Low Soo Peng Banking World

1. The World Bank

2. Structure and Objectives of
Lecture
• Section One: The founding principles of the
World Bank and the History of the World
Bank until 1981 (Berg Report)
• Section Two: Critically examine the World
Bank’s structural adjustment policies in the
1980s
• Section Three: Examine the main tenants of
the Bank’s contemporary polices/project

3. • Section Four: Raise some conceptual issues
about how we conceptualise the banks
relationship with clients and other
international institutions
• At the end of lecture you should have a clear
sense of the manner in which the World
bank’s policies have evolved over time and
the main debates surrounding the Bank’s
contemporary polices.

4. Section One
• The World Bank Group actually consists of
five institutions
• The International Bank for Reconstruction
and Development (IBRD), established in
1945, which provides debt financing on the
basis of sovereign guarantees.
• The International Finance Corporation (IFC),
established in 1956, which provides various
forms of financing without sovereign
guarantees, primarily to the private sector.

5. • The International Development Association
(IDA), established in 1960, which provides
concessional financing.
• The Multilateral Investment Guarantee
Agency (MIGA), established in 1988, which
provides insurance against certain types of
risk, including political risk, primarily to the
private sector.
• The International Centre for Settlement of
Investment Disputes (ICSID), established in
1966, which works with governments to
reduce investment risk.

6. • Five purposes:
• Assist development and reconstruction
• To promote long term balanced
international trade
• To lend for project development
• To conduct its operations with due
regard to business conditions
• Promote private investment

7. • ‘Reconstruction’ alludes to its proposed
role in rebuilding war ravaged
economies of Europe and Japan
• However the Bank’s role in the entire
enterprise was negligible
• Bank intervened within and supported
post-colonial states

8. • In contrast to the WTO the World Bank is an
international organisation in a sense that can
be relatively easily understood
• It has a large staff and an executive board
who are appointed by its largest contributors
• Its head is always a American (current
Wolfowitz). United States holds 16.4% of total
votes, Japan 7.9%, Germany 4.5%, and the
United Kingdom and France each held 4.3%

9. • In the 1950s and 1960s the Bank
largely serviced the agenda of postcolonial state elites
• Project based lending
• $1 Billion support to Tanzanian statist
modernisation project
• Very poor auditing

10. • Bank’s capacity to dominate the development
agenda limited by 3 factors
• Dominance of the idea of ‘state led
development’
• The international moral standing of postcolonial leaders
• The relative health of post-colonial
economies

11. GDP growth per capita in Sub-Saharan
Africa
1960-74 :1.9
1974-1990: 0.7
1990-2000: 0.3

12. • 1970s witnessed a massive increase in
private lending to the third world
• Bank mirrors this overall increase
• Lending to Sub Saharan Africa rose
from less than $2 billion in 1969 to over
$12 billion in 1981

13. • National Development Projects in 3rd
world literally living on borrowed time
• Between 1970 and 1978 Sub Saharan
African debt rose from $9 billion to $60
billion

14. • National Development Projects in
3rd World literally living on
borrowed time
• Between 1970 and 1978 Sub
Saharan African debt rose from $9
billion to $60 billion

15. • Robert McNamara powerful head of
Bank with clear anti-poverty agenda

16. Second Two
• By end 1970s it is clear that National
State-led Development had run its
course (and in most cases failed)
• Recession following 1979 OPEC price
increases drove economies over the
edge
• Election of Thatcher and Regan (new
ideational climate)

17. • Berg Report 1981(Accelerated Development
in Africa: An Agenda to Action)
• The Problem is the post-colonial state. The
answer less state and more market
• Conditionality
• The Conditions: Open Up, Privatise, Deregulate, Control Inflation and Cut Public
Spending

18. • Social spending declined by 26% from
1980 and 1985 in Sub Saharan Africa
• Even in there own terms SAPs were a
complete disaster
• Growth was negative (even worse than
macroeconomic statistics suggest), no
influx of private investment or growth in
exports

19. •
•
•
•
Why did they fail?
Failure to Implement properly (Yes)
Dreadful Initial starting point (Yes)
Fundamentally misunderstood the
nature of the problem and the way
markets work (The Bank itself now
largely accepts this)

20. • Many states in question were predatory but
they were also weak (The Weberian
substance of the state was weak). SAPs
weakened them future.
• Markets require elaborate institutional
frameworks and certain basic public goods to
function properly. In the absence of a
effective state the formal policy stance of
government is largely irreverent

21. Section Three
• Post-Washington Consensus: The
World Bank rediscovers the state
• What new and what is not new about
the Post-Washington consensus?

