Should the World Bank go the way of USAID ?
Of course not
Walden Bello, writing in CounterPunch (February 26, 2025), has declared that “The World Bank and the IMF await Elon Musk”. In what follows, I review Bello’s suggestion of a Muskotic raid on the Bank.
The USG could unilaterally disincorporate the Bank. This is nonsense. The Bank is an international organization, with Articles of Agreement ratified by member states; the Articles function as a treaty and are binding on member states. The US can withdraw from the Bank—indeed, I have written that the other shareholders should expel the US but that is a different issue[1].
“The World Bank has come under fire for the billions it has spent supporting fossil-fuel projects throughout the Third World that have contributed to global warming.” Bello is right—the WB should not spend a dollar on fossil fuel projects and it should cancel any IDA funds used to finance fossil fuel use. That these billions are a tiny share of private investment in fossil fuels and a tiny share of WBG funding does not pardon the crime of Bank funding and advice.
“Some 3.5 billion people, or 44 percent of the globe [in 2022], remain poor, after decades of massive World Bank lending. A major part of the reason is that World Bank programs have created poverty instead of alleviating it”.
Bello correctly cites a Bank report (https://www.worldbank.org/en/publication/poverty-prosperity-and-planet) on 3.5 billion people in poverty in 2022, failing to note that the same report shows a decline in the poverty number from 4.3 billion in 2003. Nor does Bello cite a fall in the numbers of the poorest people from 1.6 billion in 2003 to 0.7 billion in 2022. The allegation that “World Bank programs have created poverty instead of alleviating” is unsupported; I invite Bello to prove that assertion by reference to specific operations or country programs.
“U.S. government money [is] being wasted in programs that are mischievously justified as aid to the poor people of the world [; the Bank and the IMF are two] [2] of the most questionable and controversial institutions directly or indirectly funded with U.S. taxpayers’ money”.
The USA commits little taxpayers’ money to the Bank. The US is indeed the largest shareholder in IBRD, with paid-in capital of some US$4 billion, yet Bello refuses to understand that IBRD is not a charity or even a concessional lender—the capital of the US and the other shareholders is lent on near-commercial terms and generates a positive return to taxpayers (known as “net income”).
The US is a major donor to IDA, committing US$ 4 billion of US taxpayers’ money in the most recent triennial replenishment of US$100 billion. Bello may wish to note that the US annual commitment of roughly US$1.3 billion to IDA is barely one-third of one percent of projected FY25 federal revenue of US$5.2 trillion. Reviews of IDA have shown that it is an effective development instrument [3]. There are thousands of project reviews, done by an independent entity in the Bank that reports directly to the Board of Executive Directors; most of those reviews show that the operations are effective and efficient.
The US blocks reform of the WBG, according to Walden Bello, by threatening to withhold its capital contributions. Bello writes: “I can guarantee that immediately [after US withdrawal] the interest rate at which the Bank borrows in international capital markets would leap upward, paralyzing its lending operations”. What Bello misses is that IBRD lending terms are not determined by the institution’s capital structure but by its borrowers’ guarantees. If the US were to withdraw from IBRD, then other countries (Norway, France, China, Brazil, Turkey, Mexico, Indonesia, South Korea, Japan) could buy the US shares in the Bank (now about US$ 4 billion, not including, as far as I know, any US claims on the Bank’s undistributed dividends) while maintaining the historical practice of lending against sovereign guarantees. There would be a shock to IBRD bonds but I believe it would be temporary; the other nations are capable of managing the institution because they are already managing other institutions like the WBG (the regional MDBs, notably).
Bello “proposes” a 75 percent cut in Bank staffing. He does so without evidence—perhaps the reduction should be 10% or 20% or 36.4 % or 71.2%. Advocates for any institutional reform have to say what they would cut and how the cuts would affect operations. Bello does not give evidence for this proposal because he has none.
Bello distorts the findings of the Deaton Panel (Angus Deaton, chair. An evaluation of World Bank research, 1998-2005. 2006. Available at SSRN 2950327) on the Bank’s research. The Deaton Panel has strong and valid criticisms of Bank research and makes valuable recommendations for reform. Yet, the Panel’s conclusions do not support the slash-and-burn attack mounted by Bello. Those conclusions are that Bank research needs: (i) more money; (ii) greater independence; (iii) stricter quality control; (iv) closer upstream integration with operational design and preparation (notably in using RCTs); and (v) greater transparency on data collection and management. These conclusions do not sum to, as Bello wrongly claims, a “damning assessment”. As the Executive Summary of the Deaton Panel states: “As the world becomes richer, and already today among middle income countries, the need for high-quality, research-based advice will only become stronger as the need for Bank lending diminishes. “
Bello worked on the “50 Years is Enough” campaign, but is unaware of Bank reforms [4] done partly in response to “50 Years”.
Created (1996) the job of resident Country Director as the main decision maker on projects and advisory services, and with some (admittedly not always extensive) oversight on Bank-funded research in the country;
Decentralized directors and technical staff to the country offices, where they are empowered to do anything within the Bank’s mandate except approve loans, something which remains the job of the Executive Board;
Appointed national staff in the country offices and given them responsibilities formerly held only by HQ staff;
Developed a modern financial management system;
Created new financial and technical instruments to allow more responsiveness to national priorities;
Developed modern websites where the public can find information on operations supported by IDA and IBRD[5] including project documents, financial and performance audits, supervision reports, EIAs, procurement information, and reports of complex restructurings;
Made its research data and results more widely available;
Diversified management and staff, at all levels, by nationality, race, and gender;
Commissioned independent opinion surveys in member countries across government and civil society and published the results;
Required staff consultations with beneficiaries, civil society, and development partners throughout the project cycle;
Created an independent Inspection Panel to investigate allegations of adverse project impact on affected groups;
Created a grievance resolution process within Bank-supported operations;
Created an Internal Ethics Group to investigate allegations of corruption and abuse by Bank staff;
Required managers and other staff in positions of authority to make financial disclosures, and, in some cases, to make those disclosures public; and
Avoided, to some degree, the politicization of managerial and technical appointments, as is universal in the UN and European agencies.
There is much to criticize in the Bank’s work, notably in the areas of climate and rural development, and in enforcing accountability on the Executive Directors. Yet violent fantasies [6] about destroying an association of 189 sovereign nations serves no purpose beyond the puerile satisfaction of people who refuse to understand what the Bank does and the genuine reforms it has made since Jim Wolfensohn became President in 1995.
[1] https://johnmcintire.substack.com/p/the-world-bank-should-expel-the-us?r=lxiat
[2] I am not discussing the Fund here; Varoufakis "Adults in the Room", on Greece and Europe; and Makoff, "Default", on Argentina, have said what there is to say.
[3] https://www.cgdev.org/blog/how-do-we-know-ida-works; and the mid-term review of IDA 20 (chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.parlament.gv.at/dokument/XXVII/III/1124/imfname_1613386.pdf); the “publish what you fund” movement gives high marks to the Bank (https://www.publishwhatyoufund.org/the-index/2022/world-bank-international-development-association-ida/). Even MOPAN, whose chief purpose is to attack the Bank because it does not appoint enough European managers, gives high marks to the Bank’s work.
[4] I have written Substacks which anticipate Bello's criticisms--"The World Bank must improve accountability at its Executive Board" (July 9, 2024);"Some thoughts on year 1 of the Banga regime" (June 11, 2024).
[5] I am not sure about IFC.
[6] There is no need to make up stories about the Fund because the reality is bad enough.