Tag Archives: world bank

World Bank Sorry for Mistakes of 30 Years

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World Bank on March 17, 2026 confessed to an error of more than three decades duration, moving to embrace industrial policy as tariffs, subsidies and a variety of other interventions become increasingly popular with governments in search of growth. Back in 1993, the bank published an assessment of the rapid economic growth achieved by some economies in east Asia, and which appeared to owe something to government interventions in support of selected industries. The bank controversially concluded that their economic success had nothing to do with those interventions, which it instead described as a “costly failure.” As World Bank Chief Economist Indermit Gill wrote in a new report, that conclusion helped “stigmatize” industrial policy just as a leap forward in transport and communications technologies spurred a period of intense globalization. Instead, governments were encouraged to let markets operate without direction or barriers to trade, while keeping inflation low and budget deficits narrow and backing investment in education and vital infrastructure. “That advice has not aged well—it has the practical value of a floppy disk today,” wrote Gill.

Taking a fresh look at the evidence, the new report concludes that the South Korean government’s “big push” during the 1970s in support of heavy industry and chemicals has resulted in the economy being 3% larger each year. In other words, it was very much not a failure, nor was it particularly costly.

Despite the stigma, many economies never entirely lost faith in industrial policy. Indeed, China resorted to a wide variety of interventions during its period of record growth. In emulation, many rich economies—including the U.S.—have begun to implement industrial policies. “Industrial policy—the range of policy tools that governments use to shape what an economy produces rather than leave it to the discretion of markets alone—is back with a vengeance,” the bank said.

Excerpt from Paul Hannon, World Bank Embraces Industrial Policy, Abandoning Three Decades of Stigma, WSJ, May 17, 2026

China’s Infrastructure Investment Bank

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The Asian Infrastructure Investment Bank (AIIB ) reflects China’s new eagerness to institutionalise its official lending abroad, which has been generous but contentious….It is billed as China’s “21st-century” answer to lenders like the World Bank (always led by Americans) and the Asian Development Bank (dominated by Japan)…

China’s financial commitment to the AIIB is equivalent to less than one percent of its remaining reserves. Almost 70% of the institution’s $100 billion of capital is drawn from its other 56 participants. It will also raise money by issuing bonds of its own. Far from being a fair-weather folly, the AIIB appears well-timed. Global capital has retreated from emerging markets, leaving a gap the AIIB will help fill. By the same token, the retreating dollars are sheltering in safe assets, such as the highly rated bonds the AIIB proposes to sell.

Unlike the World Bank, which is pulled hither and thither by its members, the AIIB will keep a tighter focus on infrastructure. It has no sitting board or permanent branch offices in borrowing countries. It is also quick, approving four projects within six months of its launch date. More established multilateral lenders can take a year or two to do the same. Some fear the AIIB will deviate from prevailing norms in other, more troubling ways—undercutting environmental standards, say. But of its first four projects, three are joint ventures with existing institutions, subject to their protocols. Its $217m project to improve slum-life in 154 Indonesian cities, led by a veteran of the World Bank, seems alert to the dangers of soil erosion and groundwater pollution. Likewise, its road-improvement plan in Tajikistan, administered by the European Bank for Reconstruction and Development, will tactfully relocate a monument to Avicenna, a Persian polymath who memorised the Koran by the age of ten….

If international financial institutions make room for China, it may bypass them anyway, but if they do not, it definitely will. The AIIB’s first solo venture will bring electricity to 2.5m rural homes in Bangladesh. That is not the only kind of power distribution that needs modernising.

Excerpt from The AIIB: The infrastructure of power, Economist, July 2, 2016