When an organization's mission has been completed and its presence no longer required, there are almost no instances of simply liquidating it, turning out lights and going home. Instead a new mission is invented, since the real objective of bureaucracies -- public or private -- is survival. The IMF, designed to function in a world of fixed exchange rates, now faces a world of floating currencies. Former Secretary George Shultz has suggested that the IMF be liquidated and its capital spun into the World Bank; another alternative would be to return its capital to the taxpayers from whence it came. The suggestion in this paper on the World Bank takes the middle ground of privatization, combined with a shift away from its new found mission of international lender of last resort and returning it to its roots of sound banking and supplying value-added services, like global export guarantees.

New circumstances require new actions. The international capital market has grown so huge and so liquid as to bear little or no resemblance to that which existed at the time of Bretton Woods. There will always be a shortage of capital for poor projects, but good projects get financing in the private market. Propping up nations which pursue untenable and bad economic policies is a far cry from the original mission of trying to help rebuild a war-torn world. The dream of universal development from President Truman's Point Four in 1950 through President Kennedy's Alliance for Progress rested on increasing the investment of money capital in the developing world, and the World Bank was very much a part of that scene. As the money flowed out around the world, however, we learned that capital alone is unproductive -- one must have competence created by training and education to create growth. Indeed some studies have shown that recipients of World Bank loans were worse off than before the loans were obtained. A privatized World Bank might return to real bank lending and eschew subsidized interest rate loans to mega-government projects and make a contribution in the years ahead. In the real world, capital cannot be driven, it can only be attracted. It goes where it is wanted and stays where it is well treated. No government or international agency can repeal those basis laws of capital flows.

Since the World Bank was formed in the years when much of the conventional wisdom decreed that more and bigger government was the answer for all human problems, it is understandable that the charter specifies that it can lend only to governments or against a government guarantee. This of course has the effect of increasing government control over the private sector, generally with bad results. Since the bank was formed by politicians to lend to other politicians, it is useless, not to say ridiculous, to criticize it for making political loans at subsidized rates to government projects. The able and dedicated staff is doing what it was supposed to do. We now know that those programs do not help the world's poor. Indeed there may be a kind of Gresham's Law that bad loans to huge government projects drive out good private loans to the productive private sector. One way to help the poor may be to privatize the bank and change its mission.