The World Bank as an Agent of Development

The World Bank, also officially referred to as the International Bank For Reconstruction And Development (IBRD), came into existence in 1944 alongside the International Monetary Fund. It was the brainchild of 44 allied nations congregated at Bretton Woods in New Hampshire to strategize on how to revive the war-ravaged economies. The World Bank’s role was, therefore, to facilitate the reconstruction of European and Japanese economies.

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Its headquarters in Washington DC in the US and draws its funding from the member’s contributions in accordance with their abilities and size of the economy. Consequently, the US is by far the biggest contributor though over the years it proportions has reduced. In its decision-making procedure, the World Bank members use a voting system that grants voting power in correspondence to the contributions made. This means that the largest donors and the US, in particular, have great control over the bank. (Johnson, B.T, 1996, Gilbert, C. and D. Vines, 2000: 204)

When the bank started out, its primary objective was to leave Europe and Japan from the ruins of the Second World War. The revival of these economies would rejuvenate international trade and stabilize the international financial market. Economic development of countries not ruined by the war was, therefore, a peripheral issue overshadowed by reconstruction. The World Bank, therefore, stepped in to provide capital to the economies.

These economies were starved-off commercial loans due to poor creditworthiness and failure to repay loans advanced to them after World War 1. The funding targeted the reconstruction of key infrastructure ranging from energy generation plants, transport networks to means of communications. These countries had proper and efficient institutions and advanced economics and were thus able to reconstruct quite speedily. They also benefited from the Marshals Plan formulated by the US. Their economies were also hugely boosted by the significant role of the private sector in reconstruction and investment. The countries per capital growth rate rose significantly, and they were no longer candidates for world banks financing. (Gilbert, C. and D. Vines, 2000: 204)

With its main goal achieved and in a bid to remain relevant, the World Bank reinvented itself in the 1950s as a welfare body. Its new goal was to alleviate poverty in the poor countries of the world. To achieve this objective fully, a number of affiliates have sprouted up, including The International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), The International Centre For Settlement Of Investment Disputes (ICSID) and the International Development Association (IDA).

These affiliates, together with IBRD, comprise the World Bank Group. ( Gilbert, C. and D. Vines, 2000). IFC provides loans to business in the poor countries at the prevailing market rates while the ICSID is an arbitration body but also encourage FDI in countries regarded as economically unviable. The role of MIGA is to boost FDI in poor countries through the provision of guarantees. However, among these affiliates of the IBRD, the IDA plays the most crucial role in poverty alleviation in LDCs. While the IBRD provides credit to the middle level and poor but creditworthy countries, the IDA focuses on countries that fall outside the above criteria.

The IDA was created in 1960 to facilitate the transformation of poor countries into economically prosperous countries. (Johnson, B.T, 1996). It sourced funds from wealthy nations, which is lent out to the poor countries. The loans IDA advanced to poor countries are unique in that they have long repayment periods of over 35 years, no interest and an annual service charge of 0.5 %. In its endeavour to alleviate poverty in poor countries, the World Bank has not solely concentrated on economic growth.

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It has adopted other criteria that it deemed coincidental to poverty alleviation. It then advances loans with conditions attached to ensure that the objective is achieved. (Steger, Manfred, 2003: 267) It is on this platform that this paper assesses the success the World Bank has attained in meeting its redefined goal of poverty alleviation by looking at its relationship with Cote D’Ivoire.

Cote D’Ivoire, a West African nation, joined the World Bank in March 1963 and received the first loan in 1968. When it joined the bank, the country was experiencing commendable growth rates. The economy was largely dominated by the agricultural sector, with coffee and cocoa being the main exports. The economy did occasionally experience budget and trade surpluses. The government sector was dominant over the private sector, and the economy was characterized by large state-owned enterprises. The government also engaged in price stabilization to safeguard farmers’ prices from market fluctuations.

The country enjoyed good economic times up to 1980 when it started experiencing budget deficits and balance of payments problems. All this time, the World Bank had played a largely insignificant role in determining the country’s economic policies, with France enjoying a more privileged status. Its economic performance made it the model state for other African countries and a darling of the West. Most of the proposals the World Bank made were rebuffed by the government, and continued growth acted to prove the government right. (Mundt, R. J, 2000: 78)

However, from 1980 the economic deterioration meant that the country had to source credit from the World Bank and the IMF. The role of the bank in the economy grew significantly, and it was, therefore, able to push its agenda through. The government could no longer afford to rebuff the bank’s proposals. Cote D’Ivoire was forced to adopt the Structural Adjustment Programs (SAPs) as a remedy to the economic crisis. Key among the conditions was the lowering of the government expenditure so as to reduce the deficit. The government had always been bullish in its expenditure in times of economic bliss. It now had to cut its expenditure, especially on social programs.

