Close Down the Masters of Reinvention:
The Case for a World Bank Shut Down
Multinational Monitor magazine, June 2000
The masters of reinvention are at it again. In a time-tested
stratagem, World Bank officials now readily admit that the Bank
has committed grievous errors in the past. But now, they say,
things are different.
The Bank has adopted this mea culpa strategy over and over
again during the past couple decades. Little changes after these
declarations of previous mistakes, but the acknowledgment of prior
wrongdoing and failure does help deflect criticism.
Today, acknowledging the problems accompanying road building,
dam construction and other mega-infrastructure projects, Bank
officials say they have turned their attention elsewhere. We have
a renewed focus on poverty, they say.
Repeated ad nauseum, this line has served the Bank well, especially
in media coverage following the April protests against the Bank
and International Monetary Fund (IMF) in Washington, D.C.
Here's the problem with the Bank's new story: On the one hand,
it is continuing to support an array of megaprojects with hugely
destructive consequences for the environment and especially for
the poor. On the other hand, much of the Bank's poverty focus
is likely to make living conditions for the poor even worse.
Ask the people in Laos, or Chad, if they have seen evidence
of the Bank's shift away from major infrastructure projects. In
Laos, the World Bank is lending support to the Nam Theun 2 Dam,
imperiling the well-being of indigenous populations, endangered
species and the financial future of Laos, as Witoon Permpongsacharoen
explains in an interview in this issue. In Chad and Cameroon,
the Bank in early June committed itself to lending catalytic support
to an oil development and pipeline project, to be carried out
by Exxon/Mobil, the Malaysian company Petronas and Chevron, that
threatens to replicate the environmental, human rights and development
nightmare of Shell's oil development in the nearby Niger Delta.
"It's clear that many of their projects create poverty,"
says Witoon when asked about the Bank's new poverty focus. "Many
Bank projects destroy people's lives. They can no longer live
in their rural area."
Meanwhile, the Bank is increasingly complementing its direct
support for major projects in developing countries with key insurance
and financial support for foreign corporate investment in developing
countries. Noting the increasing velocity of private capital flows
into the Third World- at least to selected regions and in selected
sectors-the Bank is placing increasing importance on its International
Finance Corporation (IFC), as well as its Multilateral Investment
Guarantee Association (MIGA), both corporate welfare enterprises.
The IFC provides loans to and takes equity positions in private
sector projects. It has a strange penchant for backing oil, mining,
gas and major banking investments. MIGA provides political risk
insurance and related to services to similar types of private
investments. Big, especially foreign corporations, are the main
winners from these projects, which frequently do nothing to promote
real development-or set it backwards.
What about Bank loans that are intended to address poverty?
It turns out that many of these are adjustment loans, which in
the past fiscal year for the first time accounted for more than
half of the Bank's total fiscal commitments. According to Bank
definitions, a whopping 69 percent of its adjustment loans were
poverty-focused (on a cure, supposedly, not to make things worse).
The World Bank's structural adjustment loans, combined with
those of the IMF, have wreaked havoc in developing countries.
Sub-Saharan Africa, the region of the world most subjected to
structural adjustment over the past two decades, has seen income
levels plummet and poverty increase. Developing countries that
have done well in recent decades have generally ignored key structural
Less well known, at least in the rich countries, is the effect
of the Bank's structural adjustment lending, focused on particular
industries. By and large, the purpose of these loans is to promote
privatization, marketization and deregulation of the targeted
Predictably, these schemes disadvantage the poor. Bolivian
labor leader Oscar Oliveres describes in an interview in this
issue how Bank-encouraged marketization led to skyrocketing water
rates and an appropriation of communal water rights, shifting
control from the poor to a subsidiary of the U.S. company Bechtel-until
a mass movement reversed the privatization scheme.
Also in an interview in this issue, Dr. Vineeta Gupta explains
how the Bank has encouraged the charging of user fees for health
care, with excruciating consequences for the poor. A system which
is supposed to exclude the poor from charges fails in practice-as
is typical around the world- meaning the user fees deny the poorest
access to healthcare services.
Peeling back the rhetoric and subjecting Bank operations to
even a cursory examination shows that little has changed, at least
for the better, at the World Bank. Most of what the Bank is doing
is harmful, not because of poor project implementation-though
this is surely a serious problem-but because the Bank is trying
to do the wrong thing. Its obsession with the multinational corporate
objectives of marketization, shrinking government and removing
social restraints on private sector economic activity has been
a disaster for the peopIe the Bank says it is trying to help.
Some critics review the record and urge major reform at the
But while there are certainly people working at the Bank with
good intentions, and one or another project sponsored by the Bank
may do more good than harm, an honest look at the World Bank shows
it is unsalvageable. It absorbs criticism and promises change,
but continues as before. In many ways, for example, current Bank
President James Wolfensohn's high-minded rhetoric about poverty
echoes that of his predecessor a quarter century ago, Robert McNamara.
In 1975, the Bank was churning out reports with titles like Assault
on Poverty. This year, the Bank issued Voices of the Poor.
There is also a more profound reason to call for a World Bank
shut down. It is time for major rethinking about the role of outside
financing, and especially loans, in development.
The purpose of external financing should be to enable a country
to buy goods and services from outside the country. Mozambique
does not need dollars to purchase locally produced or generated
goods and services, only for items from South Africa, Europe or
the United States.
While there are exceptions-medicines being a good example-most
of the basic inputs for a sustainable development program simply
do not require much or any outside funding. Schools, clinics,
land redistribution, clean water, ensuring food security-these
raise difficult questions about the mobilization and allocation
of local resources, but they do not require outside money.
And they certainly do not require external loans. Loans must
be paid back, in foreign currency. Clean water should be a top
priority of national governments, but it won't generate foreign
exchange. South Africa seemed to get things right when the African
National Congress said in its 1994 Reconstruction and Development
Program that it would accept foreign loans only for projects that
would generate foreign currency. (Unfortunately, the ANC seems
largely to have abandoned its commitment to the Reconstruction
and Development Program.)
All of this suggests that serious consideration should be
given to a diminished and more targeted role for foreign aid and
a dramatically reduced role for loans from public institutions
(though such a reduction would require a cancellation of the Third
World debt, payment of which now depends on a constant flow of
loans-with the money coming into poor countries and going right
back out as interest payments on prior loans).
In such a world, with drastically curtailed public lending,
there would be little point in maintaining a World Bank. Whatever
residual and beneficial functions would be left at the Bank could
easily be shifted to more appropriate institutions at the United
Nations and elsewhere.
IMF, World Bank, Structural