What Is the World Bank and What Does It Do?

Summary

The World Bank, established in 1944, is a powerful institution with a $400 billion portfolio, focusing on reconstruction and development in post-war countries to reduce global poverty. It operates as an international organization with 189 member countries, each holding shares that translate into voting power. The US, with the largest voting power, traditionally appoints the Bank's president. The Bank Group consists of five institutions, including the IBRD and IDA, which offer low-interest loans and grants to developing countries. Despite its significant role in global development, the World Bank faces criticisms regarding corruption, environmental impact, and policy imposition.

Takeaways

• 🏦 The World Bank was established in 1944 to aid in the reconstruction and development of countries after World War II, with a focus on reducing global poverty.
• 🌐 It is an international organization with 189 member countries, which are also its shareholders, influencing its decision-making through voting power based on their economic size.
• 💼 The World Bank's mission has evolved from post-war reconstruction to promoting development in areas like infrastructure, with a current focus on ending extreme poverty and promoting shared prosperity.
• 💵 It offers financial assistance to developing countries, primarily through low-interest loans, which are made possible by its AAA credit rating and financial reserves.
• 📈 The United States has the largest voting power in the World Bank, followed by Japan, and then China, Germany, the UK, and France, reflecting their economic influence.
• 🔝 The presidency of the World Bank has traditionally been held by an American, as part of an informal agreement made during the Bretton Woods Agreement.
• 💼 The World Bank Group consists of five institutions, with the IBRD and IDA being the most well-known, focusing on lending to low and very low-income countries, respectively.
• 📊 The IDA provides interest-free loans or grants to the poorest countries, often with a repayment start delayed by up to 10 years after loan issuance.
• 🌱 The World Bank also offers advice and expertise in various fields including agriculture, education, climate change, and food security, aiming to tackle a broad range of global issues.
• ⚖️ Despite its goals, the World Bank has faced criticisms and controversies, including allegations of corruption, harmful environmental impacts, and criticisms of its operational practices.

Q & A

What is the primary purpose of the World Bank?

The primary purpose of the World Bank is to end extreme poverty and promote shared prosperity by providing financial and technical assistance to developing countries.

When was the World Bank established and why?

The World Bank was established in 1944 in response to the Second World War, with the aim of helping with the reconstruction and development of war-torn countries and reducing global poverty.

What is the total lending commitment of the World Bank over its history?

Over its history, the World Bank has taken on over 13,500 projects with total lending commitments exceeding a trillion dollars.

How does the World Bank differ from a typical bank?

The World Bank differs from a typical bank in that it is an international organization focused on development and poverty reduction rather than personal banking services. It provides loans and grants to countries for development projects.

How many member countries does the World Bank have, and what are they called?

The World Bank has 189 member countries, which are referred to as shareholders because they hold shares in the organization.

What determines the voting power of a country within the World Bank?

A country's voting power within the World Bank is determined by the number of shares it owns, which is based on the fees it has paid to the World Bank, largely dependent on the size of its economy.

Which country has the largest voting power in the World Bank, and why?

The United States has the largest voting power in the World Bank with 15.85 percent, primarily due to its significant share ownership and an informal agreement made during the establishment of the World Bank.

What is the role of the International Bank for Reconstruction and Development (IBRD) within the World Bank Group?

The IBRD provides loans to middle-income and creditworthy low-income countries for development projects and programs, offering them valuable financial assistance at relatively low-interest rates.

What assistance does the International Development Association (IDA) offer to the poorest countries?

The IDA offers interest-free loans, or grants, to the poorest countries, defined as those with a per-capita income below $885 per year, and may allow repayment to start up to 10 years after the loan issuance.

What are the criticisms and controversies surrounding the World Bank?

The World Bank has faced criticisms and controversies, including allegations of corruption, harmful operational effects, increasing poverty in some cases, detrimental environmental impacts, and pushing policies that impose damage on public health and diversity.

What is the twin goal of the World Bank, and by when does it aim to achieve them?

The World Bank's twin goals are to end extreme poverty by 2030 and to boost the shared prosperity of the poorest 40 percent of the population in all countries.

