The World Bank has long been criticized by non-governmental organizations, such as the indigenous rights group Survival International, and academics, including Henry Hazlitt, Ludwig Von Mises, and Joseph Stiglitz, former Chief Economist for the World Bank.
Stiglitz is equally critical of the International Monetary Fund, the US Treasury Department, and the US and other developed country trade negotiators. Hazlitt argued that the World Bank along with the monetary system it was designed within would promote world inflation and "a world in which international trade is State-dominated" when they were being advocated. Stiglitz argued that the free market reform policies that the bank advocates are often harmful to economic development if implemented badly, too quickly ("shock therapy"), in the wrong sequence or in weak, uncompetitive economies. Ludwig von Mises opposed institutions like the World Bank because he believed they replace market-based investment controlled by the collective decisions of voluntary participants with politically driven lending controlled by bureaucrats who are shielded from the consequences of their actions. He argued this practice distorts prices and interest rates leading to malinvestment, or inefficient use of capital (see economic calculation problem). He also warned such systems raise moral hazard by encouraging government dependency and poor economic decision-making.
World Bank loan agreements can also force procurements of goods and services at uncompetitive, non-free-market, prices. Other critical writers, such as John Perkins, label the international financial institutions as 'illegal and illegitimate and a cog of coercive American diplomacy in carrying out financial terrorism.
Defenders of the World Bank contend that no country is forced to borrow its money. The bank provides both loans and grants. Even the loans are concessional since they are given to countries that have no access to international capital markets. Furthermore, the loans, both to poor and middle-income countries, are below market-value interest rates. The World Bank argues that it can help development more through loans than grants because money repaid on the loans can then be lent for other projects.
The IFC and MIGA and their way of evaluating the social and environmental impact of their projects has also been criticized. Critics state that even though IFC and MIGA have more of these standards than the World Bank, they mostly rely on private-sector clients to monitor their implementation and miss an independent monitoring institution in this context. This is why an extensive review of the institutions' implementation strategy of social and environmental standards is demanded.
One of the most common criticisms of the World Bank has been the way it is governed. While the World Bank represents 188 countries, it is run by a small number of economically powerful countries. These countries (which also provide most of the institution's funding) choose the bank's leadership and senior management, and critics argue the interests of these economically powerful nations dominate the World Bank agenda. Titus Alexander argues that the unequal voting power of western countries and the World Bank's role in developing countries makes it similar to the South African Development Bank under apartheid, and therefore a pillar of global apartheid.
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In the 1990s, the World Bank and the IMF forged the Washington Consensus, policies that included deregulation and liberalization of markets, privatization and the downscaling of government. Though the Washington Consensus was conceived as a policy that would best promote development, it was criticized for ignoring equity, employment, and how reforms like privatization were carried out. Stiglitz argued that the Washington Consensus placed too much emphasis on GDP growth and not enough on the permanence of growth or on whether growth contributed to better living standards.
The United States Senate Committee on Foreign Relations report criticized the World Bank and other international financial institutions for focusing too much "on issuing loans rather than on achieving concrete development results within a finite period of time" and called on the institution to "strengthen anti-corruption efforts".
James Ferguson has argued that the main effect of many development projects carried out by the World Bank and similar organizations is not the alleviation of poverty. Instead, the projects often serve to expand the exercise of bureaucratic state power. His case studies of development projects in Thaba-Tseka show that the World Bank's characterization of the economic conditions in Lesotho was flawed, and the bank ignored the political and cultural character of the state in crafting its projects. As a result, the projects failed to help the poor but succeeded in expanding the government bureaucracy.
Criticism of the World Bank and other organizations often takes the form of protesting, such as the World Bank Oslo 2002 Protests, the 2007 October Rebellion, and the 1999 Battle of Seattle. Such demonstrations have occurred all over the world, even among the Brazilian Kayapo people.
Another source of criticism has been the tradition of having an American head the bank, implemented because the United States provides the majority of World Bank funding. "When economists from the World Bank visit poor countries to dispense cash and advice," observed The Economist in 2012, "they routinely tell governments to reject cronyism and fill each important job with the best candidate available. It is good advice. The World Bank should take it."
In 2021, an independent inquiry of the World Bank's Doing Business reports by the law firm WilmerHale found that World Bank leaders, including then-Chief Executive Kristalina Georgieva and then-President Jim Yong Kim, pressured staff members of the bank to alter data to inflate the rankings for China, Saudi Arabia, Azerbaijan and the United Arab Emirates.
In September 2023, it was revealed that the World Bank had poured billions of dollars into fossil fuel projects in 2022. Campaigners estimated that about $3.7bn in trade finance was supplied to oil and gas projects despite the World Bank's green pledges.
Allegations of corruption
The World Bank's Integrity Vice Presidency (INT) is charged with the investigation of internal fraud and corruption, including complaint intake, investigation, and investigation reports.
Structural adjustment
The effect of structural adjustment policies on poor countries has been one of the most significant criticisms of the World Bank. The 1979 energy crisis plunged many countries into economic crisis. The World Bank responded with structural adjustment loans, which distributed aid to struggling countries while enforcing policy changes in order to reduce inflation and fiscal imbalance. Some of these policies included encouraging production, investment and labour-intensive manufacturing, changing real exchange rates, and altering the distribution of government resources. Structural adjustment policies were most effective in countries with an institutional framework that allowed these policies to be implemented easily. For some countries, particularly in Sub-Saharan Africa, economic growth regressed and inflation worsened.