The education sector, which represented 40% of the government budget, was the worst hit. Other sectors included the health and housing programs. Cost-sharing was entrenched into the whole system to trim runaway expenditure. The government also had to reduce its expenditure on SOEs. The non-performing ones had to be closed down. This was drastic as these corporations were massive and employed many Ivorians. Closely related to this condition was a requirement for the government to embark on a privatisation program. This would speedily see the government switch from economic activity to a more supervisory role. Some of the sectors targeted were transport and communication. (Pegatienan, J. and B. Ouayogode, 1997: 136)

Cote D’Ivoire also had to liberalize its market and promote competition. This involved removal of quotas and reduction of tariffs. It had to get rid of all protectionist policies. The government also had to stop subsidizing agriculture and guaranteeing producer incomes through the Stabilization Fund. The SAPs also targeted the devaluation of the CFA. This was highly resisted by the government as the country’s pride was at stake. However, it did not make economic sense, as Ivorian products were less competitive internationally. Other programs focused on safeguarding the environment, press freedom, greater political liberty, good governance and empowerment of women.

The bank funding was largely policy-based, accounting for 66.4% rather than targeting individual projects. Infrastructure development was the main beneficiary receiving 45% of the funding. Agriculture and forestry received 28% of the funds, but this was mainly policy-based, with only 6% going to individual projects. Industry came third with 20% of the funding. Social programs including education, health and housing were thus not prioritised. Lack of individual projects in agriculture also meant that the sector was not prioritised. (Pegatienan, J. and B. Ouayogode, 1997: 113)

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As was the case in most African countries, WB loans and SAPs in Cote D’Ivoire did not achieve the desired goal of poverty alleviation. In fact, the per capita income fell by 18% between the country’s first loan in 1968 and 1992. (Johnson, B.T, 1996) The funding has been highly criticized over a number of points. Firstly, the World Bank is accused of shifting goalposts in its conditions. During the era of economic prosperity in the country, the WB actively supported the SOEs only to demand them to be curtailed once the economy took a downturn. The bank also demanded that the government eliminates the Stabilization Fund, which ironically it had initially lent its support. (Pegatienan, J. and B. Ouayogode, 1997: 139).

The privatisation program was also insensitive to the poor in the country. The public sector was the major employer, and the closure of the SOEs led to massive job losses. The bank was seen to be out of touch with the people. It focused on infrastructure, shunning social programs and agriculture. Consequently, it resulted in massive projects that did not actually lift the poor out of poverty. The programs also raised the country’s over-reliance on exorbitant expatriate labour. The Bank, in introducing the SAPs, assumed that African problems were identified and the SAPs were the universal remedy. (Handloff, R.E, 1991: 37)

However, the World Bank also scored several successes in the country. The CFA was devalued in January 1994, which effectively made the country’s exports cheaper. The country also made gains in press freedom and political space. Women were significantly empowered through greater representation. The bank has also made available huge amounts of knowledge on the country that is not available elsewhere. The Bank cannot also be solely blamed for the failure of the country to achieve economic development.

Other factors at play also contributed highly to this failure. The main reason why the bank succeeded in Europe but failed in Africa is the lack of structures and mechanisms that would ensure fiscal discipline, accountability, enhanced property rights and the rule of law. The bank should provide a case-by-case solution to a country’s problems rather than impose uniform remedies to all problems. (Chossudovsky, Michel, 2003: 47) Its success in future lies in how it will re-strategize in achieving its endeavours. The fate of Ivory Coast has lately worsened after the country broke into war between North and South. With peace and stability being elusive, economic recovery will remain a distant dream.

References

Chossudovsky, Michel, 2003. The Globalisation Of Poverty And The New World Order. Global Research, Pp 47.

Gilbert, C. and D. Vines, 2000. The World Bank Structure And Policies. Cambridge University Press. Pp 204.

Handloff, R.E, 1991. Cote D’Ivoire: A Country Study. The Division, 3rd Ed. Pp 36-53.

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Johnson, B.T, 1996. The World Bank And Economic Growth: 50 Years Of Failure. Heritage Foundation. Web.

Mundt, R. J, 2000. Historical Dictionary Of Cote D’Ivoire (The Ivory Coast). Scarecrow Press, 2nd Ed. Pp 78.

Pegatienan, J. and B. Ouayogode, 1997. The World Bank: Its First Half Century: The World Bank And Cote D’Ivoire. Brookings Institution Press, Vol. 2. Pp 109-161.

Steger, Manfred, 2003. Globalisation A Very Short Introduction. Oxford University Press. Pp 267.

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