Outlines

00:00

🏦 Introduction to the World Bank

The World Bank is described as one of the world's most powerful institutions, with a portfolio of nearly 400 billion dollars. Established in 1944 in response to the devastation of World War II, its original purpose was to aid in the reconstruction and development of affected countries and to reduce global poverty. The bank has since undertaken over 13,500 projects with lending commitments exceeding a trillion dollars. Despite its name, the World Bank is not a conventional bank; its mission is to end extreme poverty and promote shared prosperity, focusing on development projects such as infrastructure. It is an international organization with 189 member countries, which are also its shareholders. The voting power in the World Bank is proportional to the shares a country holds, with the United States having the largest voting power. The script also notes that China, despite its economic size, holds a relatively small percentage of shares due to its history as a major borrower rather than a lender. The presidency of the World Bank has traditionally been held by an American, following an informal agreement made during the Bretton Woods Agreement.

05:01

🌐 The World Bank Group's Structure and Criticisms

The World Bank Group is composed of five international organizations, with the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) being the most well-known. The IBRD offers valuable services to low-income countries by providing loans at low interest rates, backed by the strong credit ratings of the World Bank. The IDA, on the other hand, works with the poorest countries, offering interest-free loans or grants with lenient repayment terms. The remaining three agencies focus on financing private sector investments, protecting foreign investments, and settling disputes between foreign investors and host countries. In 2018, the World Bank's lending commitments reached 47 billion dollars. However, the bank has faced controversies and criticisms, including allegations of corruption and harmful environmental and social impacts. David Malpass, nominated by President Trump to lead the World Bank, has been critical of the institution's practices, particularly its large loans to China. It is suggested that Malpass may aim to reform the World Bank, which could be beneficial for its long-term future.

Keywords

💡World Bank

The World Bank is an international financial institution that provides loans and grants to the governments of low and middle-income countries for the purpose of pursuing capital projects. It was established in 1944 in response to the Second World War to help rebuild war-torn countries and reduce poverty. In the video, the World Bank is described as having a total portfolio of almost 400 billion dollars and a triple-A credit rating, making it one of the largest sources of funding for developing countries.

💡Reconstruction and Development

Reconstruction refers to the process of rebuilding infrastructure and economic systems after a period of destruction, such as war. Development, in this context, refers to the process of improving the economic, social, and environmental well-being of a country. The video explains that the World Bank was initially established to help with reconstruction after World War II but has since shifted its focus to development, including projects related to infrastructure like roads, electrical systems, and irrigation.

💡Triple-A Credit Rating

A Triple-A credit rating is the highest possible rating assigned by credit rating agencies to entities that are considered to have an extremely low risk of defaulting on their financial obligations. The video mentions that the World Bank has a Triple-A credit rating, which allows it to borrow money at lower interest rates from capital markets, which is then lent to developing countries at affordable rates.

💡Member Countries

Member countries of the World Bank are the nations that have joined the institution and contribute to its capital base. These countries are also referred to as shareholders because they hold shares in the organization. The video explains that the number of shares a country owns depends on the fees they have paid to the World Bank, which in turn determines their voting power within the institution.

💡Voting Power

Voting power within the World Bank is determined by the number of shares a member country holds. The video highlights that the United States has the largest voting power with 15.85 percent, followed by Japan and then China, Germany, the UK, and France. This voting power influences the decision-making process within the World Bank.

💡International Bank for Reconstruction and Development (IBRD)

The IBRD is one of the five institutions that make up the World Bank Group. It offers loans and grants to middle-income countries. The video explains that the IBRD provides invaluable services to poverty-stricken countries by offering loans at lower interest rates than what these countries could secure on their own, thus making borrowing more affordable.

💡International Development Association (IDA)

The IDA is another institution within the World Bank Group, and it focuses on providing assistance to the poorest countries. The video notes that countries with a per capita income below $885 per year are eligible for IDA support, which can include interest-free loans or grants, with repayments sometimes not starting for up to 10 years after the loan is issued.

