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Reinventing the World Bank

MADRID – Robert Zoellick’s announcement that he will not seek reelection as President of the World Bank has focused attention on whether the tradition of putting an American in charge will or should endure. But, legitimate as that question is, it is just a minor aspect of the debate that is needed about the World Bank’s role in the twenty-first century.

During its 67 years, the Bank has outgrown its original design with the addition of an arbitration court and three specialist financial institutions: one for the private sector, the International Financial Corporation; another, the Multilateral Investment Guarantee Agency, to insure against political risks; and the International Development Agency, which funds the poorest countries. The World Bank has become the World Bank Group, though its founding pillar, the International Bank for Reconstruction and Development (IBRD), remains at its center. And that is the problem.

Conceived in 1944 at Bretton Woods primarily as an instrument through which a war-torn world’s physical assets were to be rebuilt, the IBRD’s accent was on reconstruction; development was essentially an afterthought, with the first loans going exclusively to Europe. The Bank’s development focus emerged as the reconstruction task waned, and its current breadth and scope was consolidated under Robert McNamara’s presidency, from 1968 to 1981.

With decolonization fueling a baby boom of independent countries in the 1950’s and 1960’s, McNamara reinvented the World Bank as a cornerstone of the free world’s model of economics and international relations. The Soviet Union, though a signatory to the Bretton Woods Agreement, never joined the Bank. It was not until 1992 that the Russian Federation, along with 13 other former Soviet republics, became a member.