World Bank. 2012. International Bank of Reconstruction and Development Articles of
Agreement. Washington,
 DC: World Bank. Accessed 24 November 2020.
https://www.worldbank.org/en/about/articles-of-agreement/ibrd-articles-of-agreement
Wynne, William Harris. 1951. State Insolvency and Foreign Bondholders Vol II: Selected
Case Histories
 of Governmental Foreign Bond Defaults and Debt Readjustments.
Washington, DC: Beard Books.
3 Development thinking, debt, and the
multilateral development bank
system: 1946–79
This chapter is the first of two chapters exploring the emergence of
development ideas and how they link to (i)
the advent of the MDB system
and (ii) development in practice. Chapter
3 explores the period from the
start of the Bretton Woods system at the end of the Second World War until
the late 1970s, three decades through which the post-war Keynesian
consensus
melded with welfare state and modernisation model to dominate
economic thinking (Fine 2001). It was also the
largest period of MDB
creation with 22 organisations established. The chapter pays special
attention to the
founding of the first MDB – the World Bank – as it
provided the model for future development banks. Thus, this
chapter begins
with a brief outline of the Bank set within the context of the emergence of
development thought.
The second section of the chapter explores the impact
of regionalism and the United Nations (UN) on the expansion
of the MDB
system, outlining how the marginalisation of the UN in favour of the MDBs
profoundly shaped
development practice and more. The third section
explores the sub-regional expansion of the MDB system, while the
final
section returns to the issue of debt, which rapidly expanded in the 1970s
laying the foundations for the
so-called 1982 Third World Debt Crisis.
As Chapter 2 outlined, the theoretical tradition that most influenced the
Bretton Woods
institutions was Keynesianism. Keynes’ (1973) work was
aimed at saving capitalism from its tendency to crisis as
well as ensuring
high levels of employment and reasonable standards of living for all; he
aimed to make
capitalism work more effectively. Keynes argued that
capitalism tended to boom and bust
cycles and that contra neoclassical
economics, there was no automatic system for adjustment rather
government
intervention was needed (Galbraith 1975, Roll 1973). Keynes
also saw the need for international economic cooperation as these same
forces were at work globally and coordination was vital,
especially during
crises. Indeed, he was a key participant at the July 1944 Bretton Woods
Conference that created the World Bank. Keynesianism fed into the
establishment of development economics in the 1940s and 1950s and
helped consolidate the idea that the state was a key
means to organise
society and promote development (Berger 2004). Keynes’ work also
reflected changes that had
already been taking place in many industrialised
states, where the role and reach of the state was expanding.
This has been
called a revolution in practical governmental policy, and Meade (1975, 87)
argues this was ‘of much
greater importance and significance for the
welfare of mankind’ than the revolution in macroeconomics produced by
Keynesianism.
After the Second World War, influenced by Keynesianism, development
thought was not particularly ideological, it
was not ‘left’ or ‘right,’ rather
there was general consensus that more government intervention was needed
than
previously (Rapley 2002). Other key influences on development
thinking were Modernisation Theory, with its focus
on emulating the
political and social systems of the West, and Growth Theory, which
focussed on expanding capital
formation from savings and investments as
crucial to accelerating economic growth. Fine (2001) usefully labelled
the
post-war consensus as the Keynesian, welfare, modernisation model. This
was the general milieu as the
World Bank was established – development
studies and development economics were in their
infancy and thinking
focussed on a greater role for the state through planning. Statism,
Modernisation Theory, and Growth Theory all saw debt as a useful way
the
state could obtain the capital necessary for investment and ‘take-off,’
though Structuralism and Dependency Theory would challenge many of
these ideas.
3.1 The World Bank: a brief introduction
The World Bank commenced operations in 1946 as the IBRD but later grew
into the World Bank Group, which today
has five institutions: IBRD,
International Finance Corporation (IFC) added in 1956, IDA in 1960,
International
Centre for the Settlement of Investment Disputes (ICSID) in
1966, and Multilateral
Investment Guarantee Agency (MIGA) in 1988.
Given that this book studies MDF, we focus on
the Bank’s MDF arms: the
IBRD, IDA, and IFC. As per World Bank Group usage, the term ‘World
Bank’ refers to the
IBRD and the concessional lending arm, the IDA, which
have different
Articles of Agreement but share the same staff and
headquarters. In contrast, the IFC
invests purely in private enterprises via
loans and guarantees and provides risk management and advisory
services.
The Bank is the largest development agency in the world with over 12,000
staff and 5,000 contractors
in 2019. After a large capital increase agreed to
in 2018, its total capital base is $312.9 billion, meaning
that surpassed even
the European Investment Bank (EIB) which has $275 billion in capital.
Most historical accounts of the World Bank largely present it as the
product of Anglo-American negotiations. As outlined in Chapter 2,
however, its origins
are more complex than that, with proposals for
international economic cooperation dating to the 1800s. The
story of the
Bretton Woods Conference, where the final details of the IMF and Bank
were
negotiated, has been told often and very well (see inter alia Block
1977, Gardner 1980, Oliver 1971) and hence
is not retold here. Overall,
Bretton Woods gave the IMF responsibility for promoting an orderly
exchange rates
system, providing short-term assistance to nations facing
balance of payment crises and undertaking
surveillance of global economic
conditions. Of course, its role in the exchange rate
system changed
dramatically in the early 1970s with the end of the gold standard and the
shift to floating
exchange rates. The Bank was to provide long-term loans to
promote reconstruction and
development. As Chapter 2 outlines, both
institutions reflected the
growing belief in the importance of international
organisation, and they had Keynesian
social democratic aims. The Bank’s
primary architect, Harry Dexter White, intended the IBRD as an alternative
to private banks, which had been too exploitative and crisis prone (Oliver
1975). But, like most things, the
devil is in the detail and in setting up the
IBRD as a bank, White created an institution that would
institutionalise
banking norms more than human development goals. Other MDBs largely
followed the model framed
by the Bank, with their structures outlined in
Chapter 5. Still, the Keynesian ideals that
imbued the Bank’s creation
remain an important influence on the institution and subsequent MDBs,
often most
visible in their purposes, one focus of this chapter.
Analyses of Bretton Woods have tended to argue that reconstruction was
at the forefront of White’s mind in
establishing the IBRD (e.g., Oliver
1971). In fact, White also had a strong focus on development and the Latin
American delegations – and Mexico’s representatives in particular –
ensured that development was higher on the
Bank’s agenda than would
have otherwise been the case (Helleiner 2017, 2014, Urquidi 1996). US
bureaucrats did
use the funding of reconstruction as a way of selling the
Bank to Congress (Gardner 1980) and most of the other
large shareholders
were engrossed by concerns with reconstruction and the Bank’s early loans
reflected this
(Mason and Asher 1973).
The IBRD’s main aim is facilitating investment ‘for productive
purposes,’ promoting
private foreign investment, and promoting ‘longrange
balanced growth,’ productivity, and standards of living
(World Bank
2012, 3). The MDB was designed to help capitalism function more
effectively and in a socially
acceptable manner. In line with the Keynesian
project, growth was important not just for its own sake but for
its impact on
employment (Engel 2010). The Great Depression had
demonstrated that the
international economy would not, under its own momentum, provide
investment at a level
that would achieve near full employment. Once
operational though, the Bank understood development as the
expansion of
capitalism. But as Amin (2014, 14) has argued, ‘[c]apitalism is not “a
system
of development”,’ rather it is about the expansion of capital and
private property. The Bank demonstrates this
point in the way that it has
sidelined some of its purposes, including balanced trade and national
accounts,
standards of living, and employment. To illustrate, the Bank for
years claimed that its prohibition on
political activity prevented it from
promoting the International Labour Organisation’s
Core Labour Standards
(Murphy 2014) despite the fact that among its purposes is the promote of
the ‘conditions
of labour’.
The focus on private investment, private markets for capital, and
guaranteeing private loans was a key
contribution of the European
delegations at Bretton Woods. As the Bank’s first official history noted, it
‘was
all but the universal expectation of the founders of the Bank that its
primary function would be to guarantee
private investments’ (Mason and
Asher 1973, 26). In practice, it focussed on direct lending to states. The
clause on private investment also highlights how economic logic dominated
Bretton Woods
thinking which has ‘colored the Bank’s development efforts’
ever since, as the Bank’s second official history
pointed out (Kapur, Lewis,
and Webb 1997, 70). The purposes demonstrate belief in planning and
management by
experts, noting the need for prioritising ‘useful and urgent
projects’ (World Bank 2012, 3). Finally, the
clause highlighting ‘the effect
of international investment on business conditions’ (World Bank 2012, 3)
offered a limited promise of counter-cyclical investment on both a country
and a world scale, a Keynesian view.
This is an area where it rarely engaged
up until the 2007–8 GFC.
In terms of what investments should be prioritised, the World Bank sets
the agenda and
continues to play a leading, indeed often hegemonic, role in
shaping the development practices of other MDBs.
Founding senior IBRD
staff held that manufacturing and export industries should be funded by
private investors,
so they were excluded as was investment in state-run
enterprises, other than utilities. The consensus that
dominated IBRD
lending for more than a decade was that public utilities – in particular
electricity, dams, transport, and communications – provided the
preconditions to economic growth and the
expansion of private investment
(Mason and Asher 1973). As Toussaint (2008) points out, in its first 17
years
the Bank did not lend at all for education, health, drinking water, or
wastewater treatment and certainly not
for welfare. Bank staffers felt their
contribution to economic growth was ‘less measurable and direct than that
of power plants’ (Mason and Asher 1973, 151) though it is now clear that
this is the most direct way to improve
human well-being.
In its early years, the Bank made several loans to colonial powers to
finance projects in colonies in direct
contravention of the UN’s commitment
to self-determination (Kapur, Lewis, and Webb 1997). Once independent,
former colonies were required to take over Bank debts contracted by former
colonial entities regardless of how
odious they were (Toussaint 2008).
Further, a key loan condition from its earliest operations has been
settlement of outstanding debts, making the Bank a debt collector enforcing
a capitalist
hegemonic principle. Table 3.1 outlines the main contributions
of Bank Presidents until
1981.
Table 3.1 World Bank Presidents 1946–81
Eugene
Meyer
June–Dec
1946
Born in US,
attended Yale
University, wealthy
banker, served in
several government
offices, owned
Washington Post.
Recruited senior staff, mostly bankers. Laid some of the
groundwork for the Bank,
especially loan analysis backed
by a research department. Adopted a conservative
approach to gain Wall
Street’s confidence. Clashed with
Executive Directors over authority.
John
McCloy
1947–9
Born in US,
attended Harvard
University, trained
as lawyer, served
Assistant Secretary
of War during
World War II.
Accepted presidency on the basis that he would have
strong executive authority relative
to the Board of
Executive Directors. Obtained funds from capital markets
and to do so demonstrated ‘sound’
(read conservative)
lending and staffing policies. Established the interest rate
policy and negative pledge
– that no other creditor would
take precedence over the IBRD – and policy of not lending
to countries that
had not tried hard to settle on any defaults
to other creditors. Started the shift from reconstruction to
development financing.
Name and
Term
Background Legacy
Eugene
Robert
Black
1949–62
Born in US,
attended University
of Georgia, served
in US Navy, worked
as investment firm
banker, saw himself
as a development
diplomat.
Built up the foundations of the Bank started by McCloy in
terms of loan development,
staffing, management, and
access to US credit markets to raise capital. Emphasised
conservative banking
principles. Focused on projects that
align with strong national development plans and launched
the Bank’s
technical assistance program. Promoted a vision
of development as modernisation and advocated the role of
private sector finance, leading to the creation of the IFC in
1956. The concessional loan affiliate, the
IDA, was
established in the Bank in 1961, although he originally
rejected the idea. Popular with Bank
staff.
George
David
Woods
1963–8
Born in US, office
worker at bond
firm, investment
banker.
Viewed the Bank as a development institution rather than
just a bank. He expanded
lending and introduced program
loans and established the Bank’s role in aid coordination
and strengthened
the IFC. Woods expanded research from
country creditworthiness to a more comprehensive
assessment and
expanded economic staff. He shifted focus
from large-scale investment to agriculture productivity,
education, and population growth. To allay investor fears
about private investments, he established ICSID
in 1966.
Decolonisation saw membership increase by one third.
Name and
Term Background Legacy
Robert
Strange
McNamara
1968–81
Born in US,
attended University
of California and
Harvard Business
School, introduced
quantitative
management to US
car industry, served
as US Secretary of
Defence,
responsible for the
Vietnam
War
strategy that
analysed success by
the number of
enemy dead.
One of the most influential and transformative Bank
Presidents and a spokesperson for
developing countries. He
applied his quantitative managerial program to achieving
Bank expansion in lending
volume, geographical reach and
staffing, and diversifying sources of finance. Lending
expansion came at the
expense of quality. McNamara
focused the Bank on inequality and poverty, basic needs,
education, and rural
development especially for
smallholders. Strengthened aid coordination and research
capacity. Successful in
substantially increasing IDA
replenishments through political lobbying. Responded to
the OPEC oil crisis by
expanding lending and introducing
structural adjustment late in his term.
Source: Compiled by authors from a range of sources, basic details from World Bank website (2019).
3.2 The expansion of the MDB system: the role of
the UN and regional politics
The World Bank’s shift to lending to developing countries occurred in the
context of early
Cold War hysteria. Despite the Cold War, many newly
independent countries were assertive
about their developmental needs and
they were motivated by the success of the Marshall Plan. They focussed on
the need for external capital for the development and were concerned that
continued reliance on primary
products exports would lead to underdevelopment.
This latter concern was empirically demonstrated by the work
of Raúl Prebisch (1950) and Hans Singer (1950), whose separately
published work on First-Third World trade, titled the Prebisch-Singer thesis,
showed that the price of primary
commodities, the main exports of
developing countries, was declining relative to the price of manufactured
exports from the First World. The declining terms of trade meant Third
World countries
would either need to export more and more primary
commodities, change the structure of production in their
economies, or live
with increasing under-development. Faced with this dilemma, developing
countries made a
revolutionary push for soft finance to be provided through
the UN and not the IBRD (Shaw 2005). The call was
originally made by the
Name and
Term Background Legacy
Indian economist Dr. V.K.R.V. Rao in 1949 and was championed in
developing countries and
by Singer over the next decade. In 1952, the
proposal was labelled the Special United Nations Fund for Economic
Development (SUNFED) and it provided the core ideas for what became
the IDA. SUNFED was to provide highly
concessional loans and grants and
be replenished regularly (Shaw 2005). The World Bank originally opposed
the
idea, in particular low-interest, long-term loans, as it perceived such
loans would reduce the creditworthiness
of borrowers (Mason and Asher
1973, 389–90).
The US was also opposed to SUNFED and little happened in IOs in
these years without their imprimatur. US
initial aid efforts focussed on
technical assistance and Congress was very hostile to proposals for grant
aid,
indeed isolationist elements opposed any expansion of aid (Engerman
2018). The growth of MDF was an attractive
alternative to grant aid and US
President Truman’s famous Four Points Speech in 1949 opened the door for
its
further expansion (Peet 2003). Still, it took some time to convince
Congress of this and an idea from a State
Department official for an Asian
Development Fund went by the wayside in 1955 (Engerman
2018). This
was despite the famous Asian-African Conference taking place in Bandung
in
April 1955, where 29 Afro-Asian states met to promote economic and
cultural cooperation and to oppose
colonialism and neocolonialism; the
Bandung Conference was a key step
in the creation of the Non-Aligned
Movement (NAM) in 1961.
