The Emergence of the World Bank as a Development institution

My terms of reference for this paper are to deal with the appropriateness of the World Bank for handling postwar problems in financing reconstruction and development and, in particular, to discuss the suitability of the Bank for meeting the problems as they were conceived at Bretton Woods and as they actually emerged. If those of us who were at Bretton Woods had been insulated from all knowledge of the World Bank since 1944 until the past year or two we would probably deny its parentage. It was narrowly conceived in terms of the reconstruction problems of World War i and of the concept of development assistance prevalent in the 1930s. Its immediate task was to provide reconstruction capital for devastated countries on liberal terms, largely by guaranteeing private international loans. But its role during the reconstruction period was a minor one since the large financial requirements for reconstruction were met by bilateral assistance under the Marshall Plan and other programmes. Furthermore, the management of the Bank concluded that the procedure of guaranteeing private international loans would be more costly and less suitable to carrying out the Bank’s functions than that of making loans directly out of its paid-in capital and borrowed resources. At the insistence of Keynes, the principle of limited paid-in subscriptions and severe limitations on their use was adopted at the Bretton Woods conference.