Probe International in the News

It’s time for the World Bank to close its doors

(October 22, 1996) For more than decade, citizens’ groups around world have been trying stop World Bank from wreaking environmental havoc, financial ruin, social harm throughout Third World. Bank’s charismatic president, James Wolfensohn, has pledged change “culture” Bank increase “openness, partnership, accountability, effectiveness Bank.”

But Bank’s attempts reform have been half-hearted. Its loans continue finance disastrous projects sink its Third World borrowers deeper and deeper into debt. It’s time Western countries acknowledge Bank an unaccountable institution, incapable reform, should shut down.

Since its formation 52 years ago, World Bank has built up disastrous record. has financed dozens of massive hydropower projects, like infamous Sardar Sarovar dam complex India, Pak Mun dam in Thailand; has supported road-building projects through heart Amazon, leading massive deforestation; has helped support toxic mining operations India, Guyana, elsewhere. And throughout its history, Bank has shown blatant disregard rights people communities most affected by its projects.

Evidence Bank’s shoddy record abundant continues grow, whether collected outside critics or internal investigators. 1992, two particularly damaging reports sponsored Bank revealed an institution out control. first an independent review Bank’s 10-year involvement controversial Sardar Sarovar dam, which documented how tens thousands people were being moved their homes into abject poverty accused World Bank “gross delinquency handling environmental matters.” Most damning, however, investigator’s conclusion problems Sardar Sarovar project were not an exception, but were indicative “chronic failings” World Bank. Meanwhile, another internal report found over one-third World Bank’s projects were failing, deterioration Bank’s loan portfolio “steady pervasive.”

More recently, review Bank’s portfolio Bank’s Operations Evaluation Department revealed that “one three [projects] judged not . . . have made an acceptable contribution development.” report concluded number projects with “satisfactory outcomes” “still far too low acceptable.”

unprecedented criticism within Bank itself, well citizens’ groups worldwide, has led the World Bank undertake massive campaign improve its image. Bank introduced environmental impact assessment procedures, an inspection panel investigate complaints against its projects an information disclosure policy designed give NGOs citizens affected Bank projects easier access Bank documents. Since assuming presidency June, 1995, James Wolfensohn has vowed bring “results-oriented” ethos to institution. He has chastised senior management about “lack trust” “cynicism” pervades Bank he trying increase “participation” working more closely with NGOs.

But these measures have had little, if any, effect practice. A 1996 Operations Evaluation Department study, for instance, revealed despite Bank’s insistence its borrowers perform environmental assessments (EAs) certain projects, “when EAs are finally completed, project design often already finalized, thus precluding meaningful consideration alternatives.” inspection panel has been toothless, information policy more effective withholding documents than releasing them, public participation process futile exercise for Third World people who still have means stop Bank projects threaten their communities.

Perhaps best illustration failure on-going “reform” within World Bank its record on involuntary resettlement. Since 1980, Bank policy has required people displaced project “improve restore their former living standards.” However, one internal review after another (there have been six since 1984), the World Bank’s own experts have concluded Bank has failed miserably enforce its own policy.

Despite its consistent record failure, World Bank basks blue-chip institution, having difficulty borrowing pension funds, insurance companies, corporations individuals — are happy buy World Bank bonds, yet few would lend money directly Third World countries are ultimate borrowers.

Bank takes its blue-chip status vote confidence its banking prowess, but status has nothing do with wise investments: backing World Bank loans are rich governments who have pledged repay bondholders should Third World governments default. fact, World Bank would insolvent without continuing bailouts its rich member countries which come form regular cash infusions, government guarantees, disguised write-offs its bad loans.

Bank itself has admitted many its debtors are unable pay back their loans. At World Bank’s annual meetings October, Bank endorsed debt relief plan, ostensibly relieve world’s poorest countries’ their unpayable multilateral debts. bailout mechanism, called Heavily Indebted Poor Countries’ Initiative (HIPC), will financed industrialized countries, multilateral institutions, an initial US$500 million contribution World Bank itself. lion’s share funds will return World Bank coffers form debt repayment its most vulnerable debtors.

But World Bank, whose triple-A cred rating depends part on its refusal write off bad loans, fears that financial markets cred agencies might construe debt facility Bank paying itself instead writing off bad loans. document leaked 1995 proposing plan, World Bank warned avoid such “self-entanglement,” debt facility must operate “a separate, arms’ length mechanism.” report added that financial markets will “need convinced approach signals departure prudent financial management policies expected multilateral institutions, therefore has bearing on their preferred creditor status.”

No amount clever engineering, however, can disguise fact HIPC Initiative new mechanism for taxpayer bailouts World Bank its Third World clients which has served so badly. simply another attempt World Bank deny obvious: that, despite its claims prudent investing hard-nosed management, has earned its triple-A cred rating based entirely on political commitments rich countries.

Neither World Bank’s precarious financial situation, nor its record failed loans can fixed rhetoric or policy changes. time recognize World Bank set up politicians lend other politicians and its constitution ensures immunity both public sector oversight private sector discipline. As such, is inherently unaccountable unreformable. World Bank should Third World favour close its doors good.

Andrea Davis, Development Today, October 22, 1996

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