The World Bank was focussed on expanding support for the private
sector. President Eugene Black proposed the
establishment of the IFC as a
sibling to the IBRD, to fill a supposed void in private sector lending. The
US originally opposed its establishment too, but reversed this as a way
of
being seen to respond to the SUNFED calls (Mason and Asher 1973, Shaw
2005). Thus, the
IFC was established in 1956 ‘to further economic
development by encouraging the growth of productive private
enterprise in
member countries, particularly in the less developed areas, supplementing’
IBRD activities (IFC
2012). The US shift was influenced by Cold War
concerns too, which is clear from the fact that it created its
own
Development Loan Fund in 1957 under the Mutual Security Act aimed
at
strengthening ‘friendly foreign countries’ through ‘competitive free
enterprise’ (United States Committee on
Government Operations 1960, 6).
Other MDBs started to appear at this time. The Council of Europe
Development Bank (CEB) (1956) and
EIB (1958) were established without
US involvement and are both borrower-led banks in contrast to the IBRD.
They were early attempts to create a regional European bloc, as well as
rebuild and strengthen Western Europe
following the Second World War
and during the early Cold War years (Bussière and Willaert
2006, GriffithJones
and Tyson 2013). The CEB is a specialised development
bank and it
initially focussed on the welfare element of the Keynesian, welfare,
modernisation model. Its
social mandate aimed to help solve Europe’s
problems focussing on the impact of refugees and displaced peoples.
It
established the idea of both a regional and specialised focus for the MDBs,
demonstrating that MDBs could
engage with social issues, something the
IBRD had avoided. The EIB followed in 1958, established by the
Treaty of
Rome as part of the European integration project. It aimed to build a
common
market, facilitate European integration, and promote balanced
growth, which set the region-building tone of the
RDBs and returned to a
modernisation, economic focus. Still, Keynesian social elements continued
with its focus
on ‘balanced and steady development’ (European Union
2002, 139). It claims not to be an MDB, but its structure
and functions are
so similar that we think that it doth protest too much (see Chapter 6).
The
EIB’s focus on region-building – it prioritises funding to
‘projects of
common interest to several Member States’ (European Union 2002, 140) –
was explicitly replicated
in later regional and sub-regional banks (see
Chapters 6 and 7). It
was also the first MDB to specify that it is not-forprofit,
in contrast to the IBRD being formally a
profit-making institution
and other MDBs being a mix.
Next came the US-backed IADB, established in 1959. As noted in
Chapter 2, the early ideas
for an inter-American bank pre-date the IBRD,
although formal negotiations fell through. It was resurrected in
the post-war
era by the 1957 Economic Conference of the Organisation of American
States.
By 1958, the US supported the proposal, first and foremost because
the US was concerned that the Cold War was
impacting its zone of
influence (Tussie 1995). Further, as discussed in more depth in Chapter
6,
the IADB was seen as a counterweight to the IBRD’s rather monopolistic
position (Phillips 2009) and as a
response to the Bank’s perceived
inadequate attention to Latin America and regional interests in integration
(Barria and Roper 2004, Krasner 1981, Tussie 1995).
The IADB started a new approach to the purposes of the MDBs, moving
away from the IBRD’s mandate of
facilitating investment for productive
purposes and promoting private investment to the broader goal of
contributing ‘to the acceleration of the process of economic and social
development of the regional developing
country members, individually and
collectively’ (IaDB 1996, 5). While this could be seen as broadly
Keynesian,
it also reflects the impact of structuralist and statist development
ideas that came out of the UN’s Economic
Commission for Latin America
(UN-ECLA), which were popular in the region (Tussie 1995).
Indeed, it had
more flexibility to direct loans to the private sector than the World Bank
(Humphrey 2016). This
follows the strategy of import substitution
industrialisation (ISI), which was the main way structuralism was
operationalised to change the structure of production and avoid underdevelopment
(Rapley 2002). ISI was a key
strategy in Latin America from
the 1930s and was adopted by many newly independent states after the
Second
World War as well.
Although conforming to the IBRD’s banking model, the IADB was
established with a
concessional lending arm, the Fund for Special
Operations (FSO). This indicated that it was possible to combine
hard-nose
banking functions with a social agenda. While Latin American states had a
majority of votes in the
main body, the US demanded a veto over FSO
operations and insisted that the IADB be
headquartered in Washington, DC
(Humphrey 2016), demonstrating again the impact of geopolitics on MDBs.
Technical assistance is included in the IADB’s functions, which was not the
case in the earlier MDBs. This
likely derived from the experience of the
IBRD, which found it could not develop a project pipeline without the
provision of extensive advisory services (IBRD 1948). This is further
demonstration that the network between
the MDBs started early. The
establishing agreements of the subsequent RDBs – the AfDB,
AsDB, and
EBRD – all include technical assistance in their functions.
The IADB supported the creation of other RDBs (Culpeper 1997). Still,
the supporters of SUNFED at the UN
continued their efforts and even
started drafting statutes in 1957. US views had been shifting, which was
clear
by 1958, but they wanted a soft lending facility under their control
rather than the UN, hence tied it to the
World Bank. The US had other
motivations for supporting the IDA too, they had been accumulating non-
convertible
foreign exchange through the US food aid programme sale of
surplus agricultural commodities and saw the IDA as
an outlet for these
holdings (Shaw 2005). Further, it was clear that the outlook for developing
countries was
not great and that the IBRD could not provide the needed
support. Indeed, a report on the US Development Loan Fund had noted the
IBRD was more like ‘the international equivalent of the
Export-Import
Bank rather than’ a loan fund (United States Committee on Government
Operations 1960, 33). In
other words, the IBRD had a hard-nosed business
focus. Once the US supported the IDA idea, the US Treasury
Secretary took
an outline for it to the IBRD, and they then filled out the details and the
IDA was launched in 1960.
The consequences of this decision were profound. The UN ‘became a
residual organization in
economic and social development programs’ (Shaw
2005, 58). The World Bank, in contrast, with the IDA add-on
increased its
resources and client base and was able to move into whole new areas of
work that were not
self-liquidating like most IBRD lending, including
poverty and the social sector. The IDA
may have slightly reduced Bank
reliance on Wall Street, but it increased the power of major donor states
because of the need for regular resource replenishments (Kapur, Lewis, and
Webb 1997). The desirability of IDA resources helped facilitate structural
adjustment lending in the 1980s at the
same time as donors, especially the
US, intervened more in policymaking. Overall, the IDA add-on put the
Bank
in a tremendous position of power in relation to borrowers, meaning
that it is not a servant of sovereign
states – as the UN system was designed
to be (Shaw 2005, 59). The Bank was meant to liaise with the UN system
but in practice even liaison has been weak and there is a chasm between the
two organisations. In another
weakening of the UN system, a group of
Northern states set up a coordination mechanism for donors in 1960
through
the grouping of rich states, the Organisation for Economic Cooperation and
Development (OECD), which came to be called the Development
Assistance Committee (DAC). It gets to decide what counts as aid and has
become an influential voice in
development debates.
Despite the focus on poverty and social lending in the debate that
produced the IDA, its
purposes – like that of the IBRD – make no mention
of poverty. The IDA aims to ‘promote economic development,
increase
productivity and thus raise standards of living…,’ which will trickle down
to raise standards of
living (World Bank 1960, 2). This is not surprising as
the IBRD played a key role in drafting the Articles and
President Black
promised that the ‘IDA will not be a “soft lender”’ (cited in Kapur, Lewis,
and Webb 1997,
155). To protect the IBRD’s creditworthiness, the IDA was
created under its own establishing agreement, which
duplicates the IBRD’s
with three changes: first, the Articles identify developed and developing
countries and
link countries’ access to the IDA to their status to ration its
concessional resources, second, the IDA’s
voting structure is slightly more
favourable to developing countries, and, third, the IDA can fund social
projects. Even though they have separate Articles and finances, the IBRD
and IDA function as one institution.
By the late 1960s, the World Bank was largely focussed on assisting
poorer countries,
having reduced lending to rich states, and diversified
sectoral loan allocations (Kapur, Lewis, and Webb 1997,
140). This did not
happen just through the Bank’s own vision of course, but in the context of
rapid
decolonisation, demands from the Global South, and challenges to the
Keynesian, welfare, modernisation
development model. The IDA and
retained IBRD earnings also facilitated expansion, though the big push took
place under President McNamara (see Table 3.1), who turned his zeal for
prosecuting the
Vietnam War to combatting poverty or, to be precise,
promoting redistribution with growth
and later basic human needs. The
Bank expanded into soft sectors including health, education, water supply,
and
agriculture. In a way, McNamara was re-inserting welfare into the
Keynesian, welfare, modernisation model, but
in a minimalist form with the
focus on absolute poverty reduction rather than on equality and rights,
which has
continued to be the Bank’s focus. The basic needs approach
increased the level of intervention in developing
countries at the same time
as bolstering the legitimacy of the Bank as a development agency (Rist
1997). It
was, in Gramscian terms, part of the hegemonic struggle to shore
up capitalist development combining coercive
and consensual elements
(Engel 2010).
From 1969, the Nixon Administration supported McNamara’s growth
plans for the Bank, because they wanted to
increase private US bank
lending globally to centralise the role of the US dollar in international
finance and
hence shore up US hegemony (Gowan 1999, 22). The Bank
was useful because of its role as a recycler of funds and
signaller to private
finance. In practice, basic needs lending expanded after 1974 when
McNamara discovered the
integrated rural development approach. By the
later years of McNamara’s Presidency, the Keynesian consensus was
under
attack and neoliberalism and structural adjustment came to dominate the
Bank, which
is discussed in Chapter 4.
3.3 Sub-regional and general expansion of
multilateral development
banking
From 1960 to 1977, a further 18 MDBs were added to the system, ten of
these in the 1970s. Only two were from
Europe, the rest from the rapidly
growing number of newly independent states. MDBs continued to grow too
following the collapse of the Bretton Woods monetary order and the first oil
shock in the early 1970s. Eight
new MDBs were established between 1974
and 1979, indicating that they may even have been a response to the
chaos
generated by this time. This section explores the logic of this expansion
linking it to geopolitics and
development ideas, though given the number of
actors, the section paints a broad picture, with the details of
each MDB
explored in later chapters.
After the IDA, the next MDB was from the Latin American region,
which had fought for and won independence
earlier than most of Africa and
Asia. It was a sub-regional development bank (SRDB) and, like all the
subsequent early SRDBs, it aimed to promote the integration and
development of a
sub-region. And growth of both regions and sub-regions
were seen by structuralism as an instrument for
promoting economic
transformation (Bruszt and Palestini 2016). The Central American Bank
for
Economic Integration (CABEI) was established in 1960 by five Central
American states, which
were all members of the IADB. This makes it the
first MDB established without the backing of a First World
state. As part of
their treaty on economic integration they established a SRDB to support
sub-regionalisation,
possibly taking inspiration from the European
integration project and the EIB, but
examining its purposes reveals clear
influences from UN-ECLA and structuralism. As Chapter
7 outlines,
CABEI’s objectives start with the aims visible in earlier MDBs of regional
development and balanced economic and social development but go on to
specify that it will support projects and
programmes in infrastructure,
industry, and agriculture that benefit and modernise the region. Thus, it
incorporated ISI in its objectives more directly than the IADB. Further,
CABEI’s subscriptions
were not weighted, so founding states had equal
shareholdings (Cochrane 1965), though this changed with the
introduction
of non-regional and non-founding member states, which quite a number of
the smaller MDBs did in
the 1980s, as discussed in the next chapter.
Several Soviet states created the International Bank for Economic
Cooperation (IBEC) in
1964. It started as something closer to the IMF, but
post-Cold War reforms saw it become an MDB. Next from what
was then
Communist Eastern Europe and Russia was the International Investment
Bank (IIB)
in 1970, a Soviet competitor to the World Bank. Its original
aims are worth quoting as they are at one level so
different from all the
other SRDBs yet, at another level, they share the view of development as
industrialisation and growth. It aims to provide:
long-term and medium-term credits primarily for the implementation
of measures relating to the international
 socialist division of labour,
specialization and co-operation in production, expenditure for the
broadening
of the raw materials and fuels base in the common interest
and the building of projects in other branches of
the economy…
(IIB 1970, 344)
The IIB’s aims have since been changed quite radically, which is discussed
in more detail
in Chapter 7.
The 1955 Bandung Conference helped stimulate the idea of panAfricanism,
and five African
MDBs were created between 1964 and 1975,
the first an RDB – the AfDB in 1964 – and then four
SRDBs. The AfDB
followed the IADB’s purposes in promoting accelerated economic and
social
development, and it also specified that development must be
sustainable. Like CABEI, and inspired
by NAM and Group of 77 (G77)
agenda of seeking independent development, it was formed
without any
superpower or First World engagement (Culpeper 1997, English and Mule
1996, Mingst 1990). The four
African SRDBs originally had only regional
developing country membership as well and all arose from
sub-regional
integration efforts, which the UN Economic Commission for Africa (UN-
ECA)
played a key role in (Humphrey 2019). Many of the regional
integration and trade agreements are no longer
operational yet the MDBs
remain. The SRDBs are the:
East African Development Bank (EADB), formed in 1967 to support
the East African Community
(EAC);
West African Development Bank (known by its French acronym,
BOAD),
 established in 1973 as part of the West African Monetary
Union (WAMU);
Development Bank of Central African States (known by its French
acronym, BDEAC), set up in 1975 to support the Central African
Economic and Monetary Community (CEMAC); and
Fund for Cooperation, Compensation, and Development formed as
part of a second West African initiative –
the Economic Community of
West African States (ECOWAS) – in 1975; in 1999, it was renamed
the ECOWAS Bank for Investment and Development (EBID).
All four African MDBs have standard SRDB purposes, although the EADB
includes
a role for regional promotion and BOAD has a strong focus on
mobilising
domestic resources. These SRDBs demonstrate the conflicting
forces at play in post-colonial Africa of
fragmentation and cooperation – as
in Latin America, economic cooperation was seen as vital to post-colonial
development. Mostly the African SRDBs financed infrastructure and small
and medium
enterprises to support industrialisation (Delikanli, Dimitrov,
and Agolli 2018).
Following the AfDB, the next RDB was the AsDB established in 1966.
It did not have
anti-colonial credentials being proposed by Japan, then an
emerging regional and global power. The US
originally opposed the MDB’s
formation but later changed mind, seeing it as a way to contain perceived
Soviet
and Chinese influence by fostering regional growth and cooperation
(Dent 2008, Kappagoda 1995). With Japan and
the US as its major
shareholders, it adopted much more pragmatic and capitalist language in its
Charter with
the aim of fostering ‘economic growth and co-operation’ in the
region (AsDB 1967, 2). Like the
World Bank, the AsDB now articulates a
poverty-free region as its mission.
The AsDB mirrored earlier MDBs
closely from its inception, with the first President Takeshi
Watanabe
attending IBRD and IADB meetings to see how they were run before the
Asian MDB began operations
(McCawley 2012). Notably, there are no
SRDBs in South or Southeast Asia, though a couple
emerged that cover
Central Asia later.
The next two MDBs established were again in the Latin America and
Caribbean region circa 1970 with a
further one added in 1974, bringing the
regional total to five MDBs. The Caribbean Development Bank
(CDB) was
established in 1969 to support regional and local financial institutions and
the
development of regional capital markets as well as the usual SRDB
goals. The innovation of building local
financial markets harks back to the
failed attempts at creating an Inter-American Bank and
is a reminder of the
recent development of public and private financial markets in some parts of
the Global
South. The CDB originally had 16 regional members along with
Canada and the UK as non-regional
members. While additional
stakeholders have been added including China in 1998, the US is still not a
member.
The famous development economist Sir W. Arthur Lewis was the
CDB’s first president. Lewis was a
key founder of classical Growth Theory
which posited that states need to focus on growth,
not redistribution, and
that poverty was an employment problem, making it a suitable topic for
economists
(Engel 2019, Todaro 1985). His work on the need to transfer
labour from the supposedly inefficient rural
subsistence sector to the
industrial high productivity sector was quite influential at the World Bank.
