CSS & PMS Solved Essays | Critical Analysis of the World Bank
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Outline
1-Introduction
The success and failure of the World Bank in promoting development in middle and low-income countries is a significant issue, as while it has accomplished much, it still needs to shift its policies to become a genuinely effective and fair institution that helps people experiencing poverty.
2-A cursory glance at the World Bank
3-What is thought behind the creation of the World Bank?
4-How far has the World Bank succeeded in performing its role?
- ✓Giving loans for productive purposes
- Case in point: The World Bank has given India a loan worth 1 billion dollars for solar projects, including rooftop solar initiatives.
- ✓Ensuring clean water availability to states
- Case in point: In Bangladesh, 1.2 million people can access improved water sources due to rural water supply and sanitation projects financed by the World Bank.
- ✓Providing better transport and investing in infrastructure
- Case in point: The World Bank has been supporting India’s flagship Prime Minister’s Rural Road Program in India, aiming to expand access to previously unconnected 178,0000 villages.
- ✓Boosting the growth of the agricultural sector
- Case in point: In Azerbaijan, the World Bank funded the Agricultural Competitiveness Improvement Project, which helped small and medium-scale businesses by increasing crop productivity.
- ✓Financing businesses and reducing unemployment by creating job opportunities
- Case in point: In 2014, the World Bank granted 300 million dollars to support micro and small enterprises through a “Promoting Innovation for Inclusive Financial Access Project” project in Egypt.
5-In which domains has the World Bank failed to serve its purpose?
- ✓Giving negligible attention to addressing the challenge of climate change
- Case in point: According to the Foreign Affairs, “The World Bank has raised 3.1 billion dollars for financing climate change needs; however, by 2025, 500 billion dollars will be required for climate change financing”.
- ✓Failing to address its core purpose of removing poverty and helping poor
- Case in point: According to the Huffington Post, “The residents of Badia East were forcefully displaced from the project sight, their homes were destroyed, and they were provided with no compensation.
- ✓Promoting inequality around the globe
- Case in point: According to the World Bank, its policies have failed and promoted inequality in Mozambique.
- ✓Downgrading the economic spectrum of countries
- Case in point: According to the World Bank 2022, Pakistan must pay a debt of 18.3 billion to the World Bank, burdening the state economy.
- ✓Providing loans on harsh terms and conditions
- Case in point: According to the research of Belgium-based CSO Eurodad, in 2017, the World Bank issued 434 prior actions that were required to be adopted by lender states.
6-Critical Analysis
7-Conclusion
The World Bank is an institution, created to help rebuild the economies of post-war Europe. However, it has since expanded its reach to all corners of the globe. It has become a vital platform for middle and low-income countries that require financial assistance with their development projects. This assistance has been extended to many countries, including Pakistan, where the World Bank currently has 43 ongoing projects to boost its development. Coming towards its success, the bank has been successful in addressing various issues that many countries face, such as water and sanitation problems. While the World Bank has completed several development projects by giving productive loans, the picture has a darker side. The bank has often failed to support weak world economies and promoted inequality between the rich and poor populations of the lender countries. This is because the World Bank finances mega-projects that directly benefit the wealthy and influential people while ignoring the needs of the poor. To be a true saviour, the World Bank needs to finance projects oriented towards helping the poor. The bank also needs to shift its policies to play its role effectively. Overall, the success and failure of the World Bank are significant. While it has accomplished much and contributed to the development of many countries, it still has a long way to go to become a genuinely effective and fair institution.
Starting with decoding the glance of the organization, the World Bank was founded at the Bretton Woods Conference in 1944 in New Hampshire to rebuild Europe and Japan after the Second World War. Aiming to give developmental loans, the very first loan from the World Bank was given to France in 1947. The World Bank, officially named the International Bank for Reconstruction and Development, initially containing 36 members, now includes 189 member countries. As of 2022, it is run by 25 executive directors and 29 vice presidents. Moreover, the World Bank has six most significant stakeholders, including the United States, China, Germany, France, and the United Kingdom. The member countries’ vote powers are assigned based on the economy’s size. Therefore, the United States has the most voting power as it is the largest economy in the world.
