Cato Foreign Policy Briefing No. 3 September 20, 1990

Foreign Policy Briefing

Banking on Poverty:
An Insider's Look at the World Bank

by Michael H. K. Irwin

Michael H. K. Irwin joined the World Bank in April 1989 as director of the Health Services Department, following a 32-year career with the United Nations. During August and September 1989 he also served as the World Bank's acting vice president for personnel. On March 30, 1990, after completion of one year at the bank, he resigned out of frustration with "the bank's bloated, overpaid bureaucracy, its wasteful practices, and its generally poor management."


Executive Summary

In 1987, facing complaints from its major donor nations that it was "inefficient and drifting," the World Bank undertook an extensive, corporate-style reorganization. The bank publicized the reorganization heavily, in an attempt to convince donor nations that it could trim bureaucratic fat and thereby merit a $75 billion increase in its capital to finance an enlarged annual lending program. The funding boost was received in 1988 (the U.S. share is $14.3 billion), and the bank has expanded its lending activities in Latin America, Africa, Asia, and, more recently, Eastern Europe. In 1990, however, three years after the reorganization, the administrative budget continues to grow. The staff will soon top prereorganization levels. Extravagant benefit packages characterize the institution more than ever. As discussions at meetings of senior World Bank officials regularly disclose, the institution is plagued by massive overstaffing, bureaucratic gridlock, and staff preoccupation with further salary and benefit hikes. Public proclamations to the contrary, poverty reduction is the last thing on most World Bank bureaucrats' minds.

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