By the late 1980s, some international organizations began to believe that structural adjustment policies were worsening life for the world's poor, due to a reduction in social spending and an increase in the price of food, as subsidies were lifted. It also have been criticized for being Debt-trap diplomacy. The World Bank changed structural adjustment loans, allowing for social spending to be maintained, and encouraging a slower change to policies such as transfer of subsidies and price rises. In 1999, the World Bank and the IMF introduced the Poverty Reduction Strategy Paper approach to replace structural adjustment loans.
Fairness of assistance conditions
Some critics, most prominently the author Naomi Klein, are of the opinion that the World Bank Group's loans and aid have unfair conditions attached to them which reflect the interests, financial power and political doctrines (notably the Washington Consensus) of the bank and the countries that are most influential within it. Among other allegations, Klein says the Group's credibility was damaged "when it forced school fees on students in Ghana in exchange for a loan; when it demanded that Tanzania privatise its water system; when it made telecom privatisation a condition of aid for Hurricane Mitch; when it demanded labour 'flexibility' in Sri Lanka in the aftermath of the Asian tsunami; when it pushed for eliminating food subsidies in post-invasion Iraq".
A study of the period 1970–2004 found that a less-developed country would on average receive more World Bank projects during any period when it occupied one of the rotating seats on the UN Security Council.
Sovereign immunity
The World Bank requires sovereign immunity from countries it deals with. Sovereign immunity waives a holder from all legal liability for their actions. It is proposed that this immunity from responsibility is a "shield which The World Bank wants to resort to, for escaping accountability and security by the people". As the United States has veto power, it can prevent the World Bank from taking action against its interests.
Cronyism and Elite Capture
Criticism was also leveled under the presidency of Jim Yong Kim, particularly regarding financial management and staff morale. Reports of a controversial $94,000 bonus awarded to the Bank's CFO, Bertrand Badré (2013–2016), at his request on top of a tax-free salary of $379,000, while significant staff cuts and austerity measures were being implemented, drew criticism from within and outside the organization. This bonus, revealed by Senior Country Officer Fabrice Houdart amidst a broader effort by Kim to implement cost-cutting reforms, sparked debates over transparency, ethics, and the organization's commitment to its own principles, further exacerbating concerns about trust and leadership within the World Bank. Badré renounced the bonus and left the Bank shortly after.
The World Bank was the subject of a scandal with its then-president Paul Wolfowitz and his aide, Shaha Riza, in 2007.
According to reports citing a recording of a 2018 staff meeting shared by a whistleblower, World Bank staff were informed Robert Malpass, a recent economics graduate of Cornell University and the son of David Malpass, then US Under Secretary of the Treasury for International Affairs and later President of the World Bank Group, would be hired as an analyst in July of that year. On the recording, staff were reportedly told Robert Malpass was a "prince" and an "important little fellow" who could go "running to daddy." Bank officials also believed David Malpass was more influential than then-US Treasury Secretary Steven Mnuchin, who they said "has little or no clue on things." In April 2018, the US Treasury had changed its position to back a $13 billion capital infusion for the bank.
Malpass served as undersecretary of the US Treasury in the Trump administration before being appointed by Trump in February 2019 to be World Bank's president. Before Malpass became president, his son Robert had joined the International Finance Corporation (IFC), a branch of the World Bank Group that lends money to private sector businesses and whose USD 5.5 billion funding from a USD 13 billion World Bank capital increase was secured by the US Treasury at the time that David Malpass was the Treasury's undersecretary.
Criticism of specific loans and programs in Africa
Almost 45% of all the World Bank's resources are going to Africa, despite this the region continues to face significant financing gaps and development challenges.
On 9 August 2023, the World Bank announced it was suspending new loans to Uganda because it claims that a new anti-homosexuality act, enacted in May 2023, contradicts its core values on human rights. The World Bank joined the United States in imposing sanctions against Uganda over the anti-homosexuality law. Uganda dismissed the move by the World Bank as unjust and hypocritical.
The World Bank funded a program in Tanzania supposed to help nature conservation. The program was criticized because it led to severe violation of human rights toward the Maasai people.
Investments
The World Bank Group has also been criticized for investing in projects with human rights issues.
The Compliance Advisor/Ombudsman (CAO) criticized a loan the bank made to the palm oil company Dinant after the 2009 Honduran coup d'état. There have been numerous killings of Campesinos in the region where Dinant was operating.
Other controversial investments include loans to the Chixoy Hydroelectric Dam in Guatemala while it was under military dictatorship, and to Goldcorp (then Glamis Gold) for the construction of the Marlin Mine.
In 2019, the Congressional-Executive Commission on China questioned the World Bank about a loan in Xinjiang, China, that was used to buy high-end security gear, including surveillance equipment. The bank launched an internal investigation in response to the allegation. In August 2020, U.S. lawmakers questioned the continued disbursement of the loan.
