The World Bank and the Global Financial Crisis: The Reemergence of Lending to Middle-Income Countries

Abstract

In this article, I review the World Bank’s response to the global financial crisis that began in the fall of 2008. I show that the World Bank significantly increased lending after the crisis began. The majority of this new lending went to middle-income countries rather than to the poorest countries of the world. At first glance, this might seem like the Bank was in dereliction of its duty to help the poorest countries, but in reality, addressing the credit constraint problems of middle-income countries was perhaps the most appropriate pattern of lending for promoting the health of the overall global economy, given the potential for these countries to be drivers of global trade and finance. In addition, the thematic character of Bank lending did not change significantly in comparison with the years before the crisis. I also show how the International Finance Corporation, a branch of the World Bank that typically receives less attention than its two main lending arms, the International Development Association and the International Bank for Reconstruction and Development, positioned itself to act as a substitute for sources of private capital that were drying up around the world yet did not substantially increase lending beyond a preexisting trend. And finally I provide evidence of the World Bank’s rhetorical advocacy on behalf of the developing world during the period of the financial crisis, although I argue that this promotion of new financing flows for the developing world ultimately produced only mixed results.

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