EDITOR’S NOTE: The world urgently needs to move beyond the economic crisis and lay the foundations for a world beyond aid, World Bank President Robert Zoellick writes in this article for the Foreign Affairs magazine. A few excerpts:
In 2007, the World Bank was in crisis. Some saw conflicts over its leadership. Others blamed the institution itself. When the International Bank for Reconstruction and Development, the cornerstone of what became the World Bank Group, was founded in 1944, poor and war-torn countries had little access to private capital. Sixty years later, however, private-sector financial flows dwarfed public development assistance. “The time when middle-income countries depended on official assistance is thus past,” Jessica Einhorn, a former managing director of the World Bank wrote in these pages in 2006, “and the IBRD seems to be a dying institution.” In roundtable discussions and op-ed pages, the question was the same: Do we still need the World Bank?
I took the helm of the World Bank in 2007, bringing with me a different vantage point, gained from historical perspective, personal experience, and my sense of the international landscape: that institutions matter. The creators of the Bretton Woods multilateral system had designed an international economic architecture to deal with the causes of the global financial breakdown in the 1930s and with the economic and security problems they thought would follow World War II. The World Bank was part of that framework, which covered monetary and currency issues, trade, investment, development, and the reconstruction of broken states.
In 2007, those challenges remained, although the conditions werevastly different. The rise and diffusion of private capital and free enterprise around the world now offered developing countries a great opportunity. Yet that did not obviate the need for the World Bank, because it was never simply about loans and grants: its role has been to contribute to the development of market economies in an open international system – fostering growth, opportunity, and hope and overcoming poverty within a better political and security order.
Not only had the world changed, but the World Bank had changed, too. It now encompassed four policy and financing arms: the IBRD; the International Development Association, or IDA (the bank’s special fund for the poorest 79 countries); the International Finance Corporation, or IFC (its private-sector arm); and the Multilateral Investment Guarantee Agency (which offers investors insurance against political risk).
To accomplish its mission, the World Bank needed new directions, firmer guidance, and better execution. It had to adapt to shifts in economic influence, with emerging markets becoming new economic engines and development no longer being about a North-South hegemony. In developing countries, it needed to assist the private sector – whether investors from abroad or companies at home – to clear away obstacles to entrepreneurship. It needed to foster inclusive and sustainable growth, and shared responsibilities, within a changed international system. The job for our leadership team was to point out the new directions, build support and partnerships, translate the overarching vision into specific actions, remain alert to opportunities to innovate, and execute, execute, execute.
Republished with permission from the Foreign Affairs magazine. View the full article.