💡Bretton Woods Agreement

The Bretton Woods Agreement was an international monetary conference held in 1944 that led to the creation of the World Bank and the International Monetary Fund (IMF). The video mentions an informal agreement made during this conference, where it was decided that the US would choose the head of the World Bank and Europe would choose the head of the IMF, reflecting the significant influence of these regions within the institutions.

💡Controversies and Criticisms

The video discusses the controversies and criticisms surrounding the World Bank, including allegations of corruption and criticisms of its operational practices. Some argue that the bank's policies have had negative impacts on the environment, public health, and economic diversity, or have increased poverty in certain cases. The video suggests that these criticisms may lead to reforms within the institution.

💡David Malpass

David Malpass is a figure mentioned in the video who was nominated by President Trump to be the next head of the World Bank. He has been critical of the bank's practices, particularly its large loans to China and what he perceives as a lack of accountability. The video suggests that Malpass may aim to reform the World Bank, which could have implications for its future direction and effectiveness.

Highlights

The World Bank is one of the world's most powerful institutions with a total portfolio of almost $400 billion.

It was created in 1944 in response to the Second World War to aid reconstruction and development of war-torn countries.

The World Bank’s mission is to end extreme poverty and promote shared prosperity.

The organization has 189 member countries who are shareholders, with voting power based on the number of shares owned.

The US holds the largest voting power with 15.85%, followed by Japan, China, Germany, the UK, and France.

China, despite being a large economy, has relatively smaller voting power because it was historically a borrower rather than a lender.

The US traditionally appoints the president of the World Bank due to an informal agreement from the Bretton Woods Agreement.

The World Bank Group consists of five organizations, with the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) being the most referenced.

The World Bank issues bonds (World Bank bonds) to raise capital and then lends money to developing countries at low interest rates.

IDA works with the poorest countries, offering interest-free loans or grants, with many loans having deferred repayment periods of 10 years.

Three lesser-known agencies of the World Bank Group include the International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID).

In 2018, the World Bank's lending commitments amounted to $47 billion.

The World Bank also offers expertise and advice on issues like agriculture, education, climate change, and conflicts.

The World Bank aims to end extreme poverty by 2030 and boost the shared prosperity of the poorest 40% of the population.

The World Bank has faced criticisms related to corruption, environmental harm, and imposing policies that may increase poverty.

David Malpass, a critic of the World Bank's large loans to China and lack of accountability, was nominated by President Trump as the head of the World Bank, with likely reforms in the future.

Transcripts

we're talking about one of the world's

most powerful institutions with a total

portfolio of almost 400 billion dollars

it's one of the world's largest sources

of funding for developing countries and

it has a triple-a credit rating we are

of course talking about the World Bank

but the question is what exactly is the

World Bank and what does it do the World

Bank was created in 1944 in response to

the second world war since so many

countries were shattered by the war the

organization was established to try to

help with the reconstruction and

development of these countries and to

reduce global poverty the intention was

to provide temporary loans to low-income

countries which were unable otherwise to

get these loans on their own since that

point in time at the World Bank has now

taken on over 13,500 projects with total

lending commitments over this time of

over a trillion dollars now although the

World Bank clearly has the word Bank in

its name it's not your typical style of

bank I think this can best be seen if we

take a look at its mission which is to

end extreme poverty and to promote a

shared prosperity the main focus is

therefore shifted from reconstruction

after the war to development of

countries in areas such as roads

electrical infrastructure and irrigation

systems now essentially the World Bank

is an international organization with

189 member countries these member

countries are referred to as

shareholders since they actually hold

shares in the organization the number of

shares that our country owns will depend

on the fees that they've paid to the

World Bank and those fees will largely

depend on the size of the economy these

shares that are owned by the countries

translates into voting power I'm sure

you're familiar with the concept of one

share counting for one vote similar to a

company and this is for most of the

organizations that make up the World

Bank Group that one share will equal one

vote so this means that the US has the

largest voting power with 15 points 85

percent

this is then followed by Japan with 6.84

percents that's a big gap and then China

Germany and the UK and France are quite

equal with each other now something that

you may have picked up on there is that

China is obviously a huge economy but

they only have a relatively small

percentage of the boats and shares one

of the big reasons for this is that they

were actually one of the big

beneficiaries of the lending they were a

borrower rather than a lender although

that seems to now be changing a bit and

that's partly thanks to the US which

strongly objected to so much money being

lent to China and you know what the u.s.

