Economic Development and the World Bank

Economic Development and the World Bank

International Economic RelationsMetropolitan University PragueMartin Kolmhofer2011/2012

FACTS

• Formation: 27 December 1945 (following ratification of Bretton Woods agreement)

• 187 members• Headquarter: Washington D.C.• 10,000 employees in more than 100 offices

worldwide

The World Bank Group consists of 5 Agencies

• International Bank for Reconstruction and Development (IBRD)

• International Development Association (IDA)

• International Finance Corporation (IFC)• Multilateral Investment Guarantee Agency (MIGA) • International Centre for the Settlement of Investment

Disputes (ICSID)

The term "World Bank" generally refers to the IBRD and IDA, whereas the world Bank Group is used to refer to the institutions collectively.

Mission

Lecture 2: Institutions 5

The Three Main Institutions

• Critique / Reputation Today:

• IMF: Has imposed misguided policies• World Bank: Wastes resources on corrupt elites• WTO: Dominated by rich countries, corporations

Critique:

The World BankPresident

Traditionally, the Bank President has always been a US citizen nominated by the (president of the) United States, the largest shareholder in the bank. Current President: Robert B. Zoellick

The World BankChief Economists

The World Bank Chief Economist provides intellectual leadership and direction to the Bank’s overall development strategy and economic research agenda. As a member of the Bank’s senior management team the person advises the President and Bank’s management on economic issues.

Anne Osborn Krueger — 1982–1986Stanley Fischer — 1988–1990Lawrence Summers — 1991–1993Michael Bruno — 1993–1996Joseph E. Stiglitz — 1997–2000Nicholas Stern — 2000–2003François Bourguignon — 2003–2007Justin Yifu Lin — June 2008–present

Regional and National Development Banks

• EIB (European Investment Bank)• IADB (Inter-American Development Bank)• ADB (Asian Development Bank)• AFESD (Arab Fund for Economic and Social

Development)• EBRD (European Bank for Reconstruction and

Development)

Measuring Economic Development

Weaknesses of GDP

Definition GDP (Gross Domestic Product): The total market value of all final goods and services produced in a country in a given year

Price increases = Wealth increases?

Counts remedial and defensive expenditures as positive contributions to commerce.

Does not include non-market benefits

GNH "Gross National Happiness"The term "gross national happiness" was coined in 1972 by Bhutan's former King Jigme Singye Wangchuck, who has opened Bhutan to the age of modernization

4 Pillars:

• sustainable development• preservation and promotion of cultural values• conservation of the natural environment• establishment of good governance

The Happiest Place on Earth: Denmark

www.happyplanetindex.org

The Happiest Place on Earth: Denmark

• Relative equality between the citizens of Denmark

• Prevalent high-quality government services such as mass transportation, free healthcare, subsidized child care, and a free educational system (all the way through college) - as a result people have to worry a lot less about financial issues.

• A high amount of trust between the citizens and the government.

• Relatively low expectations