Neoliberal ideology or rent seeking? What explains World Bank financing decisions?

Financing decisions made by the World Bank are frequently criticized for their perceived alignment with the principles of the “Washington Consensus” or “neoliberal” free-market ideology. Critics argue that the conditions imposed by these institutions as prerequisites for funding reflect a commitment to this ideological framework. This article seeks to quantify the extent to which market reforms in the style of the Washington Consensus or neoliberalism serve as predictors of World Bank funding decisions. To examine this relationship, I utilize data from Malik and Stone regarding World Bank loan disbursements. The article focuses on whether changes in economic freedom before the closing of World Bank funding projects generate more complete loan disbursements. My chosen metric for measuring neoliberal reforms is the Economic Freedom of the World Index. Results of this analysis are compared with the original findings of Malik and Stone, which emphasize the significant role played by corporate interest lobbying and rent-seeking behavior in securing World Bank financing. The outcome of this study provides limited support for the rent-seeking narrative proposed by Malik and Stone, but it does not substantiate the notion that financing decisions hinge on neoliberal institutional changes.