The World Bank – does it cash in on the deprived?

Michael O’Leary, Courtesy of Lanka Monthly Digest, 11 October 2011 edn … also see http://lmd.lk/

The World Bank’s (WB) official goal is the reduction of poverty and its function is to provide loans to developing countries for capital programmes. In the 1940s and ’50s, the bank adopted a conservative approach and its level of lending was low. From 1968, its President Robert McNamara shifted policy towards measures like building schools and hospitals, improving literacy and agricultural reform. Keynesianism was the ideology of the lender’s bureaucrat-economists, whose ideals echoed the domestic policies of the US governments of the time – LBJ’s Great Society, with its emphasis on growth and redistribution as a remedy for poverty.

McNamara’s Treasurer Eugene Rotberg acquired capital from the global bond market. Ironically, Swiss banks (many of which hoard much of the money looted by dictators from developing nations) contributed a substantial share of these funds. Unfortunately, from 1976 to 1980, debt levels in developing nations rose at an average annual rate of 20 per cent.

The Reagan administration suspected WB of socialism. The boys from Chicago dominated economics with the new orthodoxy that the parasitical public sector interfered with the harmonious operation of the markets. After 1982, the bank was able to dictate terms as the lender of last resort, because commercial-bank loans to developing countries had completely dried up. Much of its lending was now for servicing Third World debt.

World Bank structural adjustment programmes aimed at streamlining the economies of developing nations were, according to UNICEF, responsible for “reduced health, nutritional and educational levels for tens of millions of children in Asia, Latin America and Africa”.

Environmental groups and NGOs were incorporated into the bank’s ethos, to mitigate criticism. Some NGOs recognised that in order to survive in a competitive market, they had to adopt an enterprise culture. Successful NGOs became more professional. Activists became businessmen, managers and politicians, taking on staff similar to those who worked for the organisations they had previously opposed. The World Bank understood that NGO professionalism could be put to use.

The lending institution paid NGOs generous commissions to manage funding and development projects on its behalf. Projects with NGO participation increased from five per cent in 1988 to 47 per cent in 1997. Although they still like to bask in an aura of holiness, the main function of NGOs has long been to provide a career for the ambitious – rather than a vocation for the idealistic. NGO links with The World Bank can lead to even more lucrative careers in inter-state organisations.

WB learnt obfuscatory cant from its NGO partners. By stressing citizen ‘participation’, institutional ‘transparency’, respect for ‘the rule of law’ and the flourishing of ‘civil society’, the bank was seemingly camouflaging its authoritarian preference for imposing its own doctrines. In spite of the permeability between the bank and NGOs, criticism continues.

The main point made by critics is that the bank, while representing 187 countries, is run by a small number of powerful countries dominated by the US. It imposes doctrinaire free-market policies which can be lethal for the weak economies of developing countries. It often seems that different nations are indistinguishable and ready to receive the ‘uniform remedy of development’. Western practices are imposed and traditional values rejected.

The International Finance Corporation (IFC) – the bank’s private-sector lending arm – increasingly uses financial intermediaries such as private equity funds and companies associated with tax havens. According to its critics, WB has a shameful record of funding corruption – for example, they cite the Lesotho Highlands Water Project, Newmont Mining projects inPeruandGhana, and the Chad-Cameroon oil pipeline.

Neo-liberal imperialism leads to the assumption that poor countries cannot modernise without foreign help. In the 1990s, this ‘assistance’ may have meant blackmailing developing countries into accepting the Washington Consensus – deregulation and liberalisation of markets, privatisation and severe cuts in the public sector and undermining sovereignty. Health and education are cut and essential utilities like water are handed over to foreign entrepreneurs. These policies have been imposed without concern for the social effects on the target economies, and this has left the bank open to charges that its main objective is to furtherUSinterests.

Under incumbent President Robert Zoellick, The World Bank is making an effort to change its image by throwing open its treasure trove of data and talking the talk of change. Nevertheless, despite paying lip service to openness and democracy, the US allows voters in developing countries no control over policies imposed by Washington-based financial institutions.