The World Bank’s Early Reflection on Development: a Development Institution or a Bank?

Until the late 1960s, the World Bank presented itself as an institution devoted to sound and directly productive project loans. Yet, during its very early years, some discussions developed inside the Bank regarding the possibility of issuing different types of loans, namely loans which – albeit sound – were aimed at tackling social issues («social loans»), or not directly project-related needs for foreign currencies («impact loans»). This paper analyzes the housing issue as a good case in point. The analysis reveals that the Bank was unwilling to lend for housing programs not because these were not sound – in fact, they were – but because they appeared to be too social-biased and not directly linked to productive investment projects, such as dams, power stations, and railroads. This early decision had a significant impact on the subsequent development of the Bank’s view of policy making. In fact, it locked the institution into a particular lending pattern, and deprived it of important intellectual resources. It was not until the late 1960s that the Bank began to take social issues into consideration, rather late as opposed to other multilateral institutions.