By Susan Engel and Adrian Bazbauers

Most people interested in development know about the World Bank and probably some of the bigger regional development banks, like the Asian Development Bank. But few people realise there is a system of 30 functioning multilateral development banks (MDBs). Indeed, we did not initially realise there were quite so many because there was no comprehensive tally or an academic study analysing them all. We set out to explore whether the MDBs work as a system and what role they play in promoting both debt and development so here is a short summary of some of our key finding on these three issues.

The MDBs as a System

The idea for the MDBs evolved out of the increasing complexity of the international finance system and the emergence of international monetary and financial cooperation well over a century ago. Key factors were inter-American financial cooperation from the 1880s onwards, international financial cooperation in the years between the two World Wars, and financial chaos during the 1930s. While most accounts of the World Bank attribute the idea of MDBs to proposals from American, Harry Dexter White, and Briton, John Maynard Keynes, we argue that the direct predecessors were, first, the establishment of export-import banks or export credit agencies beginning with America in 1934 and, second, a Mexican addition to a long-discussed proposal for an inter-American financial institution in 1939. Eduardo Villaseñor, then Mexico’s Undersecretary of the Ministry of Finance and Public Credit, proposed that the inter-American financial institution also be used to invest funds for economic development in the Americas.

Still, the first MDB only came to fruition with the 1944 Bretton Woods negotiations and the agreement to create an International Bank for Reconstruction and Development, which became known as the World Bank. And, remarkably, the 30 subsequent MDBs – of which only 29 are still functional – have followed the mandate, structures, and governance it laid out. Even the most recent additions to the MDB system – the BRICS-led New Development Bank (2014) and the China-led Asian Infrastructure Investment Bank (2015) – conform to the original blueprint. This supports the arguments that the BRICS and the new MDBs do not fundamentally challenge the neoliberal system of global governance and finance. See table 1 below for an overview of all MDBs.

The bulk of the MDBs were created during the post-Second World War Keynesian-modernisation-welfare era (circa 1946 to 1979) and followed the Keynesian formula of promoting balanced investment and economic development. But they expanded that agenda to include regional, sub-regional, and specialised development programs as with the Arab Bank for Economic Development in Africa (1974) and the OPEC Fund for International Development (1976). We use this framework of regional, sub-regional, and specialised banks to broadly categorise the MDBs.

Following the rise of neoliberalism during the 1980s, the first neoliberal MDB emerged in 1991: the European Bank for Reconstruction and Development. While the other nine MDBs that emerged since the 1980s were not overtly neoliberal in their design, we know that the World Bank and other leading banks became partners in the neoliberal paradigm. Less is known about the smaller MDBs, but many had to admit new shareholders to accommodate the changing exigencies of the neoliberal global financial system. Overall, we think that the MDBs can be usefully understood as a system, though there are some differences and quirks between them.

The MDBs and Debt

The MDBs came out of expanding international financial cooperation that followed a series of crises in the nineteenth and twentieth centuries culminating in the 1929 Great Depression. They were designed to ensure that states received sufficient investment flows to promote employment and development. Still, in setting up the World Bank as a bank, White and Keynes created an organisation that was beholden to private capital and hence could not overcome ‘the somewhat violent and not too enlightened motives of capital,’ as White once said. Further, the MDBs operate in a global system that lacks an orderly default mechanism for nation-states and they provide loans directly – and facilitate private lending for – what the Committee for the Abolition of Illegitimate Debts calls illegitimate, odious, and unsustainable debts. That is to say, the MDBs lend to regimes simply because they control a territory; they loan regardless of a regime’s legitimacy, respect for human rights, or whether the loan benefits the local population.

The MDBs facilitated financialisation in the 1970s thanks to their promotion of lending to the Global South and, once the 1982 Debt Crisis hit, the World Bank became a major debt collector for the Global North. Notably, financialised capitalism has not proved particularly efficient, and it is prone to crisis, with major debt crises in 1997 and 2008. As a World Bank paper recently detailed, 2010 to 2020 saw the ‘largest, fastest and most broad-based increase’ in emerging market and developing economy debt of the past fifty years (Kose et al. 2020, 111). This has occurred along with low interest rates and the growth of new financial ‘innovations’, which were present in the previous three debt crises. As the saying goes, we have seen this film before, and we know how it ends – with another debt crisis.