The
logic of most MDBs today is still to fund the enabling environment for
this growth model, but the model has
gaps and investments in
industrialisation often came at a high human and environmental cost.
The Development Bank of Latin America (known by the Spanish
acronym CAF) was established in 1970
and like the CDB it was tasked with
‘providing multiple financial services to
clients in the public and private
sectors’ in order to achieve regional integration and sustainable
development
(CAF 2015, 9). It started operations without member states
from the Global
North. USAID, Canada, the IADB, and a few European
states provided resources early on but stopped, leading it
to struggle to gain
enough financial resources to operate until later restructuring (Humphrey
2016). The
Financial Fund for the Development of the River Plate Basin
(known since 2018 as FONPLATA
Development Bank), followed in 1974
to support the River Plate Basin. It still has just five regional members:
Argentina, Bolivia, Brazil, Paraguay, and Uruguay. It has a strong focus on
studies and technical assistance,
though they are also empowered to act as a
financial agent or broker for loans for members (FONPLATA 2018).
Next in the MDB chronology is the Arab Fund for Economic and Social
Development (AFESD). Its
founding documents were prepared in 1968 but
entered into force in 1972 and it was the first of a group of four
diverse
MDBs whose common feature is their Arab country-led shareholding. The
Arab Fund is an SRDB with the
rather pragmatic aim of ‘[f]inancing
economic projects of an investment character… to public or private
organizations and institutions, giving preference to economic projects that
are vital to the Arab entity and to
joint Arab projects’ (AFESD 2016).
While it is best understood as an SRDB, we have included it in
Chapter 8 as
a specialised MDB alongside the other Arab-led MDBs as they are an
interrelated group that emerged after oil prices started to increase in 1971
(Corm 2006). The Arab Bank for
Economic Development in Africa
(BADEA) was established in 1973. It was a response to the
increasing
anger in the Third World about rising oil prices but also reflected the Arab
desire to replace Israeli influence in Africa and promote Arab access to raw
materials (Shushan and Marcoux
2011). It was the first development bank
whose aim was to promote linkages between two regions, by providing
financing and technical assistance. It was quickly followed by the Islamic
Development Bank (IsDB) in 1974,
which is a specialised bank operated in
accordance with Shari’ah financial principles that ban the practice of
interest. Its capital was subscribed in a new accounting currency, the
Islamic Dinar (Delikanli, Dimitrov, and
Agolli 2018). Its purposes are
economic development and social progress, with the level of focus on
human
well-being standing out among the MDBs. It has stuck to its
original, albeit broad, sectoral focus on
transportation, infrastructure,
energy, agriculture, and social infrastructure and not shifted with trends like
policy-based loans, conditionality, or safeguards (Kellerman 2019). Its
membership is not limited to Arab
states but to those with a majority
Islamic citizenry, making it a unique MDB.
Next came the Organisation of Petroleum Exporting Countries (OPEC)
Fund for International Development (OFID) in
1976, which has the very
pragmatic aim of promoting cooperation between OPEC member states and
developing
countries by providing financial support to the latter, making it a
bit like BADEA. Its membership
is again not limited to Arab states; indeed,
Venezuela is the third largest shareholder. Looking at
shareholdings in these
Arab-led MDBs, Saudi Arabia is the largest shareholder in all except the
Arab Fund where
Kuwait has a slightly larger stake (Shushan and Marcoux
2011). Libya has large stakes in the BADEA and IsDB and is the third
largest shareholder in the
AFESD and sixth in the OFID, which is a left
over from
Muammar Gaddafi’s activist Islamic socialist agenda of the
1970s.
It is useful to follow the Arab-led MDBs with the International Fund for
Agricultural Development (IFAD),
established in 1977, because Arab states
also played a key part in its formation. Intellectually informed by
calls for a
New International Economic Order (NIEO) in 1974, it is based on an
amalgam of
Keynesian and structuralist ideas. IFAD’s direct heritage is that
of a challenge between
OECD DAC donors and OPEC states in 1974 to
each put up around $600 million
for agricultural development in developing
countries (Szasz 1999). This was following the early 1970s sub-Sahelian
food crisis (Wihtol 2014) and a general increase in food insecurity
aggravated by the
1973 oil shock. The negotiations took place in 1974 and
1975, just after the NIEO. IFAD’s structure was coped
from the World
Bank, but its shareholder structure gave equal voting shares to three groups:
DAC
donors, OPEC, and G77 states. The G77 states argued very strongly
that votes within each
group should be equally distributed and not on the
basis of contribution as DAC and OPEC states
wanted (Szasz 1999). The
compromise was that each group could decide how they distributed votes
and elected
board members. The DAC managed to constrain the
organisation, however, by mandating that IFAD could not undertake project
appraisals, instead having to rely on evaluations conducted by
other
financial institutions.
One final MDB was created before 1979, the Nordic Investment Bank
(NIB), established in
1976. It had been discussed since the 1950s by the
five Nordic states – Denmark, Finland, Iceland, Norway, and
Sweden – but
a more favourable political climate and the oil shocks provided the needed
impetus (Dennis 2015).
It was set up simply to supplement existing
institutions and finance and notably did not have a mandate for
sub-regional
projects.
Overall, by 1979, there were 22 MDBs. MDB creation was very high in
Latin America (five banks) and across much
of Africa (five banks),
excluding the southern states where apartheid South Africa still exerted
hegemonic
influence. There were three banks established in Europe
including the very large EIB, four Arab-led banks, and
just one Asian
MDB. But by 1979, state debt in many developing countries had already
started to build up to
problematic levels, and this enabled the emerging
neoliberal doctrine to be imposed on states through loan
conditionality,
which is discussed in the next chapter. But to conclude this one we explore
the debt crisis.
3.4 MDBs, debt, and the developing world debt
crisis
Using debt to finance investments was a key part of the post-war
Keynesian, modernisation, welfare model, which
the MDBs were a key part
of. But they face a unique situation, having a limited clientele and, as
detailed in
Chapter 5, their non-concessional lending arms need creditworthy
borrowers to get good
credit ratings, which allows them to borrow
cheaply on financial markets and on-lend. Still, with a limited
number of
borrowers, MDBs often become debt-pushers. If they do not keep pushing
new loans out the door, they
run into the problem that borrowers are paying
back more than is being lent in new loans. This is called the
negative net
transfer problem. For most countries, MDBs are not their largest creditors
but as Chapter 1 outlined, they play a range of roles
in the development
finance system. Their role expanded over the decades, with the World Bank
at the centre
thanks to its repository of data and reports. After the first debt
crisis, the World Bank also became a debt
collector and lender of last resort.
Development banks walk a fine line between pushing debt and worrying
that recipients have too much of it. Debt
was a challenge in some countries
as early as the 1950s; a number of Latin American states had existing debt
portfolios and they had faced two large debt crises in the 19th century and
one in the
1940s as we saw in Chapter 2. The World Bank rescheduled
loans to Haiti in the 1950s on
balance of payment grounds and in 1965
made two loans to Brazil to cover the maturities due on earlier loans
(Kapur, Lewis, and Webb 1997). India’s debt problems were notable from
the mid-1960s, but
it was cushioned by its high level of access to the highly
concessional IDA, becoming its largest borrower; the
IDA was colloquially
referred to as the Indian Development Association. The IDA add-on
enabled the IBRD to
reduce its exposure to India and undoubtedly India
only met some IBRD and other obligations thanks to IDA
credits.
Nevertheless, India asked the World Bank to lead a rescheduling in 1966
(Kapur, Lewis, and Webb 1997).
A large debt build-up occurred in the 1970s bolstered by low interest
rates and financial innovations beginning
with the Eurodollar market and
syndicated loans, where a group of banks lends to a borrower. The oil price
hikes of the 1970s had very negative impacts on oil importing developing
countries by increasing their costs
and reducing export prices, meaning they
had to borrow to cover the immediate costs of the shock. The oil shock
created large revenues for oil exporters called petrodollars and these, along
with the end of the fixed
exchange rates system, contributed to a large
increase in liquidity in private banks. Like MDBs, private banks
need to onlend
their funds to pay interest to depositors. Developing countries offered a
seemingly lucrative
market and there was profligate and very large scale
lending (Bracking 2009, Scammell 1983). Debt accumulation
was largest in
Latin America with several sub-Saharan African countries following suit.
On average, debt-to-GDP
ratios for low-income countries increased from
13% in 1970 to 46% in 1982 (Kose et al. 2020, 62). Loans were
also made
to what can only be described as illegitimate, odious, or corrupt regimes
(Toussaint 2019). And too
many projects did not benefit local populations,
or caused too much environmental, social, or human rights
harm. Legal and
illegal capital flight was a particular problem, as Caufield (1998, 132)
noted, the ‘amount of money that left the Third World during the lending
boom is staggering. The World Bank
estimates that between 1976 and 1984,
capital flight from Latin America equalled the increase in the
continent’s
external debt.’
The World Bank under McNamara had a liberal approach to debt and
expanded Bank lending while encouraging
developing countries to expand
their access to private finance (Caufield 1998, George and Sabelli 1994,
Toussaint 1999). The South was creating their own MDBs too, further
expanding debt relations. While private
sector lending accounted for most
of the debt, MDBs signalled that countries were credit-worthy. It seemed
for
a time like the lending would be sustainable, though that was illusory.
The immediate triggers for the debt
crisis were the second oil shock in 1979
and the Volcker shock of 1981. The second
oil shock led to a recession that
hit the exports of developing countries very hard.
Developed countries
tightened their fiscal and monetary policy leading to increased interest rates
globally and
increased debt service payments. Paul Volcker, then Chair of
the US Federal Reserve, almost doubled the US
federal funds rate in 1981
to 20%, in what is often referred to as the Volcker shock. Given the power
of the US
dollar, it effectively sets global interest rates, still US banks also
directly held 37% of the $600 billion
developing country debt (Bracking
2009). In 1982, amid a global recession partly bought on by the Volcker
Shock, Mexico defaulted on its loans. Quickly thereafter most private
lending to developing states stopped and
the debt crisis began. Some 40
states found themselves in arrears, 27 had to restructure debts and 16 of
those
were in Latin America and the Caribbean (Kose et al. 2020).
The IMF, World Bank, and larger MDBs thrive in financial crises.
Borrowing increases and private finance looks
to them as debt collectors
and as a safe place to invest. In the 1982 crisis, the debt deals turned private
debts into public ones; the private banks were largely paid and even
received large fees for loan rescheduling.
The Bank and other MDBs took
on a larger share of developing country debt and became the global
system’s main
debt collectors. They had done this in part using what
George and Sabelli (1994, 55) aptly called McNamara’s
‘parting gift’ to the
World Bank: structural adjustment loans. These enabled the
principles of
the new Washington Consensus to be enforced upon developing countries
with ferocity.
3.5 Conclusion
This chapter shows how MDBs were created during the modernisation or
Bretton Woods era, which had a relatively
non-financialised banking system
in response to the excesses of the late 19th and early 20th centuries. The
Cold War political context was a key factor in many of the MDB creation –
many larger MDBs were created by the
Western block and the US as the
political hegemon of the time had to be supportive or at least not
obstructive.
The Soviet Union played a similar role for states then in its
sphere of influence, but it was not as interested
in MDBs and only the IBEC
and IIB were established in its sphere. Some of the MDBs in Africa and
Latin America
reflected more structuralist development ideas.
The MDBs were designed to meet one of the shortcomings of capitalist
finance; private
banks can be risk averse, particularly in developing country
contexts, and so national and multilateral
development banks were meant to
provide an alternative way to boost investment. However, the MDBs played
a role
in the growing financialisation of the 1970s by encouraging lending
to the Third World and
setting standards for it as well as by promoting new
financial instruments, so they were a contributor to the
developing country
debt crisis. Financialisation took off during the 1980s, which is where
Chapter 4 takes up the story: MDB creation in the neoliberal era.
Bibliography
AFESD. 2016. Agreement Establishing the Arab Fund for Economic and Social
Development.
Kuwait. Accessed 14 May 2020. http://www.arabfund.org/Default.aspx?pageId=429.
Amin, Samir. 2014. Capitalism in the Age of Globalization: The Management of
Contemporary Society.
London and New York: Zed Books.
AsDB. 1967. Agreement Establishing the Asian Development Bank. Manila: Asian
Development Bank. Accessed 24 November 2020.
https://www.adb.org/documents/agreement-establishing-asian-development-bank-adb-
charter
Barria, Lilian A., and Steven D. Roper. 2004. “Economic Transition in Latin American and
Post-Communist
 Countries: A Comparison of Multilateral Development Banks.”
International Journal of Politics, Culture,
 and Society 17 (4):619–38. doi: 10.1023/
B:IJPS.0000031235.74193.a4.
Berger, Mark T. 2004. The Battle for Asia: From Decolonization to Globalization. London and
New
York: Routledge Curzon.
Block, Fred L. 1977. The Origins of International Economic Disorder: A Study of United
States
 International Monetary Policy from World War II to the Present. Berkeley:
University of California
Press.
Bracking, Sarah. 2009. Money and Power: Great Predators in the Political Economy of
Development.
London: Pluto Press.
Bruszt, Lazlo, and Stefano Palestini. 2016. “Regional Development Governance.” In The
Oxford Handbook
 of Comparative Regionalism, edited by Tanja A. Börzel and Thomas
Risse, 374–404. Oxford: Oxford
University Press.
Bussière, Eric, and Emilie Willaert. 2006. Council of Europe Development Bank: The Social
Development
Bank in Europe. Paris: Council of Europe Development Bank.
CAF. 2015. Agreement Establishing Corporación Andina de Fomento. Caracas: Banco de
Desarrollo de América Latina. Accessed 24 November 2020.
https://www.caf.com/media/29934/caf-agreement-establishing-10032015.pdf
Caufield, Catherine. 1998. Masters of Illusion : The World Bank and the Poverty of Nations.
London: Pan Books.
Cochrane, James D. 1965. “The Central American Bank for Economic Integration: A
Descriptive Note.”
Caribbean Studies 5 (2):64–73.
Corm, Georges. 2006. “The Arab Experience.” In Regional Financial Cooperation, edited by
José
Antonio Ocampa, 291–328. Washington, DC: UN ECLA and Brookings Insitution
Press.
Culpeper, Roy. 1997. Titans or Behemoths? London: Lynne Rienner.
Delikanli, Ihsan Ugur, Todor Dimitrov, and Roena Agolli. 2018. Multilateral Development
Banks:
Governance and Finance. Cham: Palgrave Macmillan.
Dennis, Bengt. 2015. “Green Light at Third Attempt: How NIB Came to be Forty Years Ago.”
Nordiic Investment
 Bank. Accessed 20 May.
https://www.nib.int/who_we_are/news_and_media/articles/1761/green_light_at_third_attem
pt_how_nib_came_to_be_forty_years_ago.
Dent, Christopher M. 2008. “The Asian Development Bank and Developmental Regionalism
in East Asia.”
Third World Quarterly 29 (4):767–86. doi: 10.1080/01436590802052714.
Engel, Susan. 2010. The World Bank and the Post-Washington Consensus in Vietnam and
Indonesia:
Inheritance of Loss. London: Routledge.
Engel, Susan. 2019. “Development Economics: Classical, Neoclassical, Critical.” In Oxford
Research
Encyclopedia of International Studies, edited by Renée Marlin-Bennett, 1–24.
Oxford: Oxford University
Press.
Engerman, David C. 2018. The Price of Aid: The Economic Cold War in India. Cambridge,
MA: Harvard
University Press.
English, E. Phillip, and Harris M. Mule. 1996. The African Development Bank. London:
Lynne
Rienner.
