Latest update April 28th, 2026 12:30 AM
World Bank: Glacial Reform
It has been reported that yesterday, the World Bank’s Development Committee met in Washington and approved a proposal to increase the share of the voting power for emerging and developing countries in the pivotal global financial institution by 3.13%. It is as if the mountain struggled strenuously but finally produced only a mouse.
The World Bank (WB), of course, is one of the two financial institutions (the IMF is the other) formed by the western powers in the waning years of WWII. Its full name – the International Bank for Reconstruction and Development – gave the raison d’etre for its formation: the revival of a war-ravaged Europe.
The post-war independence wave in the several European empires brought a host of new clients in what was then dubbed the Third World – and a new instrument of influence and control for those that were in the driver’s seat, the US and Europe – especially the former. The WB, with its US$200 billion loan portfolio, became the only hope of funds for development for the world’s poor.
The US influence over the WB arises from a confluence of several factors. First, it’s located in Washington, where it is the third largest employer in the US capital – most of them being US citizens.
The US unilaterally chooses the bank’s President but even more crucially, maintains a veto over the Bank’s decision making through its control of the largest bloc of votes in the Bank’s decision making forum – 17%.
The rest of G-7 – mainly Europe and Japan have some 38% and thus constituting an insurmountable majority. The 3.13% vote just conceded to the developing world merely brings their votes up to 47.19% – still not for an outright majority.
For years, there have been calls for reform over the one-sided influence by the US and its allies in G-7 over the operations of the WB, especially when the policies of the institution became increasingly coterminous with those of the US. The calls became increasingly vociferous especially in the last decade, as the “emerging economies” came out of their poverty-stricken state and began to rival G-7’s economic might. For a while, at the beginning of the new millennium, it appeared that the US might be giving up on the WB when the neo-cons decided that with the end of the Cold War, there was no percentage in facilitating development in the Third World.
Then also, in its traditional products – aid projects and economic policy advice to governments of developing countries – the bank faced several new competitors. These included China and Korea, which became big sources of financial assistance to poorer countries; private consulting firms; private investment banks; and private foundations, like the Bill & Melissa Gates Foundation. But the bank retained a sizeable competitive advantage over these other entities based on three elements: its governmental guarantees, its own revenue base, and its global reach.
As their financial world collapsed over their heads in 2008 over the greed of their financial institutions and precipitated the greatest depression since the 1930’s however, the US decided that they needed the help of the larger emerging economies.
G-7 was expanded to G-20 and a meeting was hastily convened in November 2008 in Washington, with a follow-up in April 2009 in London. This is when the US suggested that the voting rights of the developing world be increased to encourage them to assist in the global economic recovery – with their own being one of the most critical, of course. Their veto never came up for discussion.
The votes were to come from the European bloc’s share and this is the reason why it has taken over two years for the measly change in voting rights to be accepted.
It will be interesting to learn exactly which countries’ votes were reduced: even the putatively altruistic Scandinavian countries have dug their heels in and balked at any changes.
In that time the major emerging economies, Brazil, Russia, India, China and South Africa (BRICS) have met several times – the last being two weeks ago – and reiterated their call for changes in the WB’s voting structure. They have proposed a 6% reassignment.
The control over the IMF is next with a deadline of January 2011.
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