The 80th anniversary of the World Bank is a good time to bury the arguments in favor of reforming the institution and strengthen the demand for radical restructuring.
The past eight decades did not witness any major reforms it undertook towards making it a more democratic institution. At best, it conceded to a few demands of communities and civil society organizations, like operational policy revisions resulting in relatively progressive social and environmental safeguard policies, establishing independent accountability mechanisms, transparency policies, and alike. They are certainly wins for the communities and CSOs who fought the institutions for decades and gained tools in their hands for upping their fights.
Over the years, however, the Bank found ways to weaken the effectiveness of these policies and mechanisms, found ways to bypass them, and forged new partnerships and collaborations to take forward their neo-liberal agenda, corporate welfarism, and undermine the sovereignty of emerging economies.
Moreover, none of the changes mentioned above challenged the undemocratic nature of the Bank nor its hegemonic influence over global development policies, which often perpetuates power imbalances and undermines the sovereignty of recipient countries in determining their own developmental paths.
Eight decades later, the United States continues to be the largest shareholder at the Bank, having a veto on every decision. The president of the Bank has always been a US citizen, and so far only men! Eight of the Bank’s largest shareholders—US, Japan, Germany, France, the United Kingdom, China, Saudi Arabia, and Russia—each have their own executive directors on the Board and wield 42% of votes. In contrast, all 47 sub-Saharan African countries are represented by just two executive directors and command less than 6% of all voting shares.
They continue to be the development finance gatekeeper for economies. The Bank’s lending decisions and evaluation of country development strategies affect their access to capital from different sources. Country Policy and Institutional Assessments, Investment Climate Assessment, Economic Outlook, the now discredited and discontinued Doing Business Report, and the new B-Ready are some of them.
They continue to be the knowledge bank, influencing and framing the debate on development issues and policies. They also train government officials and parliamentarians on various dimensions of macroeconomic policy and development management, making their operations in countries easy. They also continue to be a standard setter on development finance, leading the pack of other multilateral development banks and even the private sector.
The Bank’s agenda of economic prosperity, promoted in different names like Billions to Trillions, Shared Prosperity etc., resulted in contributing to wealth inequality. According to the UBS Global Wealth Report, in 2023 the world’s richest 1%, those with more than US$1 million, owned 47.5% of all the world’s wealth—equivalent to roughly US$214 trillion. Adults with less than $10,000 make up nearly 40% of the world’s population but hold less than 1% of the world’s wealth.
Through Public-Private Partnership frameworks, Development Policy Loans aimed at supporting specific policy reforms, including privatization initiatives, Structural Adjustment Loans coming with conditions requiring countries to undertake privatization as part of broader economic reforms, Maximizing Finance for Development, Blended Finance, Capital Mobilization etc., the Bank ushered in private capital in a big way in its operations, justifying and legitimizing privatization of public enterprises and services in countries.
Having substantially contributed to the climate crisis all these decades, through their promotion and investments in fossil fuel energy projects and still promoting unsustainable infrastructure projects in fragile ecologies, trying to reinvent itself as a climate bank is merely greenwashing its legacy rather than genuinely committing to sustainable development.
What a radical restructuring could look like should emerge from genuine consultations with various stakeholders, including communities and civil society organizations. Some of the principles could include:
- Democratization of governance from one-dollar-one-vote to one-country-one-vote, ensuring a shift towards a more democratic system where every country’s voice holds equal weight, emphasizing fairness and equity in representation.
- Shifting its focus from climate change to climate and economic justice. Climate and economic justice demand equitable distribution of resources, addressing environmental impacts while ensuring marginalized communities have a voice in decision-making.
- Strengthening transparency and accountability mechanisms with more power to ensure that they are genuinely empowered to hear the marginalized voices, ensuring course correction in the Bank’s operations, and that decision-makers are held responsible for their actions.
- Eliminating any loan conditions that impose neoliberal policies, allowing countries to pursue development strategies that align with their unique contexts.
- Prioritizing initiatives aimed at reducing inequality and supporting marginalized populations rather than purely focusing on GDP growth.
- Fostering partnerships with a wider range of stakeholders, including grassroots organizations and social movements, to create a more inclusive approach to global development.
A traditional Bank with a conservative approach to addressing modern-day problems will be asking too much from it. The global problems deep-rooted in capitalism, patriarchy, inequality, and overexploitation of natural resources and profits cannot be tackled by institutions that are undemocratic and in the grip of a few powerful nations, that thrusts and imposes neo-liberal agenda on countries, that believes that private finance is the way forward.
If the World Bank needs to be relevant, it needs a radical restructuring.
This article was originally published in APMDD and can be read here.
Centre for Financial Accountability is now on Telegram and WhatsApp. Click here to join our Telegram channel and click here to join our WhatsApp channel and stay tuned to the latest updates and insights on the economy and finance.
