The World Bank has discovered democracy. Or at least it has discovered that democracy may promote economic growth. The Bank once spearheaded the Washington Consensus, the belief that integration of poor economies into world markets would rapidly solve their economic and social problems. The Consensus asked for fiscal discipline, public investment in infrastructure, and trade liberalization, but came no closer to democracy than by demanding legal security for property rights. In recent years, however, the Bank has moved increasingly to the view vigorously advocated by institutional economists: that effective markets require extensive social and political infrastructures (see, e.g., North 2005). Titles of the World Bank's influential annual World Development Report have undergone an interesting evolution. As listed in Box 8-1, they shift from a strong emphasis on markets, investment, and development to a rising concern with the institutional causes and consequences of economic growth. The state appears in a title as early as 1997, but causes, consequences, and institutions take on ever greater prominence after then. Even poverty makes an appearance in 2000 to 2001.

The 2006 development report, titled Equity and Development, introduces a direct concern with democratization. True, Bank President Paul Wolfowitz' foreword to the volume avoids the words democracy and democratization.