What is the World Bank?
The World Bank provides loans to developing countries to help tackle poverty and more recently inequality (which for some reason it calls “shared prosperity”). They have two aims for the global economy by 2030: to end extreme poverty and foster growth in the incomes of the bottom 40% for every country.¹
The World Bank is not really a bank - it's more a way for the countries of the world to borrow money as cheaply as possible, so that developing countries can take out cheap loans to help tackle poverty and inequality. It gets its money from borrowing on international capital markets. The 188 countries that are members of the World Bank each declare a certain amount of money that they are willing to pay into the Bank. This gives the bank the money and security to basically borrow as cheaply as possible from international credit markets. If you are an investor, you know that the World Bank is a pretty safe place to lend your money, as it is backed up by all the world’s richest countries. As the World Bank can borrow very cheaply, it means it can lend out loans to developing countries at a very low interest. So in short, it's a way for developing countries to access cheap loans, which they would never be able to do in the normal credit markets, as they would be seen as too risky borrowers.
These loans are used to fund important development projects and emergency relief. For example, the World Bank has been praised recently for helping to fight the Ebola crisis, as it mobilised US$1.62 billion to support the countries hardest hit by the disease.
However, there are many critics of the World Bank. Much like the IMF, it doesn’t give out cheap loans for free. Debtor countries have to commit to a program of ‘free market’ policies, called structural adjustment, if they are to access credit.
Many of the infrastructure projects that the World Bank funds are criticised for actually harming the people they are claiming to help. One of the most controversial areas of investment is dam construction, as these huge infrastructure projects often cause social and environmental damage and displace local and indigenous communities who have no power or say over how the projects are managed.²
The World Bank has also been criticised for burdening poor countries with unproductive debt. Some of the world’s poorest countries spend more on foreign debt payments than they are able to spend on services such as education and healthcare.³ The World Bank has played a crucial role in this, either by directly financing to governments on projects which have bought less than intended benefits, or by helping to roll over previous debt obligations and restructuring the economy towards maintaining and increasing debt repayments.
The World Bank is also highly undemocratic, as it is mainly governed by industrialised, rich countries. The US has the most voting power with 16% of the votes, second is Japan with 8%, and then there is Germany, France and the UK. Decisions are often made by the richest countries without consulting the developing countries who are supposed to be the beneficiaries of the Bank.⁵