Patrick Ainley asked the following:
>Can anyone out there tell me about or refer me to information
>about the World Bank? Who set up this small body of people
>with such immense influence in the world and when, for
>instance and how do they relate to these other world financial
>bodies, like the World Bank?
The World Bank (officially the International Bank for Reconstruction and
Development) is affiliated with the United Nations. Its purpose is to
finance productive projects that further the economic development of member
nations. It had its origins in the negotiations that culminated in the
United Nations Monetary and Financial Conference at Bretton Woods, N.H., in
July 1944. The bank officially began operations in June 1946. Although its
first loans were made for post- World War II reconstruction, by the 1950s
the emphasis had shifted to loans for economic development in Africa, Asia,
the Middle East, and Latin America. World Bank headquarters are in
Washington, D.C.
The bank's funds come from the paid-in capital subscriptions of member
countries, bond flotations on the world's capital markets, and its net
earnings. Each member's capital subscription is based on its relative
economic resources. Usually only about 10 percent of the subscribed capital
is paid in; the remainder is subject to call if required to meet obligations.
The bank usually makes loans directly to governments, or to private
enterprises with their government's guarantee, for specific projects when
private capital is not available on reasonable terms. A large part of the
bank's portfolio initially consisted of loans to publicly and privately
owned utilities for investment in electric power, roads, ports and inland
waterways, pipelines, and airports; but by the late 20th century,
agriculture and rural development had become the most important lending
sector. Industry, water-supply and sewage systems, and education are also
major lending areas. As a matter of general policy, the bank lends only for
the cost of imported material, equipment, and services obtained from abroad,
and disbursements are usually made directly to the supplier. The interest
rate depends mainly on the cost of borrowing to the bank. In addition to
financial assistance, the bank also furnishes technical assistance.
The bank is administered by a board of governors, executive directors, a
president, and a staff. The board of governors, composed of representatives
from all the member countries, meets once a year; policy matters are carried
out by the 21 executive directors, who approve all loans.
The International Monetary Fund (IMF), a closely related agency of the
United Nations, was also founded at the Bretton Woods Conference in 1944.
Its role is to secure international monetary cooperation, stabilize exchange
rates, and expand international liquidity. Membership in the IMF grew as
former colonies gained independence. Headquarters of the IMF are also in
Washington, D.C.
Members are pledged to orderly currency exchange arrangements, a reduction
in the role of gold in international monetary transactions, and expansion of
the Fund's capability to carry out its original goals. The continuous
liaison maintained between the monetary authorities of the member states has
made the IMF a convenient instrument of consultative cooperation and an
outstanding centre of research and statistical information on international
monetary questions.
Operating funds are subscribed by member governments according to the volume
of their international trade, their national income, and their international
reserve holdings. Members with temporary difficulties in their international
balances of payments may purchase from the IMF, with their own national
currencies, the foreign exchange they need. The expansion of international
liquidity that results from these drawings is eliminated as they are repaid.
Additional devices to assist members in temporary balance-of-payments
difficulties included the Standby Arrangements, introduced in 1952, enabling
members to negotiate lines of credit in anticipation of actual needs; the
General Arrangements to Borrow, based on an agreement in 1961 of 10
countries to provide standby credit; and Compensatory Financing of Export
Fluctuations, introduced in 1963 and liberalized in 1966, enabling
developing countries to cope with a sudden fall of export receipts without
imposing exchange restrictions or severe deflation.
The increasing volume of international transactions and successive financial
crises created a demand for additional reserves that could be used in
settlement of international balances. Special Drawing Rights, which
permanently expanded the supply of international liquidity, were approved at
the annual meeting of the IMF in October 1969. Special Drawing Rights in
effect enlarged members' quotas without any additional subscription either
in gold or in national currencies. In 1986 the IMF and the International
Bank for Reconstruction and Development began a new multibillion-dollar
lending pool to serve the world's poorest nations.
Much of the foregoing is from my encyclopedia. I should add a few comments.
Both the World Bank and the IMF were established to deal with conditions
that were vastly different from those which prevail today. Their initial
roles were, in the case of the Bank, to provide capital for the
reconstruction of post-war Europe, and, in the case of the IMF, to provide
for the stability of exchange rates in a trading world which was leaving the
gold standard. Both have come under severe criticism partly because the
problems they were designed to handle have been superceded by others which
were largely unrecognized in the 1940s and 1950s. Both institutions may
have been slow to adapt. The Bank's investments have been severely
criticized on grounds of insensitivity to environmental and social issues;
the IMF's loans on grounds of requiring highly restrictive fiscal and
monetary policies from borrowing governments. Both have been accused of
being powers unto themselves or as being tools of the United States or of
international capital. Both are trying to improve their image.
Hope this helps.
Ed Weick