European Union. 2002. Consolidated Versions of the Treaty on European Union and the
Treaty Establishing
 the European Community. Brussels: European Union. Accessed 24
November 2020. https://eur-lex.europa.eu/legal-content/EN/TXT/?
uri=CELEX%3A12002E%2FTXT
Fine, Ben. 2001. Social Capital versus Social Theory: Political Economy and Social Science
at the Turn
of the Millennium. London: Routledge.
FONPLATA. 2018. Financial Fund for the Development of the River Plate Basin Articles of
Agreement.
 Accessed 24 November 2020.
https://www.fonplata.org/sites/default/files/paginas-fonplata/archivos/EN%20-
%20Constitutive%20Agreement%20%28Update%202018%29.pdf
Galbraith, John Kenneth. 1975. “How Keynes Came to America.” In Essays on John Maynard
Keynes,
edited by Milo Keynes, 132–41. Cambridge: Cambridge University Press.
Gardner, Richard N. 1980. Sterling-dollar Diplomacy in Current Perspective: The Origins and
the
 Prospects of Our International Economic Order, 3rd ed. New York: Columbia
University Press.
George, Susan, and Fabrizio Sabelli. 1994. Faith and Credit: The World Bank’s Secular
Empire.
London: Penguin Books.
Gowan, Peter. 1999. The Global Gamble: Washington’s Faustian Bid for World Dominance.
London:
Verso.
Griffith-Jones, Stephany, and Judith Tyson. 2013. The European Investment Bank: Lessons for
Developing
Countries. In WIDER Working Paper.
Helleiner, Eric. 2014. Forgotten Foundations of Bretton Woods: International Development
and the Making
of the Postwar Order. Ithaca, NY and London: Cornell University Press.
Helleiner, Eric. 2017. “What’s Been Missing from Conventional Histories of Bretton Woods?”
In Global
Perspectives on the Bretton Woods Conference and the Post-War World Order,
edited by Giles Scott-Smith
and J. Simon Rofe, 17–34. Cham: Palgrave Macmillan.
Humphrey, Chris. 2016. “The Invisible Hand: Financial Pressures and Organisational
Convergence in
Multilateral Development Banks.” The Journal of Development Studies 52
(1):92–112. doi:
10.1080/00220388.2015.1075978.
Humphrey, Chris. 2019. “‘Minilateral’ Development Banks: What the Rise of Africa’s Trade
and Development
Bank Says about Multilateral Governance.” Development and Change 50
(1):164–90. doi:
10.1111/dech.12467.
IaDB. 1996. Agreement Establishing the Inter-American Development Bank. Washington, DC:
Inter-American Development Bank. Accessed 11 March 2020.
https://www.iadb.org/en/legal-resource-center/historic-agreement-establishing-inter-
american-development-bank
IBRD. 1948. Third Annual Report to the Board of Governors, 1947–1948. Washington, DC:
International Bank
for Reconstruction and Development.
IFC. 2012. Articles of Agreement. Washington, DC: International Finance Corporation.
Accessed 24
 November 2020.
https://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporate_site/about+
ifc_new/ifc+governance/articles/about+ifc+-+ifc+articles+of+agreement
IIB. 1970. Agreement Concerning the Establishment of an International Investment Bank.
New York: United
Nations – Treaty Series Volume 801, 1975. Accessed 11 March 2020.
https://treaties.un.org/doc/Publication/UNTS/Volume%20801/v801.pdf
Kappagoda, Nihal. 1995. The Asian Development Bank. London: Lynne Rienner.
Kapur, Devesh, John P. Lewis, and Richard Webb. 1997. The World Bank Its First Half
Century, Volume 1:
History. 2 vols. Vol. 1: History. Washington, DC: Brookings Institution
Press.
Kellerman, Miles. 2019. “The Proliferation of Multilateral Development Banks.” Review of
International
Organization 14 (1):107–45. doi: 10.1007/s11558-018-9302-y.
Keynes, John Maynard. 1973. The General Theory of Employment, Interest and Money.
London:
Macmillan for the Royal Economic Society.
Kose, M. Ayhan, Peter Nagle, Franziska Ohnsorge, and Naotaka Sugawara. 2020. Global
Waves of Debt:
Causes and Consequences. Washington, DC: World Bank.
Krasner, Stephen D. 1981. “Power Structures and Regional Development Banks.”
International
Organization 35 (2):303–28.
Mason, Edward S., and Robert E. Asher. 1973. The World Bank Since Bretton Woods.
Washington, DC:
The Brookings Institution.
McCawley, Peter. 2012. Banking on the Future of Asia and the Pacific: 50 Years of the Asian
Development
Bank. Manila: Asian Development Bank.
Meade, James. 1975. “The Keynesian Revolution.” In Essays on John Maynard Keynes,
edited by Milo
Keynes. Cambridge: Cambridge University Press.
Mingst, Karen. 1990. Politics & the African Development Bank. Lexington: The University of
Kentucky Press.
Murphy, Hannah. 2014. “The World Bank and Core Labour Standards: Between Flexibility
and Regulation.”
 Review of International Political Economy 21 (2):399–431. doi:
10.1080/09692290.2013.779591.
Oliver, Robert W. 1971. Early Plans for a World Bank, Princeton Studies in International
Finance No. 29. Princeton, NJ: Department of Economics, Princeton University.
Oliver, Robert W. 1975. International Economic Co-operation and the World Bank. London
and
Basingstoke: Macmillan Press.
Peet, Richard. 2003. Unholy Trinity: The IMF, World Bank and WTO. London: Zed Books.
Phillips, David A. 2009. Reforming the World Bank: Twenty Years of Trial – and Error.
Cambridge: Cambridge University Press.
Prebisch, Raúl. 1950. The Economic Development of Latin America and Its Principle
Problems. New
York: United Nations.
Rapley, John. 2002. Understanding Development: Theory and Practice in the Third World.
Boulder,
CO: Lynne Reinner Publishers Inc.
Rist, Gilbert. 1997. The History of Development: From Western Origins to Global Faith.
Translated
by Patrick Camiller. London and New York: Zed Books.
Roll, Eric. 1973. A History of Economic Thought, 4th ed. London: Faber and Faber Ltd.
Scammell, W.M. 1983. The International Economy Since 1945, 2nd ed. London: Macmillan
Education
Ltd.
Shaw, D. John. 2005. “Turning Point in the Evolution of Soft Financing: The United Nations
and the World
Bank.” Canadian Journal of Development Studies XXVI (1):43–61.
Shushan, Debra, and Christopher Marcoux. 2011. “The Rise (and Decline?) or Arab Aid:
Generosity and
Allocation in the Oil Era.” World Development 39 (11):1969–80.
Singer, Hans W. 1950. “The Distribution of Gains between Investing and Borrowing
Countries.” American
Economic Review 40 (2):478.
Szasz, Paul C. 1999. “Establishment of the International Fund for Agricultural Development.”
Studies in
Transnational Legal Policy 31–32:32–43.
Todaro, Michael P. 1985. Economic Development in the Third World: An Introduction to
Problems and
Policies in a Global Perspective, 3rd ed. New York: Longman.
Toussaint, Eric. 1999. Your Money or Your Life! The Tyranny of Global Finance. Translated
by Raghu
Krishnan and Vicki Briault Manus. London: Pluto Press.
Toussaint, Eric. 2008. The World Bank: A Critical Primer. Translated by Elizabeth Anne,
Vicki
Briault, Bertrand Declercq, Sushovan Dhar, Judith Harris, Raghu Krishnan, Marie
Lagatta, Christine
Pagnoulle, Véronique Renard, Gillian Sloane-Seale and Diren Valayden.
London, Anne Arbor: Pluto Press in
associatin with CADTM, Committee for the Abolition
of Third World Debt.
Toussaint, Eric. 2019. The Debt System: A History of Sovereign Debts and Their Repudiation.
Chicago, IL: Haymarket Books.
Tussie, Dianne. 1995. The Inter-American Development Bank. London: Lynne Rienner.
United States Committee on Government Operations. 1960. Operations of the Development
Loan Fund.
Washington, DC: US Government Printing Office.
Urquidi, Victor L. 1996. “Reconstruction vs. Development: The IMF and the World Bank.” In
The Bretton
Woods – GATT System: Retrospect and Prospect After Fifty Years, edited by
Orin Kirshner,
30–51. Armonk, NY: M.E. Sharp.
Wihtol, Robert. 2014. Whither Multilateral Development Finance? In AsDBI Working Paper
Series. Tokyo: Asian Development Bank Institute.
World Bank. 1960. International Development Association Articles of Agreement.
Washington, DC:
 World Bank. Accessed 10 March 2020.
https://www.worldbank.org/en/about/articles-of-agreement
World Bank. 2012. International Bank of Reconstruction and Development Articles of
Agreement.
 Washington, DC: World Bank. Accessed 24 November 2020.
https://www.worldbank.org/en/about/articles-of-agreement/ibrd-articles-of-agreement.
4 Development thinking, debt, and the
multilateral development bank
system: 1980–2020
This second chapter on the evolution of the multilateral development bank
(MDB) system
starts in 1980 when neoliberalism captured the global
political economy including the World Bank and other large
MDBs. It
journeys through a range of modifications to neoliberalism leading to the
current era, which we call
retroliberal following Murray and Overton
(2016). There were nine MDBs established in this period, eight still
functioning, thus by the end of 2020, there were 30 functioning MDBs,
several with multiple financing arms. As
with Chapter 3, the emergence of
and shifts in the MDBs are linked to three factors:
geopolitics, development
discourse, and debt relations.
This chapter is divided into three periods, each linked to a major debt
crisis that can be associated with calls
capitalism’s need for spatial fixes
(Harvey 2010). The first period was high neoliberalism
or the Washington
Consensus era; it lasted from 1980 to 1997 and began and ended with debt
crises. At the start,
the Third World debt crisis saw large MDBs become
debt collectors and impose the new
orthodoxy of free markets, free trade,
small government, and individual responsibility on recipient states. Only
a
few MDBs were created during this period, including the only MDB with a
pro-democracy, pro-market mandate: the
EBRD. The Washington
Consensus era ended with the 1997 Asian Financial
Crisis, by which time
the social costs of fundamentalist neoliberalism had become too great,
including increasing
poverty and social inequalities. The post-Washington
Consensus era of 1998–2009 was the response to the problems
of orthodox
neoliberalism. Poverty reduction seemed to replace economic growth at the
top of the development
agenda, supported by the 2000 MDGs and, later, the
2015 SDGs. However, the term post-Washington
Consensus highlights the
continuities with neoliberalism – the focus on
growth and private markets
had not disappeared and the poverty-reduction agenda was ultimately rather
minimalist;
still, there was a sense that the development agenda had become
more progressive. This period saw the rise of
China and leftist movements
in Latin America, which resulted in an increased focus on the role of the
state and
new development paradigms aimed at challenging the Washington
Consensus. The era closed when debt expansion in
the US and Western and
Central Europe achieved critical mass in the 2007–8 GFC.
The GFC changed development discourse, but not as significantly as
would be hoped. The
moniker retroliberal for the period 2010–20
highlights that policy responses to the GFC mostly shored up
the position of
capital over labour by socialising private losses while maintaining the
privatisation of gains.
Financialisation was only reined in for a brief
moment, before again being unleashed in another example of how
the
practices of neoliberalism adapt to circumstances (Cahill 2014). Still, a
more state-centric, nationalist era
has emerged. Aid and development
finance are again viewed in terms of the benefits they provide to donor
states’
firms rather than to poverty reduction. Further, in large part thanks to
Chinese interests, infrastructure is
again a key focus for development
finance, which is a return to modernisation era thinking along with the
revised
fixation on economic growth. Hence the retro prefix makes sense; it
hints at the retrospective and retrograde
elements of development discourse
in 2020, with the MDBs again at centre stage after having taken somewhat
of a
back seat during the early 2000s.
A major danger of this shift is its impact on debt. Already prior to the
2020 Coronavirus crisis, the IMF and
World Bank were warning of growing
debt, with the Bank calling the build-up of debt in EMDEs from 2010 to
2018
the ‘largest, fastest and most broad-based increase’ in the past 50
years (Kose et al. 2020, 111). COVID-19 is causing further debt build-up
and may trigger a debt crisis, whereas the usual triggers
of the past 50 years
were financial or banking crises. It is an emerging context, yet it seems
rather clear that
the MDBs are again going to be key players in another debt
crisis.
The three eras explored in the chapter each follows the same structure:
first, changes in developing thinking are
briefly analysed, second, changes
in the World Bank are outlined, followed by a third section on changes in
the
other MDBs, and a fourth analysing the growth of new MDBs in each
era.
4.1 The Washington Consensus era: 1980–97
The global shift from the Keynesian, welfare, modernisation model to
neoliberal structural adjustment – or
austerity politics – must be told in
conjunction with that of the IMF and World Bank. This
is because the
policy prescriptions associated with this neoliberal approach were
negotiated between the US and
the Bretton Woods twins in Washington,
DC, and hence are called the Washington Consensus (Williamson 1990).
The
policies reflected the resurgence of a strand of neoclassical economics
propounded by scholars like Friedrich
von Hayek and Milton Friedman,
which rejected the post-war consensus and instead promoted the moral and
economic priority of individuals and markets over society and the state. It
was a broad project ushered in by a
new politico-economic climate with the
election of Margaret Thatcher in the UK, Ronald Reagan in the US, and
Helmut Kohl in West Germany. There were neoliberal regimes elected or
imposed through coups and other non-electoral mechanisms around the
world, for example, the Augusto Pinochet regime in Chile. Multinational
corporations promoted neoliberal approaches in ways that benefitted them.
In Gramscian terms, neoliberalism’s spread was
through both consent and
coercion. In examining the practices of governments, it is important to
remember that
they have been happy to implement a range of policies that
are not always immediately in keeping with
neoliberalism or may not
appear to be neoliberal, but this pragmatic approach reinforces the
legitimacy of that
state and often serves particular capitalist interests. In the
wake of financial and banking crises, the GFC
being a case in point,
governments have often resorted to Keynesian-type policies, but generally
only as a
temporary measure in order to deepen neoliberalism in the long
run (Cahill 2014).
The Washington Consensus clustered around three broad commitments:
macroeconomic stability, outward orientation, and domestic liberalisation
(Fine 2001). In the early
years, it tended to be implemented in two phases:
first, short-term macroeconomic
stabilisation carried out quickly via ‘big
bang’ reforms, which was the focus of IMF programmes; and, second,
longterm
exhaustive microeconomic reforms including trade liberalisation,
privatisation of state-owned
enterprises, and then later utilities, changes to
taxation, land titling to make land more easily alienable,
labour market
reform, and deregulation of banking and capital movement (Chossudovsky
1997). This latter
programme tended to be implemented jointly by the IMF,
World Bank, and RDBs. The Washington Consensus was based
on a
‘profoundly cynical view of the state in developing countries’ (Toye 1993,
135).
The Third World debt crisis provided the IMF and World Bank the
opportunity to implement
neoliberal policies as loan conditions, which
often supported US hegemony and made the Global South
structurally more
open to US goods and finance (Gowan 1999). As time passed, there was
variation in the Bank’s
approach, mostly prompted by the failures of
neoliberal austerity policies. The number of people living under
the
absurdly low $1 per day international poverty line increased in many
regions. The 1980s were thus labelled
the lost decade for developing
countries, particularly those in Latin America and sub-Saharan Africa. For
much
of Africa, the debt crisis was not resolved until the late 1990s. In
Latin America, where the 1980s debt relief
schemes were targeted, growth
remained low. The debt management processes also saw the Paris Club and
multilaterals holding an increasing share of EMDE debt and the new loans
they provided were often used to pay
arrears on private sector debt.
