The World Bank is not a bank designed for ordinary customers. If you're a taxpayer in just about any country in the world, this bank has already taken your money. However, you - as an individual - cannot go to Washington D.C. to withdraw funds or apply for a loan. The World Bank loans money only to governments that can't borrow money anywhere else.

After WWII, the World Bank's major focus was on the reconstruction of war-damaged Europe, not on Third World development. It wasn't long before European powers could finance internal infrastructure with private funds, leaving the World Bank open for more business. The Bank then turned to credit-worthy Third World countries to further their business through loans for revitalization and construction projects. Today, the Bank is the largest single lender and developer in some of the poorest nations in the world.

Originally, the U.S. and the United Kingdom were the controlling interests in the newly formed World Bank. As Japan and Germany developed their financial structures, they also gained more power within the Bank. Today, these countries, including France, are the major shareholders, meaning they have the most financial power within the Bank's structure.

Next in line for shareholder power are single-country entities, like China, Russia, and Saudi Arabia. Lower in this hierarchy are other countries that band together to form multi-country constituencies. If you go to the World Bank's information on membership, you'll find exacting stipulations for participation within the Bank's corporate system.

The shares and subscriptions required for membership are designed to avoid "dilution" of voting power held by smaller countries, according to the Bank. However much this power is held in balance is unknown; but we do know the charter of the World Bank is designed to safeguard western world powers. We know this because the structure of the World Bank is based on Keynesian Economics (see last week's article), which favors capitalism.

Capitalism is defined as an economic system based on private ownership of capital, a western power financial concept. In addition, the Bank's headquarters are located in Washington, D.C., and the majority of shares are still owned by the U.S. The World Bank employs 10,000 people, and 8,000 of these employees work in Washington D.C. Critics of capitalism point to the U.S. as more than an accomplice in controlling global economics through the World Bank.

Before we look further into the Bank's structure, let's define three levels of country status used within the Bank's organizations. The richest and most powerful countries or nations are labeled "industrialized" or "developed." The next level down contains "middle-income" countries. Finally, the last or lowest level of poor nations is labeled "underdeveloped" or - once a loan is granted - as "developing" or "emerging." Based on these levels of wealth and power, the World Bank is divided into five organizations designed to help each level (more information can be found at the World Bank site):

• IBRD - International Bank for Reconstruction and Development. This organization focuses on poverty reduction in middle-income and credit-worthy poorer countries. Member countries own this organization, and the IBRD links voting power to each member country's economic base.
• IDA - International Development Association. This organization helps the poorest countries redevelop through "credits" which are loaned at zero percent interest, a ten-year grace period, and a 35-40 year maturity on the loan. This 43-year-old organization agreed to let representatives of borrowing organizations join discussions with donors for IDA's future directions for the first time in 2001.
• IFC - International Finance Corporation. This organization helps reduce poverty in developing countries with sustainable private sector investments.
• MIGA - Multilateral Investment Guarantee Agency. Founded in 1988, the MIGA promotes foreign direct investment into emerging economies to reduce poverty, and offers political risk insurance to investors and lenders and helps developing countries attract and retain private investments. Membership includes 22 industrialized nations, 139 developing countries, and 9 countries in process of fulfilling membership requirements.
• ICSID - International Centre for Settlement of Investment Disputes. The ICSID was created in 1966 to help relieve board members of the World Bank from time and expense involved in investment disputes between foreign countries and investors.

The development part of "lender and developer" mentioned earlier is where the World Bank often gets into hot water. Over the past fifty + years, the World Bank faced many disputes about their development policies. The Bank wants a hand in this development and in the government policies surrounding the project in mind. This helping hand, or advising and guiding, might seem normal under ordinary circumstances. If you or I start a business and we borrow money from the local bank, that bank wants to see a business plan and they also want to keep tabs on how we're doing with our business. Their money, after all, is at stake.

The World Bank wants the same response from their borrowers. The aim of this lending is - according to the Bank's critics - a way for the western capitalists to gain control over various nations by providing a way to become dependent on the World Bank. Dependency is a concern, and some countries even admit their goal is to wean themselves from the Bank and its governing powers.

The Bank admits to some of the past problems. The IDA, for example, now makes reports public, and offers more "transparency" so everyone can see what they're up to within the poorest of nations. This openness began just two years ago, in 2001. Up till that time, the public could only guess at what developments were underway in Third World countries. This lack of transparency was a concern for critics of the Bank.

The Bank affects government policies in foreign countries, and they also have a huge impact on other international groups. These groups include politicians (lobbyists for funds), international financial markets (lenders), taxpayers (repayment of loans), corporations, contractors and consultants (who work the projects), and private banks (competition). Next week, we'll look at some real-life current examples of Keynesian Economics and the World Bank to help us - and our kids - understand global economics and our roles within this structure.

Until then,
Linda Goin