The development banks are entwined with debt networks and they play a pivotal role in this system as direct lenders, signallers, facilitators, creators of ‘common sense’ policy frameworks, financial innovators, de-riskers, and more. Contemporary development discourse from the World Bank and major donors has been about getting ‘Beyond Aid’ and increasing the level of debt for development. Many Majority World countries are again in dangerous territory when it comes to debt levels.

The MDBs and Development Discourse

While most of the MDBs reached their majority during the Keynesian-modernisation-welfare era, their banking DNA meant that they tended to focus on modernisation, or, more specifically, on bankable projects that demonstrated returns to the market. This drive did not disappear even with greater lending for basic needs during the 1970s or with the emergence of the Washington Consensus in the 1980s. When the human cost of neoliberalism became too high, the post-Washington Consensus arrived circa 1998 to renew the palatability of market austerity.

There was a brief and somewhat progressive interlude to the neoliberal agenda during the 2000s and early-2010s with the Millennium and Sustainable Development Goals targeting poverty alleviation and human development. But the penny-pinching returned with the Beyond Aid agenda. Murray and Overton (2016) coined the term retroliberal to describe current directions; an old-school focus on infrastructure as facilitating economic growth, increased emphasis on state sovereignty, and the concurrent dismantling of human rights-based approaches to development.

The two new MDBs led by the BRICS and China not only replicated the MDB model, but they also opted for a donor-recipient blueprint, which is less development-friendly than the member-owned, financial cooperation agenda envisaged by some of the World Bank’s founders. Still, member-led MDBs remain and there are examples of innovative, growing banks in the Global South, most notably the Development Bank of Latin America (CAF). Whether these innovators can reframe development discourse and practice towards a more progressive agenda remains to be seen.

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Susan Engel is an Associate Professor at the University of Wollongong, Australia. She tweets at @susanengel_oz.

Adrian Bazbauers is a Lecturer in the School of Business, UNSW Canberra, Australia. He tweets at @AdrianBazbauers.

Photo: World Bank / Grant Ellis

Table 1: Overview of Multilateral Development Banks

Year	Name	Region	Category
1944	World Bank	Global	N/A
1956	Council of Europe Development Bank	Europe	Specialised
1958	European Investment Bank	Europe +	Regional
1959	Inter-American Development Bank	Latin America and the Caribbean	Regional
1960	Central American Bank for Economic Integration	Central America	Sub-Regional
1963	International Bank for Economic Cooperation	Soviet States	Sub-Regional
1964	African Development Bank	Africa	Regional
1966	Asian Development Bank	Asia and the Pacific	Regional
1967	East African Development Bank	East Africa	Sub-Regional
1968	Arab Fund for Economic and Social Development	Arabic States	Specialised
1970	Caribbean Development Bank	Caribbean	Sub-Regional
1970	Development Bank of Latin America	Latin America	Sub-Regional
1970	International Investment Bank	Soviet States	Sub-Regional
1973	West African Development Bank	West Africa	Sub-Regional
1974	Arab Bank for Economic Development in Africa	Africa	Specialised
1974	Islamic Development Bank	Islamic States	Specialised
1974	FONPLATA Development Bank	River Plate Basin	Sub-Regional
1975	ECOWAS Bank for Investment and Development	West Africa	Sub-Regional
1975	Development Bank of Central African States	Central Africa	Sub-Regional
1975	Nordic Investment Bank	Nordic and Baltic States +	Specialised
1976	OPEC Fund for International Development	Global	Specialised
1977	International Fund for Agricultural Development	Global	Specialised
1985	Eastern and Southern African Trade and Development Bank	Eastern and Southern Africa	Sub-Regional
1989	Pacific Islands Development Bank	Pacific Islands	Sub-Regional
1991	European Bank for Reconstruction and Development	Europe +	Regional
1997	Black Sea Trade and Development Bank	Black Sea Region	Sub-Regional
2005	ECO Trade and Development Bank	ECO Member States	Sub-Regional
2006	Eurasian Development Bank	Eurasia	Sub-Regional
2014	New Development Bank	BRICS	Specialised
2015	Asian Infrastructure Investment Bank	Asia and Oceania	Specialised