When in doubt, lend more. The modus operandi that has inspired the World Bank since its creation in 1944 is still in operation. Jim Yong Kim, who took over as president in 2012, has had a torrid time trying to impose his management ideas on the perennially fractious and fractured organisation. Now he is asking the bank’s shareholder countries for an increase in its capital base.
He is unlikely to get his way soon. The US Congress in particular is no fan of doling out cash to multilateral agencies. Yet even in a more conducive political environment, it is hard to see that increasing the bank’s capacity without reforming its fundamental model will make much difference in tackling the most pressing problems in the developing countries it is meant to serve.
Despite multiple reorganisations, the bank is an institution in search of a unique selling proposition. Its traditional role was to lend (and give grants) to individual countries, for infrastructure projects and more recently to support structural reform. But the expansion of large-scale private capital markets has usurped this function. The bank increased its lending during the financial crisis as private markets seized up, but has since scaled back.