Macroscope | 4 steps to help the World Bank help the world survive this time of crisis
- The bank should be a major vehicle for crisis response and supporting the huge investments necessary for healthy global development. But it isn’t
- Four steps are necessary, if the US and its allies are to regain the trust of the developing world by supporting countries’ highest priorities
Outside of the security domain, overhauling the World Bank offers US President Joe Biden’s administration its greatest opportunity for a key foreign-policy achievement. The bank should be a major vehicle for crisis response, post-conflict reconstruction, and, most importantly, for supporting the huge investments necessary for sustainable and healthy global development. But currently it is not.
The remarkable feature of the World Bank’s financial model is that each US$1 of appropriated funds from the United States catalyses a permanent increase in lending of more than US$15. This is because other countries contribute to the bank as well, and paid-in capital is leveraged many times over. Uniquely, the World Bank and the International Monetary Fund have the capacity to do very large things worldwide and at low budgetary cost.
Charles Kenny at the Centre for Global Development and others have pointed out that, despite much rhetoric, the world is falling far short in its collective ability to respond to crises.
This should be unacceptable to the US and other major shareholders. Given the magnitude of global challenges over the next decade, we should be thinking in the trillions for the bank. If war is too important to leave to generals, financing global survival is too important to leave to international bureaucrats.