Plunder With A Human Face

by Asad Ismi

Z magazine, February 1998


Lately the World Bank has been striving to project a caring image. First, there was its World Development Report (released in June) which emphasized the important role of government in improving health and education and reducing social inequality. "Without [an effective state]," the Report stressed, "sustainable development, both economic and social, is impossible." In July, the Bank announced that it would look at the growing poverty and income inequality that has resulted from the implementation of its Structural Adjustment Programs (SAPs) in the Third World, in collaboration with 30 non-governmental organizations (NGOs) which have criticized Bank policies for these effects. SAPs offer loans on condition that governments drastically reduce public spending in favor of repayment of debt owed to Western banks. James Wolfensohn, the Bank's president, has earlier warned that maldistribution of income threatened global stability.

At the World Bank's annual meeting in Hong Kong in September, Wolfensohn called for a bank "rooted in villages and poor countries" not in Washington. He has already announced plans to send his staff to villages to learn about poverty. In Honk Kong, the Bank and the International Monetary Fund (IMF) also pledged to fight corruption (especially in developing countries) which the Bank says flourishes when "economic policies are poorly designed, education levels are low, civil society is underdeveloped and the accountability of public institutions is weak." As Wolfensohn put it, "the Bank has taken the moral high ground. I will not accept that anyone else has a higher moral ground."


A Destructive Record

World Bank policies have devastated the Third World. Between 1984 and l990, developing countries under SAPs transferred $178 billion to Western commercial banks. So enormous was the capital drain from the South that one former Bank director remarked: "Not since the conquistadors plundered Latin America has the world experienced such a flow in the direction we see today." By severely restricting government spending in favor of debt repayment, the loan terms of the Bank and the IMF have eviscerated the state they wish to be "effective," leaving in its wake spiraling poverty and hunger fueled by slashed food subsidies and decimated health and education sectors. After

12 years of following World Bank and IMF-imposed policies, Latin America is going through "its worst period of social and economic deprivation in half a century." Of the region's 460 million people, nearly half are poor-an increase of 60 million in ten years. The number of Latin American billionaires rose to 42 in 1994 from six in 1987. Populations, overall, are worse off than they were in 1980. According to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), "the levels of [poverty] are still considerably higher than those observed in 1980 while income distribution seems to have worsened in virtually all cases.

SAPs imposed on Peru by the World Bank and the IMF pushed 4 million people into extreme poverty, almost halved real wages, and cut those with "adequate employment" to 15 percent of the workforce. Consequently, there has been a forced migration of impoverished peasants and urban unemployed into coca growing as an alternative to starvation. In 1991, in exchange for $100 million from the United States, Peru put in place the IMF "structural adjustment" clause opening its markets to U. S. corn. As a result, by 1995, corn cultivation had fallen tenfold and coca production had grown by 50 percent.

Under these conditions, corruption has flourished; indeed almost an entire economy has been criminalized. Increased coca production means more cocaine trafficking which has led to deepening official corruption in Peru as the amount of money in the hands of drug lords increases. Drug corruption has ensnared an increasing number of top military officers and Vladimiro Montesinos, the head of Peru's intelligence agency and a close advisor to President Fujimori. This is hardly new for the World Bank which has long financed corrupt dictators. Wolfensohn, who has pledged to fight corruption "wherever we find it" defined the phenomenon as "exclusive: [corruption] promotes the interests of the few over the many." Exactly what World Bank policies do.

About Africa, the "concerned" World Bank chief economist has admitted: "We did not think that the human cost of these [structural adjustment] programs could be so great and the economic gains so slow in coming." The World Bank predicts that by the year 200O, 300 million Africans will be living below the poverty line, a 50 percent increase over the 200 million figure for 1994. Between 1984 and l990, the net outflow of financial resources from Africa to the World Bank and the IMF totaled about $5 billion. Africa's GNP fell by 2.2 percent in the 1980s and by l990, its estimated per capita income was at the same level it had been in 1960.

From 1990 to 1993, Zambia spent $37 million for primary school education while giving 1.3 billion to international bankers. Annually, Ghana spends about $75 million on all social programs, less than 20 percent of its payments to foreign creditors. Uganda spends less than $1 per capita on primary health as opposed to $9 per person for debt repayment. These three countries (considered models by the World Bank for their diligence in carrying out austerity programs) sent $2.7 billion to international bankers in 1994.


Austerity for Others

While worsening poverty in the Third World with its extreme austerity measures, the World Bank has been loath to take its own medicine and has spent the money taken from necessary services in the South on luxuries for

itself. The compensation for its president is $105,000 a year while the senior 74 officers receive more than $120,000. Employees have access to a free health club and complimentary vacation travel. Michael Irwin, a former personnel manager, described Bank employees as "living and working comfortably in the Washington area, and venturing forth in luxury...out of touch with both the realities and causes of poverty in the Third World. "

The World Bank is currently renovating its headquarters for $314 million-more than $100 million above the original estimate. About $300 million of this comes from the $2.7 billion loan repayment of Uganda, Ghana, and Zambia in 1994. The remodeling includes the insertion of gold leaf on ceilings at an estimated cost of $1 million. Also being used is anegre, a very expensive wood from Africa. The wood took four years to collect and the company carrying out the work was paid more than $1 million.