Before diving deep into the matter, it is essential to highlight the World Bank’s purpose. The purpose of the World Bank has shifted from supporting and giving loans to European countries to helping all the countries, developed and developing of the world. The essence of the World Bank is to alleviate poverty and improve the countries’ infrastructure. The World Bank contains a group of five organizations, namely the International Bank for Reconstruction and Development (IBRD), International Development Association (IDA), International Financial Cooperation (IFC), Multilateral Investment Guarantee Agency (MIGA), and International Centre for Settlement of Investment (ICSI), where IBRD and IDA are collectively called as the World Bank. The main agenda behind these five institutions is to provide loans to middle- to poor-income countries and the private sector and encourage the investment of private companies into foreign countries. However, along with extending the member countries, the World Bank has also widened its scope of work. It addresses multiple concerns about administration, education, health, infrastructure, agriculture, climate, and natural resources. Additionally, the World Bank helps countries facing war, focuses on climate change, publishes reports and maintains an online database. Therefore, in the contemporary era, the World Bank is a home for countries where the countries find solutions in the form of loans for grave problems.
Besides serving multiple purposes to bring prosperity to the world, the World Bank has played a significant role in giving productive loans to all developed and developing countries. One glaring example in this case is the loan given to India. The World Bank has given India a loan worth 1 billion dollars for solar projects, including rooftop solar initiatives. The project aims to provide low-carbon energy to the country. Hence, the loan given by the World Bank adds to the productivity of the country’s industrial sector. In this way, the World Bank has provided loans to countries to increase the productivity of multiple sectors.
In addition, the World Bank has made multilateral efforts to provide clean water in developing countries. Indeed, water availability is a prominent issue that developing countries are grappling with; the World Bank is a blessing in disguise as it has started multiple water sanitation projects around the globe. For instance, in Bangladesh, 1.2 million people can access improved water sources owing to rural water supply and sanitation projects aided by the World Bank. Furthermore, in liaison with the United Nations, the World Bank issued an Action Plan in 2016 to ensure water availability and sustainable water management. These actions of the World Bank thus describe the fruitful struggles of the World Bank.
Further, the World Bank has undoubtedly brought significant changes in the transport system of developing countries, reducing the cost and time of travel. Verily, rural areas in many developing countries have limited exposure due to a lack of access and long distances from metropolitan cities. The World Bank has significantly reduced the issue by providing loans to developing countries for transport and construction of roads. For example, the World Bank has been supporting India’s flagship Prime Minister’s Rural Road Program in India, aiming to expand access to previously unconnected 178,0000 villages. The project will provide easy access to villagers to communicate with the metropolitan members of their state. Similarly, the World Bank has also approved 300 million dollars for upgrading the roads in vulnerable districts of Khyber Pakhtunkhwa, Pakistan. Therefore, the World Bank has played a positive role in uplifting the transport systems of developing countries.
Likewise, the projects initiated by the World Bank have boosted agricultural growth in several countries. The World Bank has financed many agricultural projects to improve the farm sector and increase crop productivity. To illustrate, in Azerbaijan, the World Bank has funded the Agricultural Competitiveness Improvement Project, which helped small and medium-scale businesses by expanding the country’s crop productivity. Along with this, the project supported 70 per cent of the livestock and created new jobs in the agricultural sector. Many other countries, such as Benin, Armenia, and Argentina, have also benefitted from similar projects funded by the World Bank. So, the World Bank has provided a platform for developing nations to resolve their agricultural problems.
Another prominent role the World Bank plays in financing small and micro-scale businesses in developing countries is to provide job opportunities and reduce unemployment. Indeed, developing countries continuously face economic downturns. Therefore, this is a spectacular step that the World Bank has taken. In 2014, the World Bank granted 300 million dollars to support micro and small enterprises through the “Promoting Innovation for Inclusive Financial Access Project” project in Egypt. The project, primarily focused on women, youth, and marginalized groups, created more than 273,000 jobs and provided financial assistance to more than 150,000 clients, eventually boosting the country’s economic growth. Hence, the World Bank has made uncanny efforts to free the world from unemployment.