There were two early additions to the Washington Consensus to try to
improve performance. One was good governance, which initially meant
multi-party elections but was expanded to include
anti-corruption initiatives
and the adoption of Western budgetary and auditing systems. The second
was a focus
on poverty and minimalist social safety; arguably without some
focus on poverty,
neoliberalism was in danger of collapsing. In 1990, the
World Bank’s influential World Development Report was
grandly titled
Poverty and on 31 December 1991, poverty appeared in the Bank’s mission
statement
(Kapur, Lewis, and Webb 1997). Poverty reduction is the
neoliberal alternative to redistribution and social
democratic welfare
systems because it is a minimalist idea that defines equity and equality as
getting people
above the international poverty line – now at $1.90 a day –
and no more. It posits that getting out of poverty
mostly involves individual
pursuit of increased productivity (Cammack 2004) and re-awakens the
distinction
between the deserving and undeserving poor. In 1990, the UN
Human Development Reports first appeared too,
demonstrating a reemergence
of the UN system in development space, as a timid challenger to
World Bank.
The literature on the empirical and theoretical failures of the Washington
Consensus increased over the 1990s.
GDP in Latin America only returned
to its pre-debt crisis level in 1993 (Kose et al. 2020). The IFIs ‘big bang’
reform approach in the former Soviet Union was a failure as was their
response to the 1997 Asian Financial
Crisis. This 1990s debt wave was
mostly in East Asia and some other emerging economies and was
predominately
caused by an upsurge in private sector debt following
liberalisation and deregulation, while the Brady bonds
created as part of the
resolution of the Latin American debt crisis stimulated the development of
sovereign
bond markets in developing countries. In the case of the Asian
Financial Crisis, former World Bank Chief
Economist Joseph Stiglitz
(2000, 60) concluded that the IMF’s response made the crisis ‘deeper,
longer and
harder.’ Sustained pressure on the Bank led it to claim by the
late 1990s that it had moved beyond the
Washington Consensus. What
emerged, however, was merely a modified post-Washington Consensus.
While neoliberalism reigned at the World Bank, in academia in the
1980s and 1990s there was a flourishing of
critical development
approaches. These came from eclectic fields: concerns about the negative
impact on women
of the development project evolved into a sophisticated
literature on gender and
development; the environmentalist movement
expanded, focussing attention on sustainability; scholars and
activists
highlighted the importance of grassroots concerns and indigenous
knowledges; structuralism and
Critical Theory continued to unpick the
material interests at work behind development interventions; and, and
the
post-development school inspired by Foucault and post-structuralism
explained the extent to which
development was a neo-colonial and
Eurocentric project that needed to be challenged from the grassroots (Willis
2005). The debate around gender, participation, and the environment were
all taken up by the Bank, other MDBs,
and the wider development
community, though mostly in instrumentalist ways that ensured an
expanded commitment
to neoliberalism.
4.1.1 Key developments at the World Bank
At the World Bank, Reagan appointee Alden Winship Clausen ensured a
neoliberal agenda was followed, though
given that the organisation had
been shaped by bankers, the shift was not always large (Engel and
Bazbauers
2020). The initial debt crisis response plan – the 1985 Baker
Plan – involved the IFIs
and private banks providing additional resources to
debtor states in return for structural adjustment. The
1989 Brady Plan also
leveraged Bank resources and demanded further structural
adjustment, so
that the Bank became a key player in debt management (George and Sabelli
1994, Woods 2006).
Developing country debt increased during the 1980s
and more of it was owed to IFIs than to private sources
(Bello 1994).
Average annual Bank commitments grew from $5.36 billion in 1970–79 to
$15.69 billion in 1980–89
and $22.03 in 1990–95 (Kapur, Lewis, and Webb
1997, 6), increasing Bank leverage over
borrowing countries.
The World Bank’s environmental failings started coming home to roost
during Clausen’s presidency. The
infamous Polonoroeste project paving
1,500 kilometres of highway through Brazil’s Amazon resulted in mass
deforestation and immiseration of the local Amerindian tribes. The bad
press for the Bank was a factor in the
establishment of its first environment
department in 1987 (Rich 1994). That did not stop them financing the
Narmada Sardar Sarovar dam in India starting in 1988 that produced one of
the world’s largest social
movements up to that time. Despite its very poor
environmental track record, the Bank became one of the chief
operational
arms of the Global Environmental Facility (GEF) established in 1992. The
issues of the MDBs and
the environment are discussed further in Chapter
10. The Bank introduced an Inspection
Panel in 1993 for project affected
persons to have their concerns heard, with the US playing a key role in
its
establishment (Park 2017). Over the next decade, the AfDB, AsDB, IADB,
and EBRD
all adopted similar accountability mechanisms due to a
combination of US pressure, institutional isomorphism,
and pressure from
civil society organisations (Park 2014, Uhlin 2016). This is evidence of an
interconnected
MDB system.
The period from 1980 to 1997 saw three one-term World Bank
Presidents – Clausen, Barber Conable, and Lewis
Preston – and their key
contributions and major events are outlined in Table 4.1.
Table 4.1 World Bank Presidents 1981–95
Alden
Winship
Clausen
1981–6
Born in US,
attended
Carthage
College and
University of
Minnesota,
lawyer,
banker.
Led the Bank during the 1980s recession and developing world
debt crisis. Strong focus
on neoliberal free markets, structural
adjustment, and coordination with the IMF. These policies
damaged
the Bank’s global reputation. Priority investment areas
were agriculture, energy, and sub-Saharan Africa.
Introduced
innovations in guarantees and co-financing with commercial
banks. The Bank’s poor
environmental standards became a
focus of NGOs and media.
Name and
term Background Legacy
Barber
Conable
1986–91
Born in US,
attended
Cornell
University,
short legal
career, long-
term
Republican
politician first
in New York
state then
House of
Representatives.
The US’ refusal to ratify Clausen’s last budget forced Conable
into a major, disruptive reorganisation,
vacating all positions.
The cuts reinforced dominance of neoliberal ideas in the Bank.
He established
the Bank’s first environment department in 1987
and started negotiations on the GEF. Conable gained approval
for a large IBRD capital increase in 1988 and IFC in 1991.
Strengthened focus on poverty but in ways that promoted
privatisation and proletarianisation. The Bank
became
increasingly involved in debt management.
Name and
term
Background Legacy
Lewis
Thompson
Preston
1991–5
Born in US,
served as a
Marine during
WWII, attended
Harvard
University, long
banking
career
with JP
Morgan.
Reaffirmed the Bank’s poverty focus and took a pragmatic,
client-focused approach to
management. Commissioned
Wapenhans Report, which showed declining project quality
inside the Bank.
Established the Inspection Panel in 1993, and
GEF had the Bank as a key administrator; Preston said
development and environmental protection were
complementary. Indigenous issues and resettlement gained
attention after the disastrous Sardar Sarovar project in India; the
Morse Commission report on it was
prototype for the
Inspection Panel. 24 new members joined IBRD and 20 IDA
after collapse of USSR and many
obtained loans.
Source: Compiled by authors from a range of sources, basic details from World Bank website (2019).
4.1.2 Key developments in other MDBs
Several MDBs were restructured in this era in response to either the debt
crisis or the exigencies from the
crises of the 1970s and the growth of
globalised finance. Others, particularly the RDBs, became partners in
pushing Washington Consensus policies on borrowing states (Babb 2009).
Given the debt crisis centred on Latin
America and the Caribbean, the
IADB became a key player. In the Latin American RDB, there was a
dramatic
increase in their equivalent of adjustment programmes, indeed the
US demanded that 25% of resources were
devoted to such loans (Babb
2009, Kellerman 2019). There was also an increasing politicisation of
lending
policy, which regional member states protested with little success
(Kellerman 2019). A large capital increase
followed in 1988, so by 1994 it
Name and
term Background Legacy
had become the region’s main source of development financing. The IADB
added
new private sector financing and insurance arms in this period too.
The SRDBs in the region struggled, with CABEI losing its ability to
remain a regional
member-only MDB (Cevallos 1996); the first nonregional
members were Taiwan and Mexico in 1992 and Argentina
and
Colombia in 1995 and 1997. In 1990, CAF also started expanding its
membership to include 12
additional countries from Latin America and the
Caribbean as well as Spain and Portugal and then 13 private
regional banks
because its ‘finances were in a precarious state’ (Humphrey 2016, 104). In
order to renew its
effectiveness and relevance, CAF restructured its
corporate model to resemble the World Bank and
IADB and hired
consultants ‘from Coopers and Lybrand and a former World Bank vice
president to review the
CAF’s operations and make recommendations for
overhauling internal process’ (Humphrey 2016,
104).
Most of the African SRDBs were greatly affected by the economic
downturn of the 1970s and this spilt over
into the 1980s and even 1990s.
Problems were compounded by failed member integration, lack of political
commitment to regional actions, loan non-repayments worsening portfolio
performance, reluctance to borrow
from foreign donors, and deteriorating
economic conditions in Southern Africa (Mistry and Kritzinger-van
Niekerk
1998). The situation was so problematic for the EADB that it was almost
dissolved during
the late 1970s and early 1980s. The African SRDBs
started admitting new members during the 1980s.
Importantly, it was not
just new non-regional member states but also MDBs, IFIs, national
development banks,
and even private banks, though the shareholdings
tended to remain small.
The European-based MDBs were not particularly impacted by the debt
crisis, and the Arab-led banks were
setting up and expanding. The IsDB, in
line with its distaste for conditionality, never offered structural
adjustment
programmes or policy-based lending (Kellerman 2019). Asia was also not
hit particularly hard by
the debt crisis and the AsDB slowly expanded,
propelled by the addition of China as a borrower
in 1986. The Asian RDB
also started lending to the private sector in 1983, mirroring Washington
Consensus
trends. In regard to the specialised development banks, IFAD
was restructured in 1995 making it more like the
World Bank (Szasz 1999),
and the NIB became a development group with the establishment of the
Nordic
Development Fund (NDF) in 1989, which is a regional financing
mechanism linking Nordic
countries to developing states.
4.1.3 New MDBs
MDB creation slowed but did not come to a standstill during the
Washington Consensus era; five new banks were
created between 1980 and
1997, though the Development Bank of the States of Great Lakes (BDEGL)
established in 1980 was not operational long. It was another African SRDB
founded to support a regional economic community, the Economic
Community of the Great Lakes Countries. It was
proposed in 1977 and
became effective in 1980 and included two non-regional members: Belgium
and the
AfDB (The New Times 2009). Conflict between its regional
member states of Rwanda, Burundi, and
the Democratic Republic of the
Congo led to its collapse in 1993. Discussions were held in 2009 about
reopening
it but little seems to have happened.
The next MDB was the first of a sub-group of SRDBs focussed on trade
and development, which combine the
functions of an MDB with a
multilateral version of national export-import banks. They are often
focussed on
regional infrastructure. The Eastern and Southern African
Trade and Development Bank (TDB) was established in 1985. It came out
of African regional integration efforts, and then
called the Preferential
Trade Agreement (PTA) of Eastern and Southern Africa – now called the
Common Market
for Eastern and Southern Africa – so it was initially called
the PTA Bank. Southern Africa had remained
outside earlier regional
integration programmes but with Zimbabwe’s transition to majority rule in
1980, the
door opened for expansion south.
The Pacific Islands Development Bank (PIDB) came next in 1989. It
was established by a
group of US-associated states in the Pacific, which
worried that the US was going to end aid (Mak and Naya
1994). Despite its
name, it only covers Micronesia and not any of the Polynesian or
Melanesian Pacific Island
states. Most of those states were already
members of the AsDB, which has been the Pacific’s
‘principal multilateral
development finance institution,’ even though most Polynesian and
Melanesian states
are also members of the World Bank (Mak and Naya
1994, 36).
Established in 1991, the EBRD came in the wake of the collapse of
communism and at the height of neoliberal
fervour. It has the most political
and neoliberal aim of any MDB, which is ‘to foster the transition towards
open market-oriented economies and to promote private and entrepreneurial
initiative in the Central and
Eastern European countries committed to and
applying the principles of multiparty democracy, pluralism and
market
economics’ (EBRD 2013, 4). Indeed, the EBRD is the only MDB with an
explicitly political mandate. Its
region was extended to include Mongolia
and the Southern and Eastern Mediterranean after 2006, which has
expanded its lending. It has adopted a persona more alike a commercial
bank than a traditional MDB (Babb
2009), but it still operates as an MDB.
It is the smallest of the RDBs but may benefit from an InvestEU
programme that was being legislated in 2020.
The second trade and development bank of the period was the Black Sea
Trade and Development Bank
(BSTDB), which was established in 1997
and became operational in 1999. Like all SRDBs, it was
linked to a regional
cooperation forum and has as its first goal assisting the transition of
member states
towards economic prosperity as well as promoting regional
projects and banking services. It originally
thought that trade finance would
be its bread and butter; however, its portfolio is dominated by project
loans
either directly or through financial intermediaries (BSTDB 2019).
The continued growth of MDBs during this period demonstrates that
they were not incompatible with
neoliberalism, indeed the EBRD was a
neoliberal-inspired creation. Still, most MDBs were bound up with
postcolonial developmentalism and, as this slowed, so too did the creation
of new banks.
4.2 The Post-Washington Consensus era: 1998–
2009
The post-Washington Consensus era began following the Asian Financial
Crisis and it saw a large shift in the
global aid agenda with a big push for
debt forgiveness and poverty reduction resulting in increasing the
concessional resources available to developing countries and developing
country ownership of development
pathways through the Aid Effectiveness
Agenda. Politically, the shift built on the rise of large progressive
social
movements and centre left parties like those of Bill Clinton in the US
(1993–2001)
and Tony Blair in the UK (1997–2007), whose minimally
progressive agendas were friendly to globalisation
(Mawdsley et al. 2018).
Large social movements included the anti-globalisation movement
peaking
in the Battle for Seattle in 1999, the landmark protests in Cochabamba,
Bolivia
against privatised water price hikes in 2000, and the Make Poverty
History coalition. Economically, the growth of China and relative stability
globally meant many developing
regions started to emerge from the
austerity-induced recessions of the 1980s and early 1990s. It is a mistake,
however, to think that there were no crashes: Brazil in 1999, the dotcom
bubble burst of 2000, and Argentina in
2001 were three of the largest and
the pre-conditions for the next regional debt crisis began with the build-up
of private sector debt in the US and Europe, leading to the GFC.
Ideationally, the MDBs drew mostly on the New Institutional Economics
(NIE) strand of mainstream economics. NIE
was an attempt to build on
neoclassical economics by incorporating a theory of institutions (North
1998). By
significantly expanding neoclassical analysis of market failures
to include information failures and
transaction costs, NIE produced a
picture of markets as subject to extensive imperfections, in contrast to the
neoliberal idea of perfectly functioning markets (Fine 2001, 2005). As
Greenwald and Stiglitz (1986) outlined,
this means that government
intervention could be efficient in many more cases than neoliberal doctrine
allowed.
Stiglitz was World Bank Chief Economist from 1997 to 2002 but
was fired for his somewhat unorthodox views,
though his influence lived
on. His review of neoliberal ‘big bang’ capital market liberalisation
concluded that
if attention was not given to the order and timing of reform,
programmes can cause more harm than good (Broad
2004, Stiglitz 2002).
Beyond NIE, the Developmental State and Neostructuralist literature
were important parts of the broader context of development thinking,
drawing a critical eye on the failings of
the Washington Consensus. The
Developmental State literature, analysing the rapid post-war development
of
Japan, South Korea, Taiwan, Singapore, and Hong Kong, emerged in the
early 1980s and had some impact on the
post-Washington Consensus. This
literature highlights that active states utilising macroeconomic and
industrial
policies, run by a developmental elite shielded to a degree from
political competition, had been able to
achieve high levels of industrial
transformation and economic growth (Amsden 1989, Thurbon 2016, Wade
2018).
