The History of the World Bank
Depending on who you ask, the World Bank is either a humanitarian organization focused on development of Third World countries or an exploitative institution of U.S. imperialism. Arguably, it has acted as both during its more than 50-year history. While it's true that many World Bank loans finance the construction of critical infrastructure and provide social services in the Third World, the primary beneficiary of the loans are the American corporations that receive the contracts to build the infrastructure. Ultimately, corporations then use the infrastructure to extract natural resources for private gain, while the local population is stuck with the debt for the initial loan. At the same time, the World Bank has instituted reforms in response to intense criticism. The World Bank has evolved considerably since its origins at the end of World War II.
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History
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In 1944, in the wake of World War II, an international economic conference was held at Bretton Woods, New Hampshire. Although many countries participated, the winners of the war, primarily Britain and the United States, controlled the meeting. The purpose of the meeting was to establish a new financial order based on the outcome of the war. The U.S. dollar, because of the country's massive gold reserves, was made the official reserve currency of the world. The World Bank was established at this conference as an institution charged with lending money to war-ravaged nations for rebuilding.
Early Years
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The first loan from the World Bank was to war-torn France, which received approval for a loan after complying with a U.S. State Department request to expel communists from its national government. The $987-million loan came with the conditions that the French government operate on a balanced budget, that World Bank staff supervise use of the loan funds and that the World Bank be treated as a priority creditor above any other foreign governments. In 1948, a similar loan to Chile, the first Latin American country to receive World Bank aid, was eventually approved.
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Development and Private Loans
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The loan to Chile was a landmark that illustrated the future course the World Bank would take. Rather than a loan for postwar reconstruction, the loan to Chile was for general development of a Third World nation. A year later, a private company in Mexico received a World Bank loan to develop the country's electrical power infrastructure. The first loan to an Asian country went to India the same year for building a $34-million railway. For the first 20 or so years of the World Bank's existence, loans went out for similar projects that had ultimately produced a clear revenue stream for repaying the loan.
Social Services
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Under the presidency of former U.S. Secretary of Defense Robert McNamara (appointed World Bank president by President Johnson), the World Bank increased the frequency and amount of its loan offerings. The bank's portfolio now included loans for such social services as schools, hospitals, literacy and agriculture. Unfortunately for the Third World countries receiving these loans, they did not produce a means of repayment. As a result, these countries found themselves under unmanageable debt burdens, and in the period from 1980 to 1989, a large percentage of the World Bank's loans were to these same nations so they could service their prior debt obligations.
Millennium Development Goals
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Today, in the 21st century, the World Bank is a diverse organization of economists, public policy specialists, engineers, financial analysts and social scientists. Its stated goal is the reduction of poverty as a social and health concern, as well as a financial reality. Due to sharp criticism on many fronts, from environmental organizations and health care activists to indigenous populations, it has increased the number of grants it offers, lowered the interest rate on many of its new loans and embraced a "green" technology focus. The World Bank continues to offer development loans for infrastructure construction and investment loans for social services.
Economic Hitmen
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John Perkin's best-selling autobiography "Confessions of an Economic Hitman" is one of the most shocking accounts of the World Bank and its activities from the late 1960s through the turn of the 21st century. According to Perkins, the use of World Bank loans as a means of political leverage (hearkening back to its very first loan to France) has been repeatedly used to aid the exploitation of natural resources by American and international corporations. Perkins describes his own experience consulting on and negotiating World Bank loans that resulted in default, private exploitation of resources through infrastructure financed by loans charged to the indigenous population and political coercion.
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- Photo Credit Jonathan McIntosh