says and things about the World Bank is

going to be very influential

first of all books they obviously own

the most shares and voting power but

also because of something else as well

you see the board of directors for the

bank consists of a president and 25

executive directors and that president

has traditionally always been an

American and this is due to an informal

agreement that was made when the

organization was established so

basically the World Bank and the IMF the

International Monetary Fund's were both

created as part of the Bretton Woods

Agreement and following this agreement

an informal agreement was made which is

that the US would choose the head of the

World Bank and Europe would choose the

head of the IMF so it sounds kind of

fair right so that's why the president

is usually always going to be American

the World Bank group consists of five

international organizations when people

refer to the World Bank rather than the

World Bank Group

they usually reference just two of these

which are the IBRD

and the ID a so the IBRD stands for the

International Bank for Reconstruction

and Development for a poverty-stricken

country this institution offers an

invaluable service

you see these countries would really

struggle to take on a traditional loan

since it would be practically impossible

with interest payments being extremely

high instead the World Bank has step in

and really helped them out with this the

World Bank has one of the strongest

triple-a ratings with the credit rating

agencies thanks to the fact that their

death instruments are backed up by the

capital commitments of the member

countries and the

fact that they have large financial

reserves this means that they can borrow

money from the capital markets

relatively cheaply mainly through

sell-off bonds which are known as World

Bank bonds and then channel this money

through to developing countries at an

extremely low interest rates making

borrowing more affordable for these

countries that really need it and in

fact the rate is usually below the rate

that the bank is paying to its

bondholders so to offset this there will

also sometimes lend money at a higher

rate to more wealthy countries who will

pay a higher rate of interest

the second institution I mentioned the

ID a is the International Development

Association this is similar to the one

that we just discussed except this

agency works with the really poorest

countries like to be in this group the

country must have an average income per

person otherwise known as per-capita

income below 885 dollars per year now

let's put that in perspective in the US

the per capita income is around $60,000

per year so you can see there's a huge

gap there now the countries in this

group can receive interest-free loans or

grants and in many cases the borrower

country may not even have to start

repayment until 10 years after the loan

has been issued the final three agencies

out of the five are less well known and

these include the International Finance

Corporation which promotes growth

through financing private sector

investments the multilateral investment

guarantee agency which helps to promote

foreign investment by protecting

investors from losses through guarantees

and finally the International Centre for

settlement of investment disputes which

deals with disputes between foreign

investors and host countries in 2018 the

banks lending commitments were 47

billion dollars however it's not just

about lending big amounts of money the

bank also offers advice and expertise in

an attempt to tackle a range of issues

including agriculture education climate

change conflicts food security trade

finance the bank has a twin goal the

first one being to end extreme poverty

by the year 2030 and this

one being to boost the shared prosperity

of the poorest 40 percent of the

population in all countries now that

obviously all sounds grades but actually

the World Bank has also got his own

controversies and criticisms as well

there have been allegations of

corruption in some cases and criticisms

of the way they operates which some

people believe causes harmful effects

some analysis shows that they actually

increased poverty in some cases and were

detrimental to the environment public

health and diversity as well as pushing

an agenda which in some cases imposes

damaging policies now one particular

critic who's received a lot of media

attention especially recently is David

Malpass who president Trump has

nominated to be the next head of the

World Bank

he's been crisco of many aspects which

include the World Bank's huge loans to

China rather than to countries that

cannot secure the capital elsewhere and

what he believes to be a lack of

accountability in the organization

however rather than burning the world

bank to the ground or undermining it as

some people have been sensationally

suggesting Malpass may do based on his

previous criticisms I think it's much

more likely that he will attempt to

reform the World Bank which may actually

be good for the long-term future of this

very powerful institution so guys that

was a brief overview of the World Bank

and what it does I hope you found it

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