One of the most successful development states, Japan, sought to
have the World Bank acknowledge the role of the
state and industrial policy
in development, funding a Bank report titled The East Asian
Miracle (1993)
to recognise this. In the editing of the report, however, the role of the state
was watered down
to the point that the neoliberal development paradigm
emerged unscathed (Wade 1996). Developmental States
certainly
influenced the AsDB. Neostructuralism in Latin America similarly aimed to
challenge
neoliberal dogma but still cast market forces as the primary driver
of development, adding that without
attention to policy and institutional
interventions focussed on equity, markets would not flourish (Leiva
2008).
Like the Development State literature, Neostructuralism created space for
thinking about the role of the
state in development, an important contributor
to the unfolding post-Washington Consensus.
Despite these new approaches, the practice of the post-Washington
Consensus generally extended the neoliberal
approach to constraining the
state in both monetary and fiscal policy and through
devolution of power to
statutory bodies like central banks (Carroll 2010, Engel 2010, Wade 2001,).
Regulation
and other mechanisms were utilised to create more space for
private markets, not states. Curbing state – but
not private sector –
corruption became a major focus, which was linked to the existing good
governance agenda,
thus many MDB projects targeted ‘reform’ of
government financial and auditing systems. In later years, the
focus was on
deepening marketisation through tendering out of activities once performed
by the state in
everything from infrastructure to healthcare, education, and
welfare.
Still, the post-Washington Consensus had a stronger focus on absolute
poverty reduction than its predecessor
and some focus on the social costs of
adjustment. It offered a more progressive approach to health and
education
investments by state and markets, though in practice did little to support
these. The World Bank and
other MDBs claimed to have abandoned onesize-fits-all
approaches to development and created tailored country
programmes, found in country programming documents. These frameworks
were meant to be based on recipient
government ideas as local ownership
was a key element of the post-Washington Consensus.
The focus on poverty and local ownership was formalised in two
international agreements
that became a key part of the 2000s aid consensus.
The first was the MDGs and the second the Aid Effectiveness
Agenda. Both
came out of the OECD DAC and, despite some progressive overtones, they
represented
the Global North shaping the global justice agenda. The OECD
DAC started work in the area in 1995,
but the work was initially done by a
group of all male, rich country development politicians and bureaucrats
whose focus was on practical issues of projects and policies, hence the use
of results-based management with
target-setting (Hulme 2009). Through
years of politicking, a series of international development goals, as the
DAC called them, evolved into the eight MDGs comprised of numerous
targets and indicators approved
by the UN Millennium Assembly held in
2000. The MDGs became a unifying framework for the
MDBs and former
World Bank President James Wolfensohn referred to them in 2002 as ‘the
hymnbook that we’re
singing from now’ (cited in Bissio 2003, 157). Yet, as
Saith (2006) argued, the MDGs were embedded in
profoundly inegalitarian
neoliberal relations and they sought not to change these, but only address
the issue
of absolute poverty. This is clear from the fact that the first MDG
was to reduce the proportion of people
living below the international
poverty line of $1 a day, an accounting illusion that did not actually provide
enough to allow people an average life expectancy (Hickel 2016).
The Aid Effectiveness Agenda emerged from the DAC, along with key
statements made at High Level
Forums in Rome (2003), Paris (2005),
Accra (2008), and Busan (2011). The Agenda was a practical plan focussed
on improving the quality and impact of aid policy and programmes and
focussed on the practices of both donors
and recipients. Ultimately a
technocratic schedule devised by the Global North-led DAC (Booth
2008),
the OECD (2011) itself acknowledged that donors did not progress the
agenda as much as recipients.
Nonetheless, all the larger MDBs and several
smaller ones participated in Aid Effectiveness programmes, 13 out
of the
then 28 MDBs aligning behind institutional standards of behaviour.
Notably, a few of the Arab-led MDBs
were involved in these programmes
but none of the smaller African SRDBs and only one of the Latin American
SRDBs, the CDB.
4.2.1 Key developments at the World Bank
Clinton-appointed President James Wolfensohn oversaw the World Bank’s
transition to the
post-Washington Consensus and expanded the povertyreduction
mission (see Table 4.2). Under Wolfensohn, the phrase ‘Our
dream is a world free of poverty’ was grandiosely
carved into the entrance
of the Bank’s refurbished headquarters in 1996 (Marshall 2008, 54). The
Bank
retained poverty reduction as its overarching mission since, even
during the presidencies of conservative US
Republican Party appointees
Paul Wolfowitz and Robert Zoellick. Still, as Cammack (2004, 197) argued,
Wolfensohn’s Bank promoted the ‘sustainable reproduction of capitalism’
by ensuring micro-level incentive
structures were in line with neoliberal
macroeconomic ones. Wolfensohn further attempted to maintain the
Bank’s
hegemony by shaping developmental thought through programmes like the
Knowledge Bank initiative in
1996, designed to make the Bank the leading
provider of development expertise, and the World Bank ‘Doing Business’
series starting in 2004, which reported on the ease of doing business
in
states across the globe and has been very influential (Banerjee et al. 2006).
He also renamed structural
adjustment loans as development policy loans in
2004 to distance the Bank from the most ideological aspects
of the
Washington Consensus (Bazbauers 2018). The Bank also helped launch the
Heavily Indebted Poor Countries
(HIPC) initiative for debt relief in 1996,
although debts to the Bank were exempt until
the 2005 Multilateral Debt
Relief Initiative, to protect its preferred creditor status
and credit rating.
Despite progress, the conditions on debt relief advocated neoliberal
prescriptions like
limiting public expenditure and prioritising debt servicing
over other needs.
World Bank lending spiked in 1998 and 1999 in response to the Asian
Financial Crisis from an annual average
of $22.03 billion in 1990–5 to
$27.8 billion but rapidly declined to $15.3 billion in 2000. Yet, MDBs need
to
lend, so they steadily grew again to reach $24.7 billion in 2008, with the
GFC then causing a further spike
in loans. The relative stability of the
1999–2007 interregnum was not great for the IMF or Bank as their
customers were reducing debt or able to borrow with few conditions and at
competitive rates from other
provides. Indeed, many countries were
building foreign reserves explicitly to avoid having to turn to the IMF
in the
future. Still, the Bank remained vitally important to many smaller and
poorer countries whose access
to private finance was limited.
Co-financing expanded World Bank lending. This was mostly with
official bilateral and multilateral partners.
Between 1996 and 1999, cofinancing
ranged between 33.9% and 40.1% of the value of bank
loans. As
Bracking (2009) argued, these linkages highlight that there is not just an
MDB system, but rather a
system of interlinked development finance
institutions. Still, an indication that MDF and the MDBs declined
in
influence over the 2000s was that by 2007 Bank co-financing was equal to
just 25.5% of operations. Bank
lending to the financial sector increased
during this period through all three of its lending arms,
particularly the IFC.
Leading up to the GFC, the Bank was quite exposed to asset- and mortgage-
backed
securities, though the IADB was far more exposed (Kellerman
2019).
Table 4.2 World Bank Presidents 1995–2007
James
Wolfensohn
1995–2005
Born in Australia,
acquired US
citizenship
specifically to
gain the World
Bank
presidency,
attended
University of
Sydney and
Harvard Business
School,
investment banker
with interest in
arts and music,
known as the
‘Renaissance
Banker.’
Launched the HIPC in 1996 along with the IMF Managing
Director. He focused on
corruption before the Asian
Financial Crisis and more so after with institutional
mechanisms established
in 1999. This crisis highlighted the
Bank’s lack of inclusion, participation, and the shallow
nature of
its poverty reduction agenda, and they became key
parts of the post-Washington Consensus along with
influences from NIE. The 1997 Strategic Compact reform
was designed to gain more resources for Bank in
return for
a streamlined institution. Launched the Comprehensive
Development Framework and PRSPs in 1999
as
frameworks for country lending and later as mechanisms for
implementing the MDGs.
Name and
term Background Legacy
Paul
Wolfowtiz
2005–7
Born in US,
attended Cornell
University,
obtained PhD
from University of
Chicago, held
a
number of
government
appointments for
Republican
administrations.
Wolfowitz was a political appointee from the Bush
administration, which did not
support the Bank. Had a
tumultuous relationship with the Bank Board. Focused on
anti-corruption but
forced to resign after giving his partner a
position with a high salary.
Source: Compiled by authors from a range of sources, basic details from World Bank website (2019).
4.2.2 Key developments in other MDBs
The AsDB took an active response to the Asian Financial Crisis, but some
of
its IMF-style policies led to backlash. It adopted poverty reduction as its
mission in 1999, predating the
World Bank. It was partly the result of
pressure from the US Treasury, which forced the Asian MDB to put a
much
greater share of its funds into social and environmental projects than it had
in the past (Babb 2009).
The AsDB and most of the RDBs adopted and
expanded safeguard mechanisms to protect project
affected people from
harm, which has helped ensure loans benefit local communities, though
many problem
projects are still funded. The RDBs increased inter-agency
harmonisation too and engaged with new financial
instruments following
the World Bank’s lead.
The post-Washington Consensus era was a solid period for many of the
sub-regional and specialised development
banks. The smaller MDBs that
would become influential during the 2010s began their expansion circa
2000, the
CDB and CAF being two examples of this change in fortune,
following organisational
restructurings implemented during the 1990s. The
focus on the private sector expanded in many smaller MDBs,
for example,
the AFESD’s Board of Governors approved a revision of the MDB’s
Articles of
Agreement in 1997 to better support the Arab private sector
(AFESD 1997).
In Europe, the CEB broadened its mandate during the post-Washington
Consensus era, through the
1997 Strasbourg Summit that advocated the
Name and
term Background Legacy
CEB incorporate ‘strengthening
European social cohesion’ into its mandate
and the 2005 Warsaw Summit that called for building a free,
democratic,
and more inclusive European society; such changes reflected the greater
focus on good governance
in the post-Washington Consensus period. The
EIB became the EIB Group during this period with the
incorporation of
sibling institutions addressing private sector financing and partnerships,
reflecting the
expansion of the World Bank into the World Bank Group with
the IFC and MIGA.
In Africa, the misfortunes of the EADB continued into the 2000s, not as
the result of the
economic decline of its members but due to severe
mismanagement of finances, leading to several high-ranking
officials,
including Director General Godfrey Tumusiime, being expelled; it posted
losses of millions of
dollars. In contrast, BOAD increased its private sector
financing, along with a few other
smaller MDBs. BOAD originally lent to
regional member states but, from 2002, it provided loans
to the private
sector for development projects of regional significance plus lines of credit
to small and
medium private enterprises. This can be interpreted as the
MDBs following the lead of the World Bank towards
more private sector
financing products in line with the post-Washington Consensus approach of
market-led
development.
4.2.3 New MDBs
Just two new MDBs were established between 1998 and 2009 and there
was one unsuccessful proposal. The first
new MDB, a trade and
development bank, was established in 1996 by the Economic Cooperation
Organisation (ECO)
regional grouping comprised of mainly central Asian
states. The ECO Trade and Development Bank (ETDB) was
founded by
three of the ECO states – Iran, Pakistan, and Turkey with Azerbaijan,
Afghanistan, and the Kyrgyz
Republic joining later. The ETDB aims simply
to expand intra-regional trade and increase
economic development. The
second new MDB, the Eurasian Development Bank (EDB), was
created in
2006 as another post-communist MDB mandated to develop and strengthen
market economies, although
its member states – the Russian Federation,
Kazakhstan, Belarus, Armenia, Tajikistan, and Kyrgyzstan – remain
far
from model market economies.
The unsuccessful proposal was for a Banco del Sur (or Bank of the
South), the
idea for which was first raised in 2005 between Venezuela and
Brazil. It was an expression of
Neostructuralism and an indicator of new
activism in the Global South. Its proposers were concerned that the
South
was still depositing large amounts of resources in Global North financial
institutions and they wanted
to create a new regional financial architecture
(Pérez 2009–10, Rosales 2013). Discussions occurred in 2006–7
between
Venezuela and Argentina, and they were joined by Brazil and Ecuador. In
2009, an agreement to
establish the MDB was signed with eight initial
members. In responding to the demands of the different
founding member
countries, the functions proposed for the MDB were:
to finance development projects in key sectors of the economy, aimed
at improving competitiveness,
 scientific-technological development,
infrastructure, creation and provision of services, intraregional
productive complementarity, and the maximization of value added to
raw materials produced in the countries
of the region.
(cited in Rosales 2013, 31)
Its proposed structure seems rather like a standard MDB: a proposed initial
capitalisation of $20 billion,
capital raised on bond markets, and weighted
voting for large projects and structures matters but one
country, one vote for
simple operational matters. Its constituent agreement entered into force in
2011 but
adequate capital was not paid-in to make it operational.
Venezuelan President Nicolás
Maduro attempted to revise it in April 2015,
but it was not capitalised (Mares and Trinkunas 2016). The
proposed Banco
del Sur was a clear manifestation of Latin American Neostructuralism, and
thus part
of the broader post-Washington Consensus discourse. It also
reopened discussion about the need for public
development financing,
which the NDB and AIIB continued in the 2010s.
4.3 Retroliberalism and the rise of debt: 2010–20
The progressive changes of the post-Washington Consensus era had come
and largely gone by the early 2010s, with
the focus turning to the
retroliberal – or beyond aid – agenda. The quantity of resources delivered as
opposed
to the quality of aid effectiveness came to define MDB cooperation
documents. The retroliberal agenda first
emerged in the early 2000s and
began as a slow political reconfiguration away from grant aid. As early as
2002,
the International Conference on the Financing of Development in
Monterrey made it clear
that poor countries were responsible for their own
development and that the private sector was expected to be
the key course
of finance going forward (Saith 2006). And, yet the retroliberal era did not
fully emerge until
around 2010, catalysed by the upheaval of the GFC.
Ideationally, it was hoped that the 2007–8 GFC would contribute to a
broadening of development discourse. And,
for a moment in the wake of
the crisis, there was a brief flirtation with unorthodox policies, in particular
Keynesian stimulus spending and financial controls in order to bail out
capitalists but this was followed by a
rapid return to austerity politics (Ortiz
et al. 2020). The minor changes to regulations such as reforms to the
Basel
banking rules did not address the systemic risk that had been created by the
liberalisation of financial
flows, and financialisation revived after the crisis
(Gabor 2020, Goldin et al. 2014). Mainstream donors and
the MDBs
maintained a broadly post-Washington Consensus mindset, but now with an
increase emphasis on
infrastructure, nationalism, and financialisation –
promoting private investment and loans over grant aid.
Thus, following
Murray and Overton (2016), we label the period from 2010 to 2020 as the
retroliberal era.
The term retroliberalism underscores that the policy response to the GFC
benefited capital by socialising its
losses and leaving labour income to pay
for this through public debt. The practice of neoliberalism has always
differed from the theory, with centre left and right governments adapting to
serve business interests. In the
current era, this means a return to a more
state-centric and nationalist discourse focussing on the benefits
that
development aid and finance can provide to private and state firms rather
than to poverty reduction.
Retroliberalism has also marginalised the SDGs;
they may get lip service, but they are no longer at the centre
of development
thinking. Significantly, the dramatic rise of China and its development
strategy has put
infrastructure again at the centre of development finance, a
resurgence that broadly aligns with the
modernisation mentality the World
Bank pursued over its first two decades.
China’s approach to rapid industrialisation differs radically from the
minimalist state agenda of the
Washington Consensus and China’s influence
on development has grown – by 2019, they were the third largest
World
Bank shareholder and were central to the formation of the NDB and AIIB.
This has led
scholars like Jakupec and Kelly (2019) and Lin and Wang
(2017) to argue that China has created space for the
Global South to adopt
developmentalist approaches. However, like Yağcı (2016, 43), we argue that
while China’s
experience may be informative for debates about
developmentalism, China itself is not concerned with ‘enlarging
space for
developing countries’ trade relations and industrialisation efforts.’ Rather,
the contemporary
inegalitarian capital order provides the foundations for
China’s development, which they
support along with the associated global
economic governance system (Bond 2015, Robinson 2015).
