The New Role of the World Bank - Working Paper 421

The World Bank was founded to correct failures in international capital markets. That role has shifted over the past 70 years. Modern analyses should proceed from the premise that the Bank’s central goal is and should be to reduce extreme poverty. We show that the vast majority of donor subsidies to the Bank go to its funding vehicles aimed at the poorest nations. We argue that the Bank’s principal impact arises through its influence on national policies, and that economic theory suggests such influence is often best exerted multilaterally. This view implies new ways to structure and evaluate the institution.