The World Bank Group was established in 1944 with an early focus of helping to rebuild the nations devastated by the Second World War. By providing reconstruction and financing services to help rebuild destroyed infrastructure and get recipient countries on their feet, the World Bank saw demand for their services grow significantly. Today, the organization’s focus has shifted away from post-war rehabilitation and toward development. The World Bank aims to end extreme poverty (defined as living on less than $1.90 per day) and “fostering the income growth of the bottom 40% for every country.”
The World Bank uses grants and low-interest loans to further these goals, and hopes to accomplish stated objectives by 2030. Unfortunately, working with Global South countries requires dealing with corrupt, unreliable recipient governments that often put personal/factional gain over national development. During the peak of Argentina’s political turmoil, for instance, the World Bank showered billions of dollars in loans on the unreliable Kirschner administrations over the 2003-2015 period. The back-to-back administrations of Néstor Kirchner and his wife Cristina often refused to honor foreign debts, defaulting on billions of dollars in government bonds. During this period, Argentina repeatedly ignored the World Bank’s arbitrational body, the International Centre for Settlement of Investment Disputes (ICSID).
The World Bank faces an even more dysfunctional financing situation in Malawi, a country riddled with corruption and human rights abuses by government forces. In response to the plundering of around $300 million in public money by government officials in 2013, the World Bank froze aid to the beleaguered nation. Financial help restarted in 2017 with an $80 million injection, due to the World Bank’s contention that corruption and abuses were improving in Malawi. But there seems to be little support for that assertion; Malawi slid in the 2017 Corruption Perception Index (from 120 to 122).
Recipient governments, though, are only part of the equation. The World Bank itself has a serious cost containment issue, with multiple failed attempts to reign in increased spending. In response to an attempted budget freeze by then-outgoing president Robert Zoellick, funds wound up in a parallel, off-budget system. Meanwhile, $2 billion worth of funding mysteriously disappeared due to a “computer glitch.” Systematic efforts to track World Bank funds, coupled with a more stringent approach toward recipient governments, can ensure more value for taxpayers forced to contribute to the IGO. Without significant reforms, taxpayers around the world will continue to see their money wasted on the extravagances of strongmen.