Nor has the Bank's newfound "concern" for the poor extended to the Pehuenche tribe in Chile which is likely to be displaced from its ancestral forests by dam construction financed by the International Finance Corporation (IFC-the Bank's private sector arm). The IFC signed a secret agreement with Endesa (the Chilean utility in charge of constructing six dams) which included resettlement provisions for about lOO,OOO members of the 5,000 strong Pehuenche tribe. The Indians were not informed of this. Subsequent independent reports have been suppressed by Wolfensohn. Theodore Downing, an anthropologist who wrote one of these reports, has filed a complaint against the Bank and the IFC, charging them with racism in the Pehuenche's treatment. According to one observer, " [Wolfensohn] and his subordinates have partaken in a conspiracy that will see the Indians either 'resettled' at higher elevations which could see them die of cold or scattered in shiftless alcoholism on the outskirts of tourist or corporate enclaves. This is what is meant by 'ethnocide'."


The U.S. Connection

It is hard to believe that the World Bank did not know about the disastrous effects its policies would have on the Third World whatever its officials might say. The Bank is dominated by the United States and has long functioned as an arm of U.S. foreign policy. The most notorious case of U.S. manipulation of Bank policy was the ending of loans to the elected government of Salvador Allende in Chile-the first step in a U. S . -planned destabilization. Richard Nixon and Henry Kissinger used the Bank to (as the president stated) "make the Chilean economy scream." The subsequent economic crisis "paved the way for the bloody coup of 1973." The U.S. then poured aid on the military dictatorship of Pinochet who killed Allende and 5,000 to 3O,OOO Chileans. From 1973 to 1976, the World Bank gave Chile $350.5 million, almost 13 times the $27.7 million it gave during the 3-year Allende presidency.

During the 1980s, the Bank's SAPs were "the second prong of the massive assault that Washington mounted against the South." The other prong was "low-intensity conflicts" (LIC), the U.S. Iaunched against governments in Afghanistan, Angola, Nicaragua, Panama, and Grenada, and against liberation movements in El Salvador, Guatemala, and the Philippines. Susan George has called the World Bank-IMF debt management strategy, "financial low-intensity conflict" (FLIC). U.S. officials are clear about the link between economic and military strategies in controlling the Third World. The Presidential Commission on Integrated Long-Term Strategy stated in 1988: "We... need to think of low-intensity conflict as a form of warfare that is not a problem just for the Department of Defense. In many situations, the United States will need not just DoD personnel and material but diplomats and information specialists, agricultural chemists, bankers and economists...and scores of other professionals."

Robert McNamara, who become the Bank's president in 1967, best epitomized the close U.S. connection. McNamara had been Secretary of Defense before being transferred to the World Bank by President Johnson. The Secretary had grown disillusioned with his idea of bombing North Vietnam since this had failed to stop Northern support for insurgency in South Vietnam. One could conclude that McNamara went from bombing the Third World to starving it.


New Strategies

FLIC succeeded in bringing economies in Asia, Africa, and Latin America to their knees. Even nationalistic elites have rejected industrialization strategies in favor of supplying greater amounts of raw materials to the North as advocated by the Bank. However, the combination of LIC and FLIC may have succeeded too well, creating a situation that the Bank may not be able to control. The weakening of Third World governments has opened up a Pandora's Box of social problems ranging from outright state collapse (as in Somalia and Afghanistan) to the increasing hold of drug traffickers on states (as in Colombia, Peru, and Mexico.) Having weakened the state to a dangerous extent, the U. S. and the World Bank are unable to deal with the consequences and this may be one reason for the latter's current stress on government. It is also difficult for the Bank to work its will on Third World societies if there is no state to work through.

NGOs can also be instruments for carrying out Bank policies especially where states are weak. This could be one reason for the Bank's recent consideration for their criticisms of its policies. Involving NGOs in looking at poverty created by SAPs seems a pointless exercise since there is no dearth of such information but this could be an effective method of co-opting such institutions.

The success of LIC and FLIC in defeating nationalistic Third World regimes has also made it necessary for the World Bank and the IMF (like the Pentagon and the CIA) to find new roles for themselves; hence the sudden concern for poverty and corruption exhibited in Hong Kong. In an immediate sense, the insincerity of this concern is most vividly displayed by the fact that, in the same breath, the two institutions urged Third World countries to liberalize their capital markets. Such a step could put developing economies at the mercy of Wall Street speculators and further reduce the ability of governments to deal with the problems of health, education, and poverty. Many Southern governments made clear their opposition to such liberalization in Hong Kong but the IMF, backed by the Group of Seven leading industrialized nations, is going to push ahead anyway.

The insistence on capital liberalization is revealing of the true agenda of the World Bank and the IMF since 1945: fully integrating the Third World into the global capitalist system in the subordinate position of raw material supplier and open market. The fulfillment of this agenda has involved the use of U.S. military power in combination with World Bank-IMF economic programs to crush Third World governments aspiring to independent development. No talk of poverty can hide such a brutal enterprise.

IMF, World Bank, Structural Adjustment