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Pages from World Bank History: Mr. Black’s Bank -- The 1950s

A presentation of historical events by the World Bank Group Archives

February 27, 2003 -- Eugene R. Black was President of the World Bank from July 1949 to December 1962. Black's presidency encompassed the whole of the 1950s -- a remarkable period of growth and diversification for the Bank. The story of that period is told by Roger Chaufournier, a witness to the Bank in the 1950s and its evolution over the years. Mr. Chaufournier joined the Bank in 1952 and retired in 1984 as Vice President of the Europe, Middle East and North Africa Regions. He had previously worked in the Western Hemisphere Department (including a term as Resident Representative in Peru), and in the West Africa Region.

"By 1950, economic recovery in Europe was well on its way. In the developing world, the notion of progress was spreading rapidly and each member country wanted its share. The Bank, which had contributed only marginally to financing reconstruction in Western Europe, was now focusing its attention resolutely to the needs of the developing world.

"The year 1952 marked a turning point in the history of the institution. It was the year during which the first major reorganization of the Bank took place. The two existing departments, the Loan Department and the Research Department, were split into three Area Departments and a Technical Operations Department. It was an early recognition of the need to focus attention on individual countries, while ensuring at the same time that the technical aspect of projects would receive full attention. The so-called creative tensions that ensued were designed, in the words of a former colleague, to protect the Bank against "the excesses of both the diplomats and the technocrats."

"The Federal Republic of Germany and Japan became members in 1952. But the Bank was not only broadening its membership, it was broadening its activities. I remember the 1950s as a decade of major accomplishments for the Bank, as a project lender, as an institution builder, and as an advocate of development. It was also a time when the ethos of the institution developed into that of a technically competent development institution, conservative but flexible, self assured, and a trifle arrogant but with a strong esprit de corps and pride in its accomplishments. This, at the beginning of the decade, was in strong contrast to the Fund, which was still trying to find its footing.

"The culture of the institution was decidedly Anglo-Saxon; close to 80 percent of the staff were from the United States, the United Kingdom, or Canada. A Bank jargon was pervasive; drafting and redrafting occupied the major part of staff and management time. There was the usual complaints from national minority groups; the "old boy" network was functioning effectively in deciding managerial appointments. I remember an interview with a panel established by Eugene Black to investigate allegations of discrimination against Frenchmen. Personally, I was struck by the absence of divisiveness, but for those who did not have English as a native language, insistence on linguistic perfection was a source of constant irritation. The sense of hierarchy was strong, but contact between senior management and staff was close and frequent. The Bank was then refreshingly unbureaucratic, small enough to rely on people more than on procedures.

"Eugene Black had a patrician aloofness -- we always called him Mr. Black -- but we knew his consideration for younger people and his ability to motivate them. I recall his impatience with the nitty gritty and his indifference to internal management. "I make deals," he used to say -- and what a superb dealmaker and bond salesman he was! There was an aura of statesmanship and flair about him that affected the institution. The Bank was known as Mr. Black's Bank.

"Important events took place under his leadership, and the diplomacy of development flourished. The Indus Basin Agreement was reached in 1960 between Pakistan and India when President Ayub Khan and Prime Minister Nehru signed a treaty. It was the culmination of nine years of complex and difficult negotiations, during which the Bank's President and some of his senior associates played a key role in shaping the outcome.

"There was also the unsuccessful mediation in the Iranian oil dispute and the Aswan Dam episode, which drew the Bank into the Cold War. The refusal of the U.S. Government to finance its share of the project, despite Mr. Black's strong plea, forced the Bank to withdraw. All those events projected the Bank to the forefront of world attention.

"This was a period of other solid accomplishments. The Economic Development Institute [now the World Bank Institute] was founded in 1956, and the International Finance Corporation (1956), and the International Development Association (1960) were created as Bank affiliates. Ten years earlier Eugene Black would have been shocked at the suggestion he might some day propose lending on soft terms. By the late 1950s he was able to see that the least developed member countries could not mount a satisfactory development effort without the support of substantial amounts of concessional lending. This realization was clearly reinforced by the acceleration of the process of decolonization, which brought so many of the newly independent states into the membership of our institution in the early 1960s. IDA was an act of vision and an essential step toward a full-service development institution.

"There were innovations and flexibility in lending, and technical assistance was expanded. The Bank was responding to change by adapting itself and, when it could not, by creating suitable new institutions. Economic work become more sophisticated and expanded steadily as an underpinning for our lending activities. A sectoral approach was introduced in economic analysis and planning of development projects. There was also a new emphasis on institution building as well as on conditionality in lending policy. As a result, for example, the Bank stopped lending for several years to some major countries like Brazil until economic performance improved. Adequate infrastructure, particularly energy and transportation, was viewed as a precondition to development. It is therefore not surprising to find that, in its first 15 years of operations, the Bank financed and installed capacity in energy in Latin America equivalent to the total capacity in existence in the region 15 years earlier; the impact on organization and policy in the sector was considerable.

"Country creditworthiness was measured through the 10 percent rule of thumb. The danger signal flashed when debt service exceeded 10 percent of export earnings. Respect of external obligations was strictly monitored; lending to several countries was delayed several years pending progress on settlement of external obligations. By the end of Eugene Black's term, lending activities were gathering momentum. During 1962, his last year in office, the Bank made 29 loans and 18 IDA credits for a total exceeding one billion dollars for the first time.

"Between 1950 and 1962, the membership of the institution and its staff had more than doubled; the number of operations and the volume of lending had increased fourfold. The Bank's reputation as a development institution was well established and the last years of Eugene Black's presidency had seen some important initiatives. In addition to the creation of IDA and IFC, there was the launching of consultative groups, and innovative cofinancing such as in Mexico."

This article is excerpted from The Coming of Age by Roger Chaufournier in the June 1984 issue of "Finance and Development."

Without records there is no history. Courtesy of ISG's World Bank Group Archives.

Copyright, 2004, The International Bank for Reconstruction and Development/The World Bank

 


Eugene R. Black

 

 

 


Roger Chaufournier

 

 


Japanese representative signing the World Bank¬タルs Articles of Agreement. August 13, 1952

 

 


A representative of the German Federal Republic signing the Bank¬タルs Articles of Agreement. August 14, 1952

 

 


Sir Alexander Cairncross First Director of EDI (now the World Bank Institute)

 

 


Robert L. Garner, President of IFC (left) and John C. Beevor, Vice President of IFC (right).




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