World Bank in Historical Perspective


The World Bank, a prominent Western financial institution, has played a major role in the changed strategy of imperialism, pursued after the Second World War. This strategy has been known as Neocolonialism. One can hardly understand the role of the World Bank without having an insight in it and for that one has to look back in history.

By the time the First World War started, capitalism had established its supremacy all over the globe. Despite various crises, its vitality remained unimpaired. The First World War, however, heralded the beginning of its end as the only economic system on the rise. Within the world capitalist system, hegemony passed to the USA and Britain and other European powers became destined to play the second fiddle. The October Revolution of 1917 marked the process of shrinking of the world capitalist hegemony as Russia, a major country with vast resources and manpower, opted out. The end of the Second World War marked the break up and, ultimately, final collapse of the colonial system. It began with the Indian subcontinent going out of it. In two decades and so, colonialism of traditional type completely vanished. But the erstwhile colonial powers came out with a new strategy to continue their economic exploitation of their former colonies sans direct political control. This new strategy came to be known as Neocolonialism. Even before this term gained currency, Lenin had noted: “… it must be observed that finance capital and its foreign policy, which is the struggle of the great powers for the economic and political division of the world, give rise to a number of transitional forms of state dependence. Not only are the two main groups of countries, those owning colonies themselves, but also the diverse forms of dependent countries which, politically, are formally independent, but, in fact, are enmeshed in the net of financial and diplomatic dependence, typical of the epoch.”  In this connection he referred to Argentina, which was formally independent, but, in effect, was a “commercial colony” of Britain.

It seems Jawaharlal Nehru was aware of imperialist attempts to foist similar relationship on India by according it “dominion status”. During the 1930s, he had stressed that he did not want India to attain formal political independence, yet remaining an economic colony. Prof. Amiya Kumar Bagchi regards the British “as the real founders of modern neocolonialism, for both in Latin America and in India in the late 19th century they depended more on economic power and political influence at every stage for obtaining the lion’s share of the surplus of the dominated countries.” (The Political Economy of Underdevelopment, OUP, 1982, p.78)

As defined by the Third All African People’s Conference (Cairo, 1961), neocolonialism is “the economic infiltration by a foreign power after independence, through capital investments, loans and monetary aids or technical experts, of unequal concessions, particularly those extending for long periods.”

Neocolonialism, thus, brings about reconciliation between political independence of a country and its economic dependence. Under the old-fashioned colonialism an imperialist nation hunting for valuable raw materials and minerals, markets, and avenues for investment of surplus capital had to establish its political rule along with necessary administrative set up over the country grabbed by it. To keep the native population subdued, adequate police and army personnel had to be deployed. In the course of time this type of arrangement did not remain equal to the task and very expensive. The world wars weakened the colony-holding powers; the pressures from American finance capital for dismantling barriers for its operation became intense; and the struggle of colonial peoples for their independence made colonial rule very expensive and unsustainable even with repression. They, ultimately, had to admit, “their interests in the developing countries no longer required the protection of governors in ceremonial dress, and expensive colonial administrations.” They had to withdraw and some did with a show of “dignity” while others after a lot of bloodshed. According to Judith Hart, the withdrawal of colonial powers or the process of decolonisation was “not the result of any romantic vision of the equality of peoples. It was an overdue recognition that twentieth-century capitalism no longer required colonialism to serve its purpose, and that political and military costs of maintaining it were both high and unnecessary. The United States had demonstrated clearly during the period between the wars, and in the decade after the war, that there were other methods of maintaining economic dominance.” (Aid and Liberation, London, 1973, p.231). The USA had been dominating Latin America, not by direct political presence, but through American private capital.

The decline of old fashioned colonialism and its replacement by neocolonialism transferred the formal dominance from government to TNCs and MNCs “in whose interests government determine their relationships with their former colonies and with all other developing countries.” (Ibid). TNCs and MNCs began dividing the developing countries among themselves. The 14-point policy statement by President Wilson after the First World War was inspired more by his concern for the interests of American finance capital rather than for the plight of the colonial peoples. To quote Dan Nabudere, “The events of the next war brought to the US the realization that her expanded production in key sectors required new markets. With the general offensive by the Soviet Union, particularly after the war when Eastern Europe was no longer under the control of imperialism, imperialism was faced with the need to preserve what remained of its power. The new policy was to intensify the idea of the self-determination of all peoples in order to give a progressive stance to imperialism and take away the initiative from the Soviets. The US could lose nothing by pursuing such a policy, which actually strengthened her economy. It is in this sense that the US multilateral strategy which called for the abolition of colonial preference must be seen and it is from these proceedings, which arise out of imperialism, that the whole neocolonial strategy springs.” (The Political Economy of Imperialism, London, 1977, p.213).

As early as May 1942, Fortune had told the British government to hand over the leadership of world imperialism to the USA: “American imperialism can afford to complete the work the British started: instead of salesmen and planters, its representatives can be brains and bulldozers, technicians and machine-tools. American imperialism does not need extra-territoriality, it can get on better in Asia if the Tuans and Sahibs stay home.”

In the changed circumstances, after the collapse of the Soviet Union and the disintegration of the world socialist system and paralysis of the NAM, the 10-point Washington consensus has been thrust upon developing countries, guaranteeing free flow of goods, services and capital across national boundaries, privatization of public enterprises, drastically curtailing the economic role of state, and doing away with most, if not all, welfare activities. The World Bank has played a major role in the formulation of the Washington consensus and it is one of the major instruments for implementing it just as it did in the formulation and implementation of the strategy of neo-colonialism. There is, however, one major difference. With the free flow of capital in the form of foreign direct investment and foreign institutional investment, countries do not seek the help of the World Bank and its agencies for aid as they used to do in the past. Obviously, its importance for and the capacity to interfere in and mould the economic decision making process in developing countries have been sharply declining.

It is high time that a fresh look is given to the utility of the World Bank and its mission. Its role and working are thoroughly overhauled to make it a democratic institution rather than corporate entity, controlled by the USA. Only then it can gain some prestige of its own. But for this, consigning the Washington consensus to the dustbin is a necessary precondition. If this is not done, the World Bank will continue to remain a plaything for the USA, and the person who happens to occupy the White House will use postings in it as largesse. There is never any dearth of the Wolfowitzes with their cronies, especially boy friends and girl friends.

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