WORLD BANK

WORLD BANK, formally known as the International Bank for Reconstruction and Development, was primarily the brainchild of Henry Dexter White, the assistant secretary of the Treasury during Franklin Roosevelt's third administration. Wary of the lessons of the 1930s, White was convinced that private investors would be unable to provide adequately for postwar European reconstruction. Accordingly, White envisioned the bank as an institution to guarantee foreign securities and, if necessary, loan money directly to governments.

Plans for creating the bank existed as early as 1942. Alongside the International Monetary Fund (IMF), the bank came into being during the Bretton Woods Conference in July 1944. Forty-four nations (twenty-seven of which were considered as "developing" countries) attended the conference, but the United States, Britain, France, and Canada primarily directed it. While the IMF was the outcome of intense negotiations between the United States and Britain, the bank's creation was largely controlled by America. Once established, the bank started with a $7.6 billion treasury, nearly all of which was fronted by the United States, to help rebuild war-torn Europe as well as aid in the development of Africa, Latin America, and Asia.

When it became clear that the needs of postwar reconstruction would far exceed the resources of the bank, and as the Marshall Plan took over the job, the focus of the bank shifted to Third World development. The shift in lending to developing countries was far from smooth, however, as many countries could not afford the bank's interest rates, its financial resources were too small, and its charter forbade making direct loans to private enterprises. To offset these problems the International Finance Corporation (1956) and the International Development Association (1960) were created as affiliates of the bank, and it began to take its present-day shape.

The bank obtains its resources in three ways: money invested by member countries, issuing bonds, and net earnings on the bank's assets. In 2002 there were 138 members of the World Bank Group, each of which must also be a member of the IMF. Each member acts as a shareholder but, due to their size and resources, the United States, Japan, Germany, France, and the United Kingdom dominate policymaking. Headquartered in Washington, D.C., the bank concentrates on issuing loans for economic development in Africa, Asia, the Middle East, and Latin America. It invests money in projects designed to create stable, sustainable, equitable growth in developing countries. Project lending makes money available for tasks such as natural resource development. Loans can also be made to an entire sector of a country's economy—agriculture, for example—or can be designed to aid in reorganizing a country's institutions to orient their policies toward free trade. Finally, loans are made to temporarily relieve debt crisis.

Until the presidency of Robert McNamara (1968– 1981) the bank showed little concern with poverty itself, but McNamara redefined the idea of "development" to include the relief of poverty. While critics charge that the bank has actually done little to alleviate long-term poverty, and while the bank itself recognizes that the tasks it sets for itself are daunting, its motto is "Our Dream is a World Free of Poverty."

BIBLIOGRAPHY

Brown, Bartram, S. The United States and the Politicization of the World Bank: Issues of International Law and Policy. London: Kegan Paul, 1991; New York: Routledge, 1992.

George, Susan, and Fabrizio Sabelli. Faith and Credit: The World Bank's Secular Empire. Boulder, Colo.: Westview Press, 1994.

Gwin, Catherine. U.S. Relations with the World Bank, 1945–1992. Washington, D.C.: Brookings Institution, 1994.

Kapur, Devesh, John Lewis, and Richard Webb. The World Bank: Its First Half Century. Washington, D.C.: Brookings Institution, 1997.

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See alsoInternational Monetary Fund .