World Bank, 11/2005

Key Lecture Points:

What is Development?

• World Bank and US Perspective: The World Bank (WB) and the United States generally suggest that “development” means economic growth. Economic growth, it is argued, means that each and every resident of that country will benefit. The general catch-phrase that describes this position is: “A rising tide lifts all boats”. From this perspective the best way to achieve economic growth is through free-market capitalist economic organization. Free markets mean greater levels of trade and investment, which means higher levels of employment, which means economic growth and greater social welfare.

• Developing Countries and Critics of the World Bank and the US: Most developing countries argue that the free-market development policies advocated by the WB and the US have not worked. They have increased poverty and inequality, led to environmental degradation, led to lower wages and labor standards for workers, and have made a few elites rich at the expense of the mostly poor masses. They argue that the Millennium Development Goals will never be reached via free-market methods. Who Gets to Decide How Money from the WB is Used?

Who Gets to Decide How Money from the WB is Used?

• World Bank and US Perspective: The WB and the US argue that developing countries have not shown that they can use loans and grants from the Bank responsibly. The debt crisis of the 1980s showed WB and US leaders the dangers of loaning money to developing countries unconditionally. For this reason, loans now come with conditions, or “Structural Adjustment Programs” (SAPs) that are thought to ensure sound economic fundamentals and to combat corruption.

• Developing Countries and Critics of the WB and the US: Developing countries argue that only they can know best how to use development funds. Every country is different, they argue, and must be allowed to pursue those development goals that it sees fit. Also, SAPs don’t work. Furthermore, loan conditionality is unwarranted because funding from the developed world (like the US) is owed to developing countries from hundreds of years of slavery, colonization, and natural resource extraction. Much the same argument is presented in the debate over debt relief and cancellation. Is it Right that the US has so much power in the World Bank?

Is it Right that the US has so much power in the World Bank?

• WB and US perspective: Yes, it is right that the US has the greatest influence of any single country in the WB because the US has the largest “subscription” to the WB. Because the US contributes more money to the WB, it is right that it has more power. Additionally, the US takes special care to consider the needs of all member countries.

• Developing Countries and Critics of the WB and the US: No, it is not right that the US has so much power in the WB. The principles of democracy suggest that all countries should have an equal vote; it is not right that the more money a country has, the more power it also has. Also, because of the US’s power, many of the needs of developing countries are not considered. The US uses the Bank to pursue its own interests.

For More Information:
• History, organization, financing, programs:www.worldbank.org
• General info: www.wikipedia.org
• Third World Perspective: www.econjustice.org
• US FDIC on debt crisis: http://www.fdic.gov/bank/historical/history/191_210.pdf

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