World Bank gets a new president

Finbarr Bermingham shines some light on this often misunderstood organisation

If the first half of the twentieth century was spent trying to blow the world to smithereens, then the second was a race to stitch parts of it together again. Despite (or perhaps because of) the looming shadow of the Cold War and a series of messy conflicts, it was a time in which the west forged a series of international coalitions: political (the UN and EU), military (NATO), and economic (the World Bank and IMF). The functions of the former are fairly widely understood, but the purposes of the economic unions are arguably more ambiguous. Conceived at Bretton Woods, New Hampshire in 1944, the World Bank in particular has undergone numerous ideological and functionality facelifts and as the septuagenarian institution sought to appoint a new president this year, it returned to the headlines again.

In the 1960s and early 70s, with most of western Europe reconstructed, the bank turned its attention to the developing world, leading to the period being called the "golden age of capitalism". Loans for infrastructure projects and social services were given to third world countries, encouraging progress on development metrics like literacy and healthcare. Citing an increase in third world debt, however, the bank's leaders (along with the IMF) switched tack in the 1970s and 80s, embracing the structural adjustment policies for which many know it today.

These involved granting loans, or favourably restructuring existing loans, in exchange for the adoption of free market reforms like privatisation, market deregulation and governmental austerity. The conditions have been criticised by economists for encouraging a kind of freewheeling capitalism that crippled economies everywhere from Argentina to Ethiopia to Russia. While the economies of the west had centuries to mature and industrialise before adopting such reforms, others were in a less advanced state. The "one-size-fits-all" policies, it's argued, favoured the developed world, rather than the developing, providing fresh selling ground for western firms at the expense of local industry.

In the face of this backlash, the World Bank has attempted to return to its development-led roots (although its sister organisation, the IMF, remains overtly political in the eyes of many). The main area of focus is its Millennium Development Goals - the next targets of which are due to be met by 2015 - which are seen as stepping stones to poverty eradication.

Race for the prize

But it hasn't escaped controversy completely. The bank has always been headed up by an unelected American, while the IMF has always had an unelected European at the helm; as the biggest donors to the organisations, the US and EU are keen to keep tabs on how their money's being spent. But the BRICs (Brazil, Russia, India and China) have long been lobbying for greater influence. In recent years, the decision-making system has been reformed to give such nations more clout in return for greater investment, but the US still has more than twice as much influence as its closest rivals. This fact means that when conditional loans are made, they're steeped in US policy.

In 2012, two non-Americans were nominated for the presidency, with the 1940s structure being challenged for the first time. Ngozi Okonjo-Iweala (Nigeria's finance minister) and Jose Antonio Ocampo (a Colombian professor) ran for the role, but it eventually went to the American candidate, Korean-born health expert Jim Yong Kim. Perhaps wary of damaging their relationships with America, BRIC economies Russia and India failed to back a developing country candidate. Tellingly, Kim was the only of the candidates not to call for more openness in the presidential race.

The new president has his work cut out for him. With austerity dominating the global agenda, the World Bank must reassert its commitment to fighting poverty. Since 2006, for instance, 27 per cent more US citizens have fallen below the poverty line. The institution must consider how to reconcile deficit cutting with development. It must also work to build bridges with newly industrialised nations. In recent decades, China has experienced the largest urbanisation in human history. The likes of India and Indonesia are following suit. The bank must ensure that economic progression is coalesced with poverty eradication.

Kim must also seek to address climate change. While the bank's rhetoric on the issue is forceful, it still funds heavy polluters in developing countries. A recent survey by pollster Gallup showed that just 52 per cent of Americans think global warming is a real issue, down from 61 per cent in 2008 - in times of economic hardship, scepticism on the issue is widespread. Aligning all these concerns will be one of the most trying tasks of the presidency.