1. International Development Finance:The Old Guard and New Challengers Flashcards
(22 cards)
gdp per capita what does that mean?
measures the total output created through the production of goods and services in a country during a certain period.
-> obtained by dividing the total of GDP of a country by its total pop
what are the challenges of financing development? (the two types of funidng and their challenges)
-Private Capital:
..Often too expensive due to high-risk premiums.
..Sometimes entirely unavailable due to market failures.
..Leads to a collectively suboptimal outcome despite individually rational behavior.
-State-to-State Public Funding:
..Motivated by national interests, potentially leading to biases.
..Can create dependencies between donor and recipient states.
..Raises questions about who defines “development” and the best strategies to achieve it.
what is the role of international organisations? How can IO resolve these pb of financing development?
-Establish shared rules, monitoring mechanisms, and enforcement structures.
-Foster long-term cooperation, increase predictability, and build trust.
-Correct individual incentives that discourage cooperation and promote collective gains.
what are the key functions of International Public Funding Mechanisms?
-Provide sufficient capital to developing countries.
-Assume financial risks at lower and more affordable costs.
-Reduce national-interest biases and inter-state dependencies.
-Encourage independent evaluation of development policies and programs.
what is the rules for beneficiaries (of funding for dvlpmt from IOs)?
coherent set of rules for beneficiaries (developing countries) of public funding:
-Clear criteria for qualification, disbursement, and repayment of loans.
-A structured and coherent framework for managing development assistance.
general def of World Bank (creation + headquarters+ goals + contrast with IMF)
-Created in 1944 during the Bretton Woods Conference (Along with International Monetary Fund: IMF)
-> Togethercalledthe“BrettonWoods Institutions”
-Headquarters in Washington DC (like IMF)
-188 members
-goals: reducing poverty, increasing shared prosperity, and promoting sustainable development
-World Bank group= 5 instituitions
- focuses on long-term development financing -> By contrast, IMF plays role of “lender of last resort” for countries facing short-term financial crises
2 key dates for the World Bank
1944= Creation of the International Bank for Reconstruction and Development (IBRD)
-> Initially focused on post-World War II reconstruction in Europe.
Later shifted towards development financing for middle-income and creditworthy countries.
1960= Establishment of the International Development Association (IDA)
-> Created to address the needs of the poorest countries, which often could not afford IBRD loans + Focuses on health, education, infrastructure, and economic development in the least developed countries.
——> WB= IDA and IBRD
=/ WB group= IDA+ IBRD + 3 others
what are the 4 points of governance structure of the WB?
World Bank Group President
Board of Governors
Board of Directors
Governments via weighted voting
explain the WB Group president as a gov structure of the WB + compare to IMF
–Traditionally from US, currently Ajay Banga (since 2023, nominated by Biden administration)
–NB: IMF Managing Director traditionally from Europe (currently Kristalina Georgieva)
explain the board of governors as a gov structure of the WB
–highest decision-making organ
–Mostly Ministers of Finance
–NB: for IMF, mostly Central Bank governors
–Joint Annual Meetings of WB and IMF!
explain the board of directors as a gov structure of the WB
–25, most of which represent groups of countries (constituencies): not enough so countries are grouped into constituencies, where multiple countries share a single representative
-> except from the largest economies like U.S., China, Germany, Japan, the UK, France who got their own seat.
explain the governments a gov structure of the WB
Governments decide via weighted voting
–voting share depends on capital contribution!
–85% for changes to Articles of Agreement
–De facto US veto –and EU veto, if biggest six EU shareholders (or more) vote together
–Built in inequality
give data examples of inequalities of governments in decision making of the WB
2023: US=15,5% of the IBRD voting
explain the changing focus of the WB
*From post-war reconstruction (sp Europe) to focus on developing countries
*From infrastructure to poverty reduction, incl. focus on agriculture, education, health, nutrition, etc. + attention to sustainability since late 1980s
*From project to programme funding (structural adjustment lending since the 1980s) + Focus on market-centred economic policies, privatisation, liberalisation
what are the criticism of the WB?
-Developed and promoted development based on Washington Consensus, in parallel with IMF
-> Washington Consensus: promotion of market-centred economic policies, including in particular privatisation of state-owned industries and liberalisation of trade and investment flows.
-Rarely worked, and lost focus on social and human development
-Abuse of “policy leverage” (in association with IMF) to promote preferred policies in international development regime: meaning it uses its financial power to push specific economic policies onto borrowing countries, particularly through loan conditions that force governments to adopt certain policies in exchange for funding
–> EX: Babb and Chorev (2016) argue that in the 1980s–1990s, the World Bank and IMF engaged in a “tight coupling” strategy, meaning they closely coordinated their actions to enforce economic reforms in borrowing countries, especially visible during the era SAPs, where dvlpng countries were required to adopt free-market, neoliberal policies to receive financial assistance.
-Considerable normative influence, criticised for pro-Western bias
bcs of all critics, the WB happened to have lost power in international development
*Loss of normative appeal
*Pressure on the Western “masters” of International Financial Institutions
–Emerging economies, BRICS…
–However, established structure has proven highly resilient
*Emergence of alternative sources of financing:
–South-south cooperation, see in particular role of China
–Generally more limited conditionality
–New multilateral development banks: Asian Infrastructure Investment Bank, led by China; the New Development Bank, founded by BRICS…
*See Babb and Chorev “thight coupling” -> “loose coupling” since 2000’:
..More diverse actors in development finance, including NGOs, public-private partnerships, and emerging economies.
..A shift away from rigid, ideology-driven policies (like the Washington Consensus).
..A new focus on results-based approaches, where policies are evaluated based on effectiveness rather than ideology.
-> tight coupling: strong, direct link between policy prescriptions (often based on the Washington Consensus) and funding.
Conditionality was strict: countries had to adopt specific neoliberal reforms—privatization, deregulation, fiscal austerity—to receive financial support
-> loose coupling: weakened or more flexible link between funding and strict ideological conditionality.
Policy advice and lending are less tightly bound to a single economic doctrine.
Reflects broader institutional changes:
What is the AIIB? headquarters, establishment, vote repartition, MS, focus
Asian Infrastructure Investment Bank:
-established 2015
–98 members, excl. US and Japan, but incl. US allies (19 EU MS + UK)
–Key decisions require 75% majority
-China holds 26.6% of votes
–Focus on infrastructure
-Headquarters: Beijing, President JinLiqun (from China)
What is the NDB? headquarters, establishment, vote repartition, MS, focus
New Development Bank :
-established 2015
–Founded by the BRICS,
-all BRICS have same share of capital and votes
–Additional members: Bangladesh, UAE, Uruguay (2021), Egypt (2023), Algeria (2024)
–Founders retain 55% of voting share
–Focus on infrastructure and sustainable development
–headquarters: Shanghai, President Dilma Rousseff (from Brazil)
what does a “sys in flux” means?
a sys in global changement (WB is)
Original Core Objectives of the World Bank at Its Establishment
lending to European countries for post-war reconstruction.
shift over time (not including the 80’)
Providing grants and interest-free loans to the world’s poorest countries.
Supporting economic development in newly independent developing nations.
Funded infrastructure projects
poverty reduction
focus of the 80’ and nowadays
Loans conditioned on economic reforms promoting liberalization and free markets.
-> More recently emphasized:
Sustainable development
Responding to health crises
