries). Borrowing countries prepare papers that detail what they would like to do, and then work with the World Bank to determine how much money is needed and what the exact implementation of the project should be.

Working with local governments, the World Bank has been able to help countries in everything from education (supplying schools with over five million textbooks in Africa) to health care (training more than 50,000 doctors in India) to economic development (encouraging companies, such as the iron-smelting corporation Mozal, to enter foreign countries to provide jobs and boost the economy. When Mozal started operating in Mozambique, it increased the GDP by 10% and created thousands of new jobs). For more detailed examples of World Bank projects, check out the Government Case Studies section, where there some of the World Bank’s most successful projects are showcased. The mini-section below also provides information about a World Bank project.

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The World Bank Group is really a collection of five organizations – two that actually make up the Bank, and three affiliates. In total, 184 countries are members of the group – through membership of the IBRD or membership of other World Bank Group institutions:

The World Bank:

• International Bank for Reconstruction and Development (IBRD): The IBRD was the first of the World Bank institutions – after all, it existed before there even WAS a World Bank Group. From its creation in 1945 until 1956, it was the only institution that would become part of the Group. The IBRD focuses primarily on loaning money and assisting poor countries that have mid-range incomes and good credit ratings. It does NOT focus on the poorest countries of the world, as some of the other Group members do.



• International Development Association (IDA): The IDA, established in 1960, is the branch of the World Bank that loans money to the poorest nations on earth. Unlike loans from the IBRD, loans from the IDA are completely interest-free. Of the 2.5 billion people in the 84 countries eligible for IDA assistance (the country must have a per capita income of less that $965 per year), 1.5 billion live on less than $2 a day.

Affiliates:

• International Finance Corporation (IFC): In 1956, the IFC was created, to help private businesses in developing areas. It provides funding, expertise, and technical help to businesses in poor countries. This helps the country create a sustainable private sector, and allows businesses to compete in international markets, create jobs, and improve the quality of life.



• Multilateral Investment Guarantee Agency (MIGA): MIGA was founded in 1988 – the latest addition to the World Bank – and focuses on promoting foreign investment in developing countries (this type of funding is referred to as Foreign Direct Investment, or FDI). It acts as a negotiator, finding projects that need funding and then encouraging foreign sources to invest in it. It also provide types of ‘insurance’ to foreign investors, to protect against things such as political failures in poor countries where FDI is directed.



• International Centre for Settlement of Investment Disputes (ICSID): The ICSID was created by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States in 1966.

  World Bank Group Headquarters, Washington D.C.

  It is responsible for mediating arguments between foreign investors and the governments of poor countries receiving investments (such as FDI).

The International Monetary Fund (IMF), is an organization originating, like the World Bank, from the Bretton Woods Conference of 1944. While it is primarily in charge of managing the global financial system, it does have some programs geared toward poverty relief. Using its Poverty Reduction and Growth Facility (PRGF) program, the IMF evaluates countries and determines whether they are eligible for loans. To receive loans, countries submit Poverty Reduction Strategy Papers (PRSPs) that are reviewed before loans are granted. Currently, 78 countries are eligible for IMF loans (countries must meet several conditions to be eligible for aid. The primary requirement is that the country must have a per-capita gross national income of less than $895).

The IMF also works with the World Bank Group when performing some of their projects. The best example of IMF-World Bank cooperation is the Heavily Indebted Poor Countries (HIPC) Initiative, discussed elsewhere in this website.

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Though they are considered United Nations institutions, the World Bank and IMF are controlled, in reality, by their member countries. However, different countries receive different amounts of votes (which are used when votes on major decisions occur) in the organizations, based on their level of financial contribution to the organization. For example, the United States has a 17.1% share of the IMF votes, because it has the largest monetary investment in the organization (it has a 16.4% share of the World Bank votes). The World Bank is headed by a President, always American, while the IMF is headed by a Managing Director, always European. The World Bank President is currently Paul Wolfowitz, and the IMF Managing Director is Rodrigo de Rato (of Spain).

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Indonesian protestors calling for the closing of the World Bank.

There are several problems that various groups have with the World Bank. The biggest of these is that the World Bank is controlled by the largest of the donor countries – such as the United States and Japan. They own the largest share of the organization, and therefore have the most votes. Often, they are accused of setting World Bank policies that do not help relieve poverty in developing countries, and even HURT the country in terms of development. This is because these rich countries have the ability to attach conditions to loans, much like those found in the HIPC initiative, that, while benefiting the donor’s economy, may not help the country receiving the loan. Donor countries are also able to control the World Bank is through its presidency – the President in ALWAYS an American.

All of these factors reduce the amount of influence that countries receiving loans have at the World Bank, though they, too, are members. In recent years, however, the World Bank has tried to give these nations a more active role. The biggest change that has come from this movement is the PRSP, or Poverty Reduction Strategy Paper. These poverty reduction papers allow countries to determine what they need to combat poverty, not what donor countries want. They can then present the papers to the World Bank and receive loans to accomplish the PRSP goals, as opposed to goals set up by foreign states.

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Columbia Encyclopedia: Bretton Woods Conference

International Centre for Investment Disputes

International Development Association

International Finance Corporation

Financial Times: 'It's Time to Free the World Bank' by Jeffrey Sachs

Multilateral Investment Guarantee Agency

Wikipedia: Bretton Woods System

The World Bank

World Bank Development 360: Morocco

World Bank Lending 2005 (PowerPoint)

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