The expansion of China’s mutual aid activities since 2008, notably the
Belt and Road Initiative of 2013, was largely in response to domestic
stagnation. Its aid promotes retroliberal policies –
supporting open markets
and broadly neoliberal fiscal and monetary policy, but with increased
investment in
infrastructure and less interference in state affairs including
around human rights. Further, China’s policies
support their investors,
whether they are seeking to source raw materials, outsource elements of
low-wage
manufacturing, or gain construction contracts outside China
using Chinese inputs and labour. Indeed, it is not
unwarranted to say that
they are often ‘kicking away the ladder for developing countries’ (Chang
2002). A key
issue here is China’s extensive use of debt instruments, which
previously had been very cautious about. During
the 2010s, however,
China’s approach became a retroliberal one – largely neoliberal policies
with a good dash
of infrastructure spending, all wrapped up in debt.
China’s expansion of debt relations has led the MDBs to expand their
loan portfolios and the Global North to
expand existing, and create new,
bilateral development finance mechanisms, such as the US International
Development Finance Corporation or Australia’s Infrastructure Financing
Facility for the Pacific. Private
sector debt has rapidly grown too over the
past decade, and in 2018 global debt reached a record high of 230%
of
GDP. Since 2010, debt in EMDEs ‘has risen 54 percentage points of GDP
to a historic peak of about 170% of
GDP in 2018’ (Kose et al. 2020, xix).
China itself has also rapidly expanded debt, but they have the advantage
of
most of their being owed to domestic sources.
Key contributors to the 2010s debt wave are the usual culprits of low
interest rates and
financialisation, as well as ‘a rise of regional banks,
growing appetite for local currency bonds, and
increased demand for
EMDE debt from the expanding non-bank financial sector’ (Kose et al.
2020, xxi). The
expansion in EMDE debt between 2010 and 2014 was
predominantly private sector debt, but from 2014 to 2018 that
reversed with
publicly guaranteed debt making up the majority. In low-income countries,
both public and private
debt has grown and there has been a shift away
from concessional finance and towards private creditors,
although smaller
sub-Saharan African states are still primarily reliant on official creditors
(Bonizzi,
Laskaridis, and Toporowski 2019). According to Kose et al.
(2020, 10), this ‘wave of debt buildup has been
unprecedented in its size,
speed, and reach’ in EMDEs. It is also more global than previous debt
build-up waves
occurring since the 1970s, though debt in the Global North
has been stable and there have been declines in debt
in the Middle East,
Eastern Europe, and Central Asia.
4.3.1 Key developments at the World Bank
World Bank President Jim Yong Kim, who led the MDB from 2012 to
2019, with his public health background,
seemed to offer a progressive
approach to development (see Table 4.3). By the time Kim
left the Bank,
however, the MDB had doubled down on financialisation. At the same time,
networks between the
MDBs and DFIs continued to grow. The International
Development Finance Club
was established by the IMF and Bank in 2011
to help DFIs set agendas on development finance and
share know-how. It
has six SRDBs and the IsDB as members of its private sector arm, along
with Global North
and South national development banks and one Exim
bank.
Table 4.3 World Bank Presidents 2007–20
Name and
term Background Legacy
Robert
B.
Zoellick
2007–
12
Born in US, attended
Swarthmore College
and Harvard, spent
three decades between
private sector firms
(including Goldman
Sachs) and
government
appointments in
Republican
administrations,
including Deputy
Secretary of State
(2005–6).
World Bank President during the 2007–8 GFC, when
lending increased to an all-time
high. He oversaw the first
general capital increase for IBRD in 20 years agreed to in
2010. Involved in
an increase in shares for developing and
transition countries and agreed to review their position
every 5
years. Commissioned Zedillo Report released in
2009 on the World Bank Group’s governance structures.
Zoellick’s presidency focused on good governance and anticorruption
and launched the World Bank’s ‘open
data’
initiative.
Jim
Yong
Kim
2012–
19
Born in South Korea,
migrated to the US
with family at age 5,
attended Brown
University, obtained
MD and PhD from
Harvard University,
co-founded public
health NGO, served as
a
director in WHO,
and worked as
university lecturer and
administrator.
Kim initiated another major and controversial
reorganisation, some of it reversed in
2017. Originally
focused on health and human development and approved
Framework for Mainstreaming Citizen
Engagement. Shifted
to focus on financialisation through the Maximising Finance
for Development
initiative, which was linked to a large
capital increase agreed to in 2018 and expanded the role of
the
IFC. This promoted privatised social services. Kim also
set stronger targets for climate finance, ended
financing for
oil and gas exploration and extraction, and strengthened
rules on lending to private banks
with fossil fuel
investments.
David
R.
Malpass
2019–
Born in US, attended
Colorado College and
University of Denver,
Georgetown
University
economist,
chief economist of
Bear Stearns, held
government
appointments in
Republican
administrations.
Warned about the build-up of debt in EMDEs, including
debt from IFIs. President during
the COVID-19 pandemic,
which to mid-2020 involved a $160 billion commitment,
with strong emphasis on the
IFC.
Source: Compiled by authors from a range of sources, basic details from World Bank website (2019).
World Bank commitments reached an all-time high in 2010 of $58.7
billion, and then dropped substantially to
$29 billion in 2012. Yet, this
lending interregnum was short. As the investment climate deteriorated
middecade,
states increased public spending, and President Kim announced his
‘billions to trillions’ agenda
in 2013 that aimed to leverage Bank lending to
Name and
term Background Legacy
shift from billions of dollars in investments to trillions.
Between 2017 and
2019, average annual Bank commitments were $44.8 billion and IBRD
gross disbursements were
$18.5 billion and IDA gross disbursements
totalled $14.9 billion (World Bank 2019).
The ‘billions to trillions’ agenda was followed by Maximising Finance
for Development (MFD) in 2017, which
sought to leverage official
development finance to attract private investment but with a focus on
‘innovative’ financial instruments. The World Bank’s 2018 large
shareholding increase (detailed in Chapter 5) was core to this, though it was
also likely partly driven by competition with the new
MDBs and Chinese
development finance. The increase substantially expanded Bank Group
lending capacity and is
linked to the IDA raising funds on money markets
for the first time in its history. With the Trump regime in
power in the US, it
seems that the shareholder increase came at the price of Kim’s resignation.
The MFD initiatives shows that, despite the havoc wreaked by
financialisation in the GFC, the World Bank has
become a proponent of it
being extended to aid and development finance; the ‘overall strategy is to
policy-engineer a shift towards securities-based financial systems and thus
render DECs [developing and
emerging countries] more amenable to the
forces of financialised capitalism’ (Gabor 2018, 16). While the
overall
strategy is clear, the precise methods for implementation are less so. One
method is issuing new
kinds of bonds, such as green bonds, IDA bonds, the
world’s first
blockchain bond, and Indonesian women’s empowerment
bonds (World Bank 2019). A second
method is the ‘cascade approach’ that
identifies imperfections that may be stopping private capital from
investing
in projects. If addressing the imperfection is not enough, subsidies and
guarantees may be needed
to leverage private investment and only when
such reforms are still not attracting private investment can
public
investment be considered (Gabor 2018). It thus combines an ideological
preference for private
investment over public regardless of profitability or
efficiency, with a preference for financialised
capitalism over traditional
banking. For example, the Bank issued catastrophe bonds in 2016 through
the
Pandemic Emergency Financing Facility (PEFF), a mechanism
pioneered by insurance companies to pay high
interest rates on the basis
that investors may lose some of or all their money. The Bank’s PEFF bond
had a
complex set of triggers before they could be paid out, leading to an
expectation that they would not be. But,
the COVID-19 crisis met all the
triggers and so investors lost their principal (Mackenzie 2020). The Bank
created PEFF bonds to build a new market in securitised risk but given most
investors
are loss adverse, they will be less likely to purchase them again in
the future (Mackenzie 2020). More to the
point, such innovative financial
instruments may have a strong structure, ‘but from almost any angle, they
look fundamentally ill-suited to protecting vulnerable people from diseases,
disaster, or climate change’
(Mackenzie 2020).
With Trump appointee David Malpass as the incumbent president (see
Table 4.3), the Bank
became more concerned with the growth of debt,
which the IMF had been warning about for a few years. Yet, the
COVID-19
pandemic has left no option but for a big increase in lending as bilateral
donors are not increasing
grant resources. The Bank has said they will
provide $160 billion in frontloaded funds to help states respond
to the crisis
and other MDBs will private $80 billion. They are also frontloading grants
through their COVID-19 Fast Track Facility, but more loans will follow.
In 2020, the Bank Group’s ambitious mission was to end extreme
poverty by decreasing the percentage of people
living on less than $1.90 a
day to no more than 3% by 2030 and to promote shared prosperity by
fostering the
income growth of the bottom 40% of people in every country.
But, just like the MDGs, this formulation is an
accounting illusion that
narrowly focusses on inequality by promoting income growth. This brings
us back to
the centrality of the Bank’s original purposes, which can be
summarised as facilitating investment in
productive purposes and
promoting private investment and trade.
4.3.2 Key developments in other MDBs
The late 2000s and 2010s saw an across-the-board improvement in the
organisational functioning and loan
portfolios of the regional, sub-regional,
and specialised development banks, particularly among a few smaller
MDBs that had struggled during the 1980s and 1990s. Such improvements
coincided with organisational
restructurings, an expansion of capital
availability, and new leadership. In the case of the RDBs, however,
most of
which had also lent counter-cyclically during the 2007–8 GFC, they had a
larger decline in lending in
the early 2010s than the World Bank, which has
been attributed to downward pressure from credit rating
agencies
(Delikanli, Dimitrov, and Agolli 2018).
In the case of the SRDBs, successful reform occurred across several
continents. In Africa, the
EADB went from severe financial
mismanagement during the 2000s to significant organisational
restructuring
and the recovery of outstanding loans under Director General Vivienne
Yeda, who was appointed
in 2009. As a result, Yeda received several
financial and banking awards, including the African Banker of the
Year
Award in 2014. At the TDB, President Adamassu Tadesse, who received the
same African Banker Award in
2019, spearheaded a dramatic reformation
of the African SRDB, including growing equity capital and annual
profits
four-fold between 2012 and 2019, attracting 15 new shareholders, and
receiving the TDB’s first
investment grade rating from Moody’s in 2017
(Africa Fintech Summit 2019). The TDB’s reform process began in
2000
and the overall result is that it is now substantially larger than the four
African SRDBs that were
created before it (Humphrey 2019). In Latin
America, CAF came to rival the IADB and exceed World
Bank Latin
American and Caribbean commitments during the 2010s, which is
indicative of the change in fortunes
and expansion of operations of so many
MDBs (Humphrey 2014, 2016).
In Europe, the NDF, after almost being dissolved in the 2000s, instituted
a series of institutional reforms
in 2009, shifting its mandate from soft loans
for social and economic development to grants for climate
change
interventions in low-income countries (Amland 2018, Normann 2019). This
was an attempt to not only
satisfy the competing interests of its Nordic
shareholders but also to better find its niche within MDF
(Wihtol 2013).
The CEB, its relevance revitalised in the 1990s with the collapse of the
Soviet
Union and reintegration of people from the former Soviet bloc into
capitalist Europe, renewed its pertinence
once again in response to the
refugee crisis affecting Europe since the mid-2010s.
In Eastern Europe and Central Asia, the IIB underwent considerable
restructuring in 2012. Following two
decades of stagnation in the wake of
the Soviet Union’s collapse, new management entered the former
Soviet-led
MDB to make it a modern-day development bank. A revised agreement in
2014 saw it shift to a much
more capitalist agenda of ‘promoting economic
growth, increasing the competitiveness of national economies,
expanding
trade and economic ties, and maximising investment interaction
opportunities’ (IIB 2018, 1). The
IIB also entered debt capital markets in
2014, the first time in its history, and began issuing bonds in
Russia,
Slovakia, and Romania.
In a range of ways, the 2010s saw a closer alignment between the MDBs
as to what a development bank ‘should’
look like. In addition to broad
harmonisation efforts, another example is the increasingly close alignment
on
climate finance following the 2015 Paris Agreement (see Chapter 10)
and further many
MDBs followed the World Bank’s lead in increasing their
financial innovation engagement.
4.3.3 New MDBs
Two new MDBs emerged during the retroliberal era, the NDB and AIIB,
and they were designed as
traditional development banks. The NDB (2015,
1) adopts neutral language in its purposes, aiming to ‘mobilize
resources for
infrastructure and sustainable development projects in BRICS and other
emerging
economies and developing countries,’ and the AIIB (2015, 2),
largely
duplicating the AsDB’s Charter, has a strong profit focus prioritising
‘infrastructure and other
productive sectors,’ despite being founded by an
ostensibly socialist state. The absence of references to
poverty reduction in
the NDB and AIIB’s founding documents speaks to them being business-
link
banks, at odds with the SDGs; the new MDBs conform to the ‘GDPcentred,
Northern-development-model approach’
(Dossani 2014).
Promoting private capital is remarkably prominent in the AIIB’s Articles
of
Agreement, giving the MDB responsibility for its promotion in the
region. The Articles suggest that, as
argued above, the practice of this
China-led development financier is not much friendly to the state than the
old traditional MDBs. The NDB is a little more conspicuous in its purposes,
referring to ‘support’ for public
and private projects. The similarities of
purposes and inclusion of facilitating private investment
demonstrates that
the new MDBs aim to promote debt-based, capitalist expansion in the same
way as the old
ones have.
4.4 Conclusion
There are so many dimensions to the MDBs discussed in Chapters 3 and 4
that it is hard to offer simple conclusions. The chapters highlight the
connections between MDB
creation, geopolitics, economic theory, and
debt. They demonstrate that there is a fair degree of coherence
around the
aims and objectives of the MDBs; almost all exhibit a Keynesian influence,
which is not surprising
given their logic is the Keynesian idea that markets
will not always ensure adequate levels of investment. Some
are more statist,
others more pragmatic, and the EBRD brought in a neoliberal tone, but, in
the end, they are
all focussed on promoting market-based economic growth
in line with banking principles. There is a remarkable
consensus around the
need for more and more debt to promote economic growth, despite there
still being no
orderly default and restructuring mechanism for states at the
international level.
Many of the MDBs started out with strong regional missions but few
have been able to live up to them in
practice; not many governments want
to be burdened by joint loans that they may not get an equal share of
benefits from. This demonstrates the dominance of the state in development
discourse and it permeates the
analysis and lending strategies of the MDBs
too. The MDBs have helped naturalise the idea that states are
actual and
effective units that can control development challenges at the same time as
their banking and
neoliberal logics lead them to want to constrain the state
and promote the benefits of markets. This is the
tension at the heart of the
MDBs.
The durability of the MDB model and the MDBs themselves are further
factors that leap out of the analysis –
‘once established MDBs do not
disappear, but rather transform and evolve’ (Delikanli, Dimitrov, and Agolli
2018, 21). The BDEGL is the only suspended MDB we have found and
even it
still exists on paper. Still, as the chapter demonstrates, many MDBs
have faced challenges. Nonetheless, they
are substantial financial actors.
The 23 MDBs studied by Delikanli, Dimitrov, and Agolli (2018, 49) had a
total
portfolio (loans, equity investments, and debt securities) of $1.13
trillion in 2016 or 1.6% of world GDP,
which was a decline from earlier in
the decade. In addition, states have turned to the idea of creating new
MDBs time and again when faced with obstacles, which suggests they
consider productive investment of the
trillions of dollars that now float
around the world is an ongoing challenge. States seem to like the influence
that MDBs provide and, as Chapter 5 shows, once established MDBs are
quite cheap for them.
The next chapter focusses on the structure of the
MDBs and it emphasises how their structure as banks has been
a long-
underestimated influence. Indeed, Kapur, Lewis, and Webb (1997, 1111)
note that at times the World
Bank’s ‘financial and development personas’
have been ‘more competitive than complementary.’
