World Bank and International Organization theory


The World Bank's role is influential in international economic relations and in particular as the principal vehicle for channeling and coordinating international governmental loans from the developed nations to the less developed countries (LDCs). Its role has changed during the past quarter century as the world economy and politics became more interdependent and complex. In recent years, the World Bank has been faced to criticism from a variety of sources that in some respects it has failed to modernize itself to meet the requirements of a rapidly changing world economy.

In the view of structural realists, who dominated thinking about international relations during most of the Cold War, international organizations were seen as the helper of the Great Powers and somewhat marginal players in the world of international politics. According to Keohane & Nye, "realist analysis . . . insisted that national security is the primary national goal and that in international politics security threats are permanent" (6). The realists assumed that "politics is continually characterized by active or potential conflict among states, with the use of force possible at any time" (Keohane & Nye 24). Modern theorists, while not discounting the importance of such factors, posit that in a world of complex interdependence, brought about by advances in technology in areas such as communications, power has tended over recent decades, and especially since the end of the Cold War, to become more diffused and military power is less often used to resolve conflicts among the Great Powers. In a multi-polar environment, international organizations and international regimes, "a recognized set of [internationally applicable] rules devised by governments . . . for regulating conflict-prone behavior, play an important role in setting the norms, rules and procedures which accompany the political bargaining process among nation states (Haas 396; Kratochwil & Ruggie 22). Examples of formal international organizations include the United Nations, the World Trade Organization and issue specific regulatory agencies such as IAEA (international control of nuclear energy and proliferation), IATA (international aviation rules) as well as less formal arrangements such as the international coffee and textile fibre agreements. International organizations interact with other international organizations and regimes and with nation states and subdivisions thereof. Keohane & Nye say that international organizations "help set the international agenda, and act as catalysts for coalition-formation and as arenas for political initiatives and linkage by weak states" (35).

Consistent with the teachings of the international realists, the World Bank Group, which includes IDA and the International Finance Corporation (IFC) which lends only to private parties, has from the outset in its mission, structure, staffing and operations primarily represented the interests of the developed world in its international lending to the less developed world.

Even though the World Bank has on occasion acted overtly as an instrument of American foreign policy, such as when it withdrew its support for the loan to Nasser's Egypt for the Aswan Dam in 1956, it is widely respected throughout the world for the impartiality and competence of its staff and for its leadership in many aspects of the struggle to improve living conditions in the developing world. Close ties developed between it and various international agencies such as the United Nations Food and Agricultural Organization (FAO) and the UN Educational, Scientific and Cultural Organization (UNESCO), regional development banks and foreign aid agencies of nation-states. After initially having no environmental policy, it has helped foster in cooperation with the UN Environment Program international cooperation on environmental issues and population control. It is generally credited with playing "a growing role in stimulating and coordinating research and development of new technologies", which have helped raise the productivity of agriculture in LDCs, such as India (Owen 99).

The World Bank has been struggling in recent years to redefine its role in the context of the Post-Cold War environment. Critics on the right have accused it of concentrating too much on "grandiose and sometimes undeserving development projects in emerging markets" (A welcome 62). The Bretton Woods Commission headed by former Federal Reserve Chairman Paul Volcker said that the Bank "must direct its aid policies away from grants to government (80 percent of its loans are to public entities) and more toward initiatives that encourage the private sector" (The party 82). According to some, the massive increase in available private foreign investment in the new global economy renders much of the Bank's lending activity superfluous. An internal report prepared by Willi Wapenhans in 1992 found that 37.5 percent of its projects in LDCs were economic failures by the Bank's own standards (Chatterjee 137).

Since the 80s the Bank's 'structural adjustment loans' have in the opinion of some economists such as Harvard's Jeffrey Sachs and companion conditions of the International Monetary Fund (IMF) unduly imposed austerity programs on local governments which have negatively impacted development, overemphasized the expansion of exports and stunted internal growth (It can 20). The Japanese in particular have pointed to the large role of government in the more rapid development of the tiger economies of East Asia than in countries assisted by the World Bank. In October, 1991, Bank of Japan Governor Yasugi Mieno declared, "experience in Asia has shown that although development strategies require a healthy respect for market mechanisms, the role of government cannot be forgotten" (Judis 149). The Economist said in 1996 that "very few cases of rapid growth are emerging from IMF World Bank programs" (It can 20).

