Suggesting that the traditional development banks have not been serving them well, the BRICS (Brazil, Russia, India, China and South Africa) have decided to establish their own development bank. More recently, China has decided to lead the creation of an Asian Infrastructure Investment Bank (AIIB).

Last October, 21 Asian nations signed a pact to establish the AIIB, with Britain agreeing to be a founding member in spite of discouragement by the United States. The Beijing-led initiative has been criticised even before beginning operations for alleged laxity of prudential standards and a willingness to ignore best practices on environment and labour.

Since their inception the traditional development banks, in particular, the 71-year-old World Bank, have been criticised for the conditionality which they impose when providing loans to developing countries, many of whose governments believe that their development model required abandonment of their own economic development strategy and thereby subverted their national sovereignty.

These criticisms have not been assuaged by the World Bank’s claim to comparative knowledge, a pool of high-level experts on development economics and that their policy recommendations are merely pragmatic based on comparative international experience. The literature on this subject could fill a library but the debate continues.

Traditional developments are also said to be no longer the largest sovereign lenders to sovereign borrowers. China’s bilateral development aid exceeds the total lending of the World Bank. The Brazilian Development Bank’s total assets of US$350 billion dwarfs the US$100 billion of the Inter-American Development Bank. The World Bank and the current Asian Development Bank (ADB) cannot meet Asia’s estimated need for US$8 trillion to fund infrastructure between now and 2020.

In addition, private lenders and international financial markets are increasingly providing fiancé in areas which previously were the exclusive domain of development banks and although they charge higher interest rates their terms are more flexible and are not accompanied by any particular development philosophy. Governments in developing countries relish the freedom to chart their own course even when this leads to economic debacles.

Critics say the political control of decision-making in the World Bank and a US monopoly on its presidency since 1944 is not reflective of the state of the world. The World Bank’s board has been dominated by the US and the European countries and their unwillingness to reallocate voting rights in a more balanced and representative way has continued to stoke the discontentment of developing countries, especially China, Brazil and India.

The logic would seem to be that the best people to run a “development bank” would be people from developing countries. For example, China could justifiably feel it has the best economic growth record in history.

The tectonic shifts in the distribution of global economic activity and the consequential reallocation of geo-political power requires technical, managerial and political change in traditional development banks starting with the World Bank. Otherwise, the traditional development banks will be marginalised and their role will diminish eventually whither away.