Bibliography
AFESD. 1997. Annual Report 1997. Safat, Kuwait: Arab Fund for Economic and Social
Development.
Africa Fintech Summit. 2019. “5 Questions with Admassu Tadesse, President & Chief
Executive of Trade
 and Development Bank (TDB).”
https://africafintechsummit.com/2019/11/19/5-questions-with-admassu-tadesse-president-
chief-executive-of-trade-and-development-bank-tdb/.
AIIB. 2015. Articles of Agreement. Beijing: Asian Infrastructure Investment Bank.
Amland, Bjørn H. 2018. “Nordic Donors to Discuss Strengthening Nordic Development
Fund.” Development Today.
 http://www.development-
today.com/magazine/Frontpage/nordic_donors_to_discuss_strengthening_nordic_developm
ent_fund.
Amsden, Alice. 1989. Asia’s Next Giant: South Korea and Late Industrialisation. New York:
Oxford
University Press.
Babb, Sarah. 2009. Behind the Development Banks: Washington Politics, World Poverty, and
the Wealth of
Nations. Chicago, IL and London: The University of Chicago Press.
Banerjee, Abhijit, Angus Deaton, Nora Lustig, Ken Rogoff, and Edward Hsu. 2006. An
Evaluation of World Bank
Research, 1998–2005. September 24. Washington, DC: World
Bank.
Bazbauers, Adrian Robert. 2018. The World Bank and Transferring Development: Policy
Movement through
Technical Assistance. Cham: Palgrave Macmillan.
Bello, Walden. 1994. Dark Victory: The United States, Structural Adjustment, and Global
Poverty.
London: Pluto.
Bissio, Roberto. 2003. “Civil Society and the MDGs.” Development Policy Journal 3
(April):151–60.
Bond, Patrick. 2015. “BRICS and the Sub-imperial Location.” In BRICS: An
Anti-Capitalist
Critique, edited by Ana Garcia and Patrick Bond, 15–26. Chicago, IL: Haymarket Books.
Bonizzi, Bruno, Christina Laskaridis, and Jan Toporowski. 2019. “Global Liquidity, the
Private Sector and
Debt Sustainability in Sub-Saharan Africa.” Development and Change
50 (5):1430–54. doi:
10.1111/dech.12507.
Booth, David. 2008. Aid Effectiveness after Accra: How to Reform the ‘Paris agenda’.
London: ODI.
Bracking, Sarah. 2009. Money and Power: Great Predators in the Political Economy of
Development.
London: Pluto Press.
Broad, Robin. 2004. “The Washington Consensus Meets the Global Backlash: Shifting
Debates and Policies.”
Globalizations 1 (2):129–54.
BSTDB. 2019. Medium-Term Strategy and Business Plan 2019–2022. Black Sea Trade and
Development
Bank. Accessed 1 June 2020. https://www.bstdb.org/MTSBP_2019-2022.pdf
Cahill, Damien. 2014. The End of Laissez-Faire? On the Durability of Embedded
Neoliberalism.
Cheltenham: Edward Elgar.
Cammack, Paul. 2004. “What the World Bank Means by Poverty Reduction and Why it
Matters.” New Political
Economy 9 (2):189–211.
Carroll, Toby. 2010. Delusions of Development: The World Bank and the Post-Washington
Consensus in
Southeast Asia. Houndmills, Basingstoke: Palgrave Macmillan.
Cevallos, Ricardo. 1996. “The Central American Bank for Economic Integration.” Tulane
Journal of
International and Comparative Law 4 (2):245–74.
Chang, Ha-Joon. 2002. Kicking Away the Ladder: Development Strategy in Historical
Perspective.
London: Anthem Press.
Chossudovsky, Michel. 1997. The Globalisation of Poverty: Impacts of IMF and World Bank
Reforms.
London: Zed Books.
Delikanli, Ihsan Ugur, Todor Dimitrov, and Roena Agolli. 2018. Multilateral Development
Banks:
Governance and Finance. Cham: Palgrave Macmillan.
Dossani, Sameer. 2014. BRICS Bank: New Bottle, How’s the Wine? Bretton Woods Bulletin
(Februrary).
EBRD. 2013. Basic Documents of the European Bank for Reconstruction and Development.
London: European Bank
for Reconstruction and Development. Accessed 11 March 2020.
https://www.ebrd.com/news/publications/institutional-documents/basic-documents-of-the-
ebrd.html
Engel, Susan. 2010. The World Bank and the Post-Washington Consensus in Vietnam and
Indonesia:
Inheritance of Loss. London: Routledge.
Engel, Susan, and Adrian Robert Bazbauers. 2020. “Multilateral Development Banks:
Washington Consensus,
 Beijing Consensus or Banking Consensus?” In Rethinking
Multilateralism in Foreign Aid: Beyond the
Neoliberal Hegemony, edited by Viktor Jakupc,
Max Kelly and Jonathan Makuwira, 113–31. Abingdon, Oxon
and New York: Routledge.
Fine, Ben. 2001. Social Capital versus Social Theory: Political Economy and Social Science
at the Turn
of the Millennium. London: Routledge.
Fine, Ben. 2005. “The New Development Economics.” In The New Development Economics:
After the
Washington Consensus, edited by K.S. Jomo and Ben Fine, 1–20. New Delhi:
Tulika Books.
Gabor, Daniela. 2018. Understanding the Financialisation of International Development
through 11
FAQs. Washington, DC: Heinrich Böll Stiftung North America.
Gabor, Daniela. 2020. The Wall Street Consensus. SocArXiv papers.
George, Susan, and Fabrizio Sabelli. 1994. Faith and Credit: The World Bank’s Secular
Empire.
London: Penguin Books.
Goldin, Ian, Mike Mariathasan, Co-Pierre Georg, and Tiffany Vogel. 2014. “The Financial
Sectors.” In
The Butterfly Defect: How Globalization Creates Systemic Risk, and What To
Do about it, edited by
Ian Goldin and Mike Mariathasan, 36–69. Princeton, NJ and Oxford:
Princeton University Press.
Gowan, Peter. 1999. The Global Gamble: Washington’s Faustian Bid for World Dominance.
London:
Verso.
Greenwald, Bruce C., and Joesph Stiglitz. 1986. “Externalities in Economies with Imperfect
Information and
Incomplete Markets.” Quarterly Journal of Economics 90 (2):229–64.
Harvey, David. 2010. The Enigma of Capital: And the Crises of Capitalism. Oxford: Oxford
University Press.
Hickel, Jason. 2016. “The True Extent of Global Poverty and Hunger: Questioning the Good
News Narrative of
 the Millennium Development Goals.” Third World Quarterly 37
(5):749–67.
Hulme, David. 2009. The Millennium Development Goals (MDGs): A Short History of the
World’s Biggest
Promise. University of Manchester, Brooks World Poverty Institute. BWPI
Working Paper 100, Manchester.
Humphrey, Chris. 2014. “The Politics of Loan Pricing in Multilateral Development Banks.”
Review of
 International Political Economy 21 (3):611–39. doi:
10.1080/09692290.2013.858365.
Humphrey, Chris. 2016. “The Invisible Hand: Financial Pressures and Organisational
Convergence in
Multilateral Development Banks.” The Journal of Development Studies 52
(1):92–112. doi:
10.1080/00220388.2015.1075978.
Humphrey, Chris. 2019. “‘Minilateral’ Development Banks: What the Rise of Africa’s Trade
and Development
Bank Says about Multilateral Governance.” Development and Change 50
(1):164–90. doi:
10.1111/dech.12467.
IIB. 2018. Agreement Concerning the Establishment of an International Investment Bank.
New York: United
Nations – Treaty Series Volume 801, 1975. Accessed 11 March 2020.
https://treaties.un.org/doc/Publication/UNTS/Volume%20801/v801.pdf.
Jakupec, Viktor, and Max Kelly. 2019. Foreign Aid in the Age of Populism: Political Economy
Analysis
from Washington to Beijing. London: Routledge.
Kapur, Devesh, John P. Lewis, and Richard Webb. 1997. The World Bank Its First Half
Century, Volume 1:
History. 2 vols. Vol. 1: History. Washington, DC: Brookings Institution
Press.
Kellerman, Miles. 2019. “The Proliferation of Multilateral Development Banks.” Review of
International
Organization 14 (1):107–45. doi: 10.1007/s11558-018-9302-y.
Kose, M. Ayhan, Peter Nagle, Franziska Ohnsorge, and Naotaka Sugawara. 2020. Global
Waves of Debt:
Causes and Consequences. Washington, DC: World Bank.
Leiva, Fernando Ignacio. 2008. “Towards a Critique of Latin American Neostructuralism.”
Latin American
Politics and Society 50 (4):1–25.
Lin, Justin Yifu, and Yan Wang. 2017. Going Beyond Aid: Development Cooperation for
Structural
Transformation. Cambridge: Cambridge University Press.
Mackenzie, Kate. 2020. Climate Change Is a Complex Problem, But Complex Financial
Products Aren’t the
Solution. New York: Bloomberg Wire Service.
Mak, James, and Seiji Finch Naya. 1994. “Is There a Need for a Pacific Islands Development
Bank?”
Pacific Economic Bulletin 9 (2):35–40.
Mares, David R., and Harold A. Trinkunas. 2016. Aspirational Power: Brazil on the Long
Road to Global
Influence. Washington, DC: Brookings Institution Press.
Marshall, Katherine. 2008. The World Bank: From Reconstruction to Development to Equity.
Abingdon:
Routledge.
Mawdsley, Emma, Warwick E. Murray, John Overton, Regina Scheyvens, and Glenn Banks.
2018. “Exporting
 Stimulus and “Shared Prosperity”: Reinventing Foreign Aid for a
Retroliberal Era.” Development Policy
Review 63 (S1):O25–43. doi: 10.1111/dpr.12282.
Mistry, Percy S., and Lolette Kritzinger-van Niekerk. 1998. Development Finance and the
Need for a
Sub-Regional Development Financing Institution in SADC. Southern African
Development Community Finance
 & Investment Sector Coordinating Unit Research
Project.
Murray, Warwick E., and John Overton. 2016. “Retroliberalism and the New Aid Regime of
the 2010s.”
 Progress in Development Studies 16 (3):244–60. doi:
10.1177/1464993416641576.
NDB. 2015. Agreement on the New Development Bank. Shanghai: New Development Bank.
Accessed 12 March 2020.
https://www.ndb.int/data-and-documents/ndb-core-documents/
Normann, Henrik. 2019. Nordic Investment Bank – Henrik Normann – Answers to UNSW
Survey 15.5.2019, edited
by Adrian Robert Bazbauers: UNSW Canberra.
North, Douglass C. 1998. “The New Institutional Economics and Third World Development.”
In The New
Institutional Economics and Third World Development, edited by John Harriss,
Janet Hunter and Colin M.
Lewis, 17–26. London: Routledge. Original edition, 1995.
OECD. 2011. “Aid Effectiveness 2005–10: Progress in Implementing the Paris Declaration.”
OECD Publishing.
 Accessed 15 January 2013.
http://www.oecd.org/dac/aideffectiveness/48742718.pdf.
Ortiz, Isabel, Matthew Cummins, Jeronim Capaldo, and Kalaivani Karunanethy. 2020. The
Decade of
Adjustment: A Review of Austerity Trends 2010–2020 in 187 Countries. Geneva:
International Labour
Office.
Park, Susan. 2014. “Institutional Isomorphism and the Asian Development Bank’s
Accountability Mechanism:
 Something Old, Something New, Something Borrowed,
Something Blue?” The Pacific Review 27
(2):217–39.
Park, Susan. 2017. “Accountability as Justice for the Multilateral Development Banks?
Borrower Opposition
 and Bank Avoidance to US Power and Influence.” Review of
International Political Economy 24
(5):776–801. doi: 10.1080/09692290.2017.1363798.
Pérez, Pedro Páez. 2009–10. “The Ecuadorian Proposal for a New Regional Financial
Architecture.”
Journal of Post Keynesian Economic 32 (2):163–72.
Rich, Bruce. 1994. Mortgaging the Earth: The World Bank, Environmental Impoverishment,
and the Crisis
of Development. Boston, MA: Beacon Press.
Robinson, William. 2015. “The Transnational State and the BRICS: A Global Capitalism
Perspective.” Third World Quarterly 36 (1):1–21.
Rosales, Antulio. 2013. “The Banco del Sur and the Return to Development.” Latin American
Perspectives 40 (5):27–43.
Saith, Ashwani. 2006. “From Universal Values to Millennium Development Goals: Lost in
Translation.”
Development and Change 37 (6):1167–99.
Stiglitz, Joesph. 2000. “The Insider: What I Learned at the World Economic Crisis.” New
Republic
222 (16/17):57–60.
Stiglitz, Joesph. 2002. Globalization and Its Discontents. London: Penguin Books.
Szasz, Paul C. 1999. “Establishment of the International Fund for Agricultural Development.”
Studies in
Transnational Legal Policy 31–32:32–43.
The New Times. 2009. CEPGL Mulls Reopening Bank. Accessed 1 June 2020.
https://www.newtimes.co.rw/section/read/80411/
Thurbon, Elizabeth. 2016. Developmental Mindset: The Revival of Financial Activism in
South Korea.
Ithaca, NY: Cornell University Press.
Toye, John. 1993. Dilemmas of Development, 2nd ed. Oxford: Blackwell Publishers.
Uhlin, Anders. 2016. “Civil Society and Policy Reforms in the Asian Development Bank.” In
Global
Economic Governance and the Practices of the Multilateral Development Banks,
edited by Susan Park and
Jonathan R. Strand, 60–79. London: Routledge.
Wade, Robert. 1996. “Japan, the World Bank, and the Art of Paradigm Maintenance: The East
Asian
Miracle in Political Perspective.” New Left Review 217:3–36.
Wade, Robert. 2001. “Showdown at the World Bank.” New Left Review 7:124–37.
Wade, Robert. 2018. “The Developmental State: Dead or Alive?” Development and Change
49
(2):518–46. doi: 10.1111/dech.12381.
Wihtol, Robert. 2013. “NDF and the Case for Niche Development Funds.” Development
Today. http://www.development-today.com/magazine/2013/dt_14-
15/opinion/ndf_and_the_case_for_niche_development_funds.
Williamson, John. 1990. “What Washington Means by Policy Reform.” In Latin American
Readjustment: How
Much Has Happened, edited by John Williamson, 7–20. Washington,
DC: Peterson Institute for
International Economics.
Willis, Katie. 2005. Theories and Practices of Development. New York: Routledge.
Woods, Ngaire. 2006. The Globalizers: The IMF, the World Bank, and Their Borrowers.
Ithaca, NY and
London: Cornell University Press.
World Bank. 1993. The East Asian Miracle: Economic Growth and Public Policy. Oxford:
Oxford
University Press.
World Bank. 2019. Annual Report 2019: Ending Poverty. Investing in Opportunity.
Washington, DC:
World Bank.
Yağcı, Mustafa. 2016. “A Beijing Consensus in the Making: The Rise of Chinese Initiatives in
the
 International Political Economy and Implications for Developing Countries.”
Perceptions XXI
(2):29–56.
5 The structure of multilateral
development
banks
This chapter analyses the structure of the MDBs, positioning the World
Bank as the archetype and exploring how
the other MDBs are similar or
different. The chapter starts with voting systems and capital subscriptions
and how
these have shaped Bank operations. Next, the Bank’s governance
structure is outlined, analysing the relative
influence of its Governors,
Directors, and senior management. The chapter then turns to the Bank’s
lending system
– types of loans, conditionality, procurement, and interest
rates. Table 5.2 systematically
compares the Bank’s structures to those of
other MDBs, highlighting organisational convergences and divergences.