The World Bank has also shown signs of administrative rigidity and inefficiency. Its staff has grown from 6,150 in 1987 to 10,100 in 1996 (Irwin 153; Stevenson C 1). The Economist said that the "Bank's conservative culture has been a stumbling block to change" and that "its efforts to reform itself have been notably unsuccessful" (Fit 74; Once 20). It went on to say that "if the World Bank did not exist, 180 governments which own it would not bother to create it now" (Once 19). Its current President James Wolfensohn has pledged to streamline the staff and to improve the efficiency of the Bank's project selection and monitoring efforts (Stevenson C1). The Economist says that "if it is to be effective, the Bank will have to . . . become smaller and more flexible" (Fit 74).

Consistent with the analysis of Keohane & Nye, Owen says that "the financial power that was once wielded by governments has both grown and dispersed" and that "the World Bank Group must therefore shape its future in a world where the nations that are its shareholders are no longer all-powerful. It must respond to the claims and views not only of [the G-7], but also of other governmental and nongovernmental organizations in both donor and recipient nations" (103).

The experience of the World Bank over the past half-century illustrates the correctness of the basic insights of the international organizational theorists in placing in perspective the role of international power relationships, their recognition of the growing influence of international organizations in an interdependent world economy and the need for such organizations to respond flexibly to the rapidly changing requirements of our age.

Works Cited

Patricia Adams. "The World Bank Is Not Financially Sound." USA Today Sept. 1995: 28-30.

"A welcome new development." Economist 26 Aug. 1995: 62.

Chatterjee, Pratap. "World Bank Failures Soar to 37.5% of Completed Projects in 1991." In Fifty Years Is Enough, ed. Kevin Danaher, 137-138. Boston: South End P, 1994

Danaher, Kevin. "Introduction." In 50 Years Is Enough, ed. Kevin Danaher, 1-5. Boston: South End P, 1994.

Diehl, Paul F. (Ed.). The Politics of International Organizations. Chicago: Dorsey P., n.d.

"Fit at fifty." Economist, 23 July 1994: 73-74.

Haas, Ernest B. "Why Collaborate? Issue-Linkage and International Regimes." n.v. World Politics, n.d.: 357-405.

Irwin, Michael H.K. "Banking on Poverty: An Insider's Look at the World Bank." In 50 Years Is Enough, ed. Kevin Danaher, 152- 160. Boston: South End P, 1994.

"It can be done." Economist 29 June 1996: 19-20.

Judis, John B. "World Bank." In 50 Years Is Enough, ed. Kevin Danaher, 148-151. Boston: South End P, 1994.

Keohane, Robert O. & Joseph S. Nye. Power and Independence. New York: Harper Collins, 1989.

Kratochwil, Friedrich & John G. Ruggie. "International Organization: The State of the Art." In The Politics of International Organizations, ed. Paul F. Diehl, 17-27. Chicago: Dorsey P, n.d.

Mason, Edward S. & Robert E. Asher. The World Bank Since Bretton Woods. Washington, D.C.: Brookings Institution, 1973.

"Once it's there." Economist 1 March 1997, 19-20.

Owen, Henry. "The World Bank: Is 50 Years Enough?" 73 Foreign Affairs Sept/October 1994: C1.

Payer, Cheryl. The World Bank A Critical Analysis. New York: Monthly Review P, 1982.

Rich, Bruce. "World Bank/IMF: 50 Years Is Enough." In 50 Years Is Enough, ed. Kevin Danaher, 6-13. Boston: South End P, 1994.

Stevenson, Richard W. "World Bank Chief Asks Slimmer Staffs and Better Lending." New York Times 21 Feb. 1994: C 1.

"The party line." Economist 6 June 1994: 82.

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