Abstract: The Rise and Fall of the World Bank's Economic Department: Economic Research at the World Bank in the Early 1950s

Michele Alacevich

Abstract

This paper contributes to two promising, but under-researched topics: the role of economists in international institutions, and the importance of organizational change in historical perspective. Today, economists have the lion's share at the World Bank, but during the 1950s they were increasingly marginalized. In the early 1950s the Economic Department promoted high-level research, contributed high-level insights on development assistance and the Bank's role in it, and provided substantial input to the design of Bank's loan policies. Economists and engineers participated with equal standing in the decision-making process. This caused frequent frictions when exploring loan formulas to foster the economic growth of borrowing countries. The paper will describe the contribution of the Economic Department to the early activities of the World Bank, and the progressive irreconcilability between economists and top management. During the 1952 reorganization, a strategic decision was made to de-emphasize economic research, and instead opt for a loan strategy that would privilege specific infrastructural projects. This enabled the Bank to become a point of reference for infrastructural investments in less developed countries; however, it also narrowed the Bank's ability to develop broad and multifaceted analyses of development processes. This caused the Bank to lag behind when, in the 1960s, development economics was evolving into a broad, all-encompassing discipline and practice.