While the World Bank has assisted the countries in countering multiple challenges, there are specific points where the efficacy of the World Bank falls back. Among them, the most pertinent factor is limited investment in climate change. Undoubtedly, developing countries are currently grappling with mounting climate change impacts. And the World Bank has failed to provide developing countries with sufficient assistance to deal with the effects of climate change and tackle the issue. According to Foreign Affairs, the World Bank has raised 3.1 billion dollars for financing climate change needs; however, by 2025, 500 billion dollars will be required for climate change financing. Similarly, Pakistan has suffered from the severe impact of climate change, but the World Bank has not provided sufficient support to Pakistan. Hence, it is the basic level at which the World Bank has failed to serve its purpose.
Moreover, the World Bank has failed to fulfil its core purpose: helping the poor and alleviating poverty. The projects financed by the World Bank are intended to help the poor; however, in most developing countries, the poor are badly affected by the projects owing to the massive displacement of people from the project sites. A similar incident occurred in Nigeria, Badia East. According to the Huffington Post, the residents of Badia East were forcefully displaced from the project sight, their homes were destroyed, and they were provided with no compensation. Evidently, the World Bank does not deeply analyse the project’s possible impacts, leaving the masses in a chaotic state. Therefore, with no doubt, it is right to say that the projects of the World Bank contain systemic gaps that are the reasons the World Bank does more damage to displaced communities and fuels poverty around the globe.
Stepping ahead, the World Bank has invoked inequality in developing countries. Instead of mega-projects and investments aimed at boosting the countries’ economic growth, the World Bank has widened the gap between the poor and the prosperous among the nations. Mozambique is a remarkable example of this inequality. According to the World Bank, its policies have failed and promoted inequality in Mozambique. Despite excessive investment in mega-projects financed by the World Bank, limited job opportunities were created for the labour sector to alleviate poverty, thereby supporting those at the top of the income distribution and neglecting the poor sector of the country. Hence, the daunting inequality prevailing in the countries, especially developing countries, points towards the failure of the World Bank.
Consequently, the World Bank has failed to boost the countries’ economic growth as loans are given with high-interest rates. Undoubtedly, the World Bank has increased the interest rate to 5 per cent over the past year, making it impossible for developing countries to repay the loans. Ultimately, the countries have no other option except to go towards the same lender to meet the state expenses. As a result, it overburdens the state and leads to a downward economic trajectory. According to the World Bank 2022, Pakistan must pay a debt of 18.3 billion to the World Bank. The loans have thus chained the countries in the vicious cycle of debt trap. Hence, despite being an institution with the core purpose of supporting economies, the World Bank has overburdened the countries.
Last but not least, the institution has proven to be a challenge for poor countries in the form of stern terms and conditions. The countries find the conditions too harsh for their states. In recent years, the World Bank has rapidly changed the conditions, decreasing the policy space for developing countries. The organization has launched a pre-requisite in prior action that the lender must adopt before taking any loan. According to the research by Belgium-based CSO Eurodad, in 2017, the World Bank issued 434 prior actions that were required to be adopted by the lender state. These steps, in their true essence, are designed to cripple the already crumbling economies. Hence, there is no denying that the World Bank failed to strengthen the state economies. Instead, it has weakened the economic sector through strict terms and conditions.
To evaluate critically, the role of the World Bank is manifold. Many projects initiated by the loans given by the World Bank are helping countries, especially developing countries, fight persistent challenges. However, on many grounds, the World Bank has failed to play its role in true letter and spirit. The institution has been unable to remove inequality and boost the countries’ economic growth owing to strict terms and conditions. Moreover, it has widened the gap between rich and poor states. Therefore, it is a gospel truth that the World Bank has done more damage to the states than relief. The World Bank, however, can turn the tide and help the countries by reshaping its policies and terms and conditions.
To sum up, the World Bank has the core vision of reducing global poverty. To alleviate poverty globally and help developing countries, multiple World Bank projects are in progress in different parts of the world, such as clean water and sanitation projects and infrastructure development projects in African countries. However, at the same time, there are particular loopholes in the functioning of the World Bank, making it clear that the World Bank has failed to play its due role, such as failure to boost economic growth, widening inequality, and insignificant efforts on climate change. Nonetheless, the World Bank can earn the title of true saviour by bringing a phase shift in its policies and playing its role in fighting the social monsters.
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