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In the aftermath of the COVID-19 pandemic, multilateral development finance institutions t banks will be a critical source of financing and capacity support to build a resilient and sustainable recovery in developing countries? Are they adequately funded for the recovery? How can they better leverage existing resources, and act more cohesively as a system? The World Bank is unique among multilateral development banks (MDBs) in its global reach – how should it best use its resources? How should other MDBs better align allocation with financing needs and the emergence of global problems that require international solutions? What is the role of international, regional, and national development finance institutions (DFIs)? How can these institutions function better as a system of financial support for public and private sector investment in developing countries?
The tragedy of foreign aid is not that it didn't work; it was never really tried. A group of well-meaning national and international bureaucracies dispensed foreign aid under conditions in which bureaucracy does not work well. The hostile environment under which such aid agencies functioned induced them to organize a cartel that increased inefficiency and reduced effective supply of development services, frustrating the good intentions and dedication of development professionals. The cartel of good intentions allows rich country politicians to feel that they are doing all in their power to help the world's poor, supports rich nations' foreign policy goals, preserves a panoply of large national and international institutions, and provides resources to poor country politicians with which to buy political support; in short, foreign aid works for everyone except for those whom it was intended to help.
Do we still need the World Bank, given how much the global financial sector has expanded since the institution was founded? The paper argues that there is a continuing role for the Bank and that it is complementary to private finance.