From Reluctant Champion to Development Ringmaster: Managing the Expanding Mission of the World Bank

In the last decade, the World Bank has catapulted from relative obscurity in its work to alleviate global poverty to centrality in the latest controversies over development, economic interdependence, and the global economy. Since its inception at the Bretton Woods Conference in 1944, the Bank has attempted to assist poor countries in developing the infrastructure they need to prosper in the world economy. The Bank’s original mission was based on pure economic and macroeconomic reform. Through its experience in implementing this mission, however, the Bank has learned more about the nature of development and the many and various inputs necessary to achieve it. As a result, the Bank’s mission has broadened significantly.

“There is probably nothing in this world more political than money.” After the Cold War was won by the proponents of free trade principles, the political spotlight fell upon the World Bank as the premier multilateral institution devoted to international aid. As understanding about the nature of development grew, developed countries and NGOs increased pressure on the Bank to expand its mission to include not only macroeconomic reform, but also reform in other social and political arenas such as human rights, protection of the environment and cultural heritage, and establishment of legal institutions. At the same time, the Bank’s own difficult experience further motivated it to expand its mission to accommodate these new areas of development assistance.

Greater pressure from developed countries such as the United States and the swift expansion of the World Bank’s mission have made the Bank’s policies a focal point for criticism and discussion about the direction of international aid in development. Some critics find that the World Bank has strayed too far from its macroeconomic underpinnings, and should rein itself in to focus on the areas of its original core competencies. Others, noting the rather dismal record of World Bank assistance based solely on economic kinds of reform, believe that the Bank necessarily must expand its function to be of any use at all to the global community; these observers suggest that the Bank continue on its path toward a “holistic” approach to development and poverty reduction.

The questions facing the World Bank today are not new. Though an institution of a wholly different character, the British East India Company (the Company) faced many of the same organizational problems, transforming from a generally ignored conglomeration of merchants seeking profit in the spice trade into the British Empire’s administrative agency in India. In its rise to prominence and later its decline, the Company became a key figure in the imperialist drive toward colonialism in the seventeenth and eighteenth centuries, and has become a well-known symbol for the prevailing mercantilist thought of the time. Soon after its beginnings as one of several private European trade conglomerates formed to explore the spice trade in the East Indies, the Company came under enormous pressure from the British government to compete with other European trade companies for trade routes and political influence in Asia. Over the Company’s two hundred year existence, the British Empire and prevalent imperialist thought pushed the Company to expand its mission to fit the Empire’s colonial goals, until, its mission expanded beyond manageable bounds, the Company ceased to be a trading company at all. Finally, the British Empire molded the Company into an administrative agent for the Empire’s colonial aspirations in India.

Expansion of the Company’s mission, driven by the ideological thrust of imperialism and the prevailing political economic theory of mercantilism, became both necessary for its survival and also the reason for its transformation into a bloated administrative agency. The World Bank potentially faces a similar dilemma. Having started as a bank concerned with purely economic reform, the Bank has been pushed by developed countries and NGOs to address and be accountable for numerous humanitarian concerns involved in its loan projects. Though the Bank has learned over the years that the humanitarian aspects of development aid must be addressed to bring about meaningful change, the Bank risks expanding its mission beyond manageable limits by championing these numerous and potentially conflicting causes in development.

This article will analyze the history and development of both the Company and the World Bank, and from the comparison will draw an important lesson for the World Bank: though some expansion of its mission may in current circumstances be necessary for its continued relevance, over-expansion beyond the Bank’s capabilities will be destructive to the organization itself, and will ultimately undermine its effectiveness in assisting development. Part I begins with a brief history of the Company, and describes its gradual expansion of mission from a loosely organized merchant venture to the agent of military control and territorial governance in India. Part II describes the World Bank’s shifting development policy since its inception, and draws parallels between the Bank’s current mission dilemma and the organizational factors that led to the collapse of the Company. Finally, Part III evaluates three current recommendations for the future direction of the World Bank.