22. • What stays the same is the basic
emphasis on private enterprise (logics
of capital) and no change in the content
of macroeconomic policy

23. • New emphasis on importance of regulation
and the provision of basic public services
• If the Washington consensus sought to
bypass the state the post-Washington
consensus seeks to remake the state and
society (social capital)(reengagement with
Webarian project)

24. • Post-conditionality: It is not enough for
countries to be forced to reform they must be
made to actively support reform
• The paradox of ownership: With the formation
of comprehensive development framework
and PRSP bank is extending its remit to all
aspects of policy. Here is the policy you must
own it
• Yet the focus on ownership is real

25. • Bank seeks to integrate itself into the
state by establishing join committees
within key domestic ministries
• Whole project is supported by clear
emphasis on transparency(The World
Bank governance frameworks)

26. • The meat of the Bank’s project is to create
functional capitalist states in the periphery
and to integrate the entire population of the
world into the capitalist system
• Surprisingly, critics and supporters essentially
agree on content of the project. Although the
language they use is very different

27. • For the Bank it is simple the Poor's
most valuable asset is their labour.
Thus the key to ending poverty is to
extend capitalist markets, give the poor
basic healthcare and education (so that
are employable), and create billions of
$2 a day jobs

28. Its critics (Cammack “Attacking the Poor”)
stress the problems associated with exposing
the poor to the vagaries of the market and the
inability of capitalism to end poverty due to its
need for a lumpenproleteriat.
We shall return to question of whether the
Banks policies can reduce/ elimate poverty in
the conclusion. Prior to this lets examine
some conceptual issues we face in studying
the contemporary bank.

29. Section Four
• Conceptual issues about how we understand
relationship between states and the World
Bank
• There is little sense in understanding the
Bank as a external actor when we study its
relationship with very poor clients (not India,
China or middle income states)

30. • 1990s 30% of Tanzanian GDP was
Bank support
• 1990-2003 55% of Ugandan public
spending was external aid
• 1990s in Mozambique 50% of
government spending externally
funded, 75% of public investment

31. • The World Bank constitutes an integral
part of the state
• Harrison idea of an sovereignty frontier
is a useful one in helping us understand
the relationship

32. • World bank part of a broader project to
extend and deepen capitalist disciplines
(think back to the WTO)
• Also other traditionally more left leaning
institutions (UNCTAD) have been
incorporated ‘Monterey Consensus’
2002

33. Conclusions
• Following the failure of state led development
in LDCs and crude neo-liberalism the World
Bank is now engaged in project of creating
capitalist states and societies not simply
capitalist markets (Sophisticated neoliberalism)
• Given that it is a attempt to reengineer states
from without and extend global systemic
logics the project is clearly imperialist
• This does not necessarily mean it is wrong
however.

34. • In my view what matters is the extent to which
it delivers on its promise to reduce poverty
and create functioning states.
• There are success stories (Mozambique,
Uganda and Tanzania), although it is difficult
to ascertain if this is because of massive aid
or the policies pursued. The World Bank gets
‘trapped’ in these states by ideational and
financial investments
• Also the project has an undeniable logic

35. • On the other hand…..
• Evidence of a wider upturn is limited (Wade)
• In fairness to the Bank it is constrained by the
consistent failure by core capitalist states to
do what it believes is required. Open markets,
engage in massive debt restructuring and
increase aid

36. • Also Quality of Clients (although the
point about Post-Washington
consensus is that you can transform
clients)
• Time will tell!
• What is clear is how the Bank’s project
fits into broader globalisation project
(think back to firms, Harvey and WTO)

37. • Looking forward it also clear role this
institution plays in the Global
surveillance regime. The subject of next
weeks lecture!