New York Times
July 6, 2000

World Bank and IMF policies have failed the poor, the environment and participating nations.

Pity the World Bank. Every month, the organization gets hit with
another scandal or resignation that sends its hefty public relations
operation into overdrive, working on damage control.

This month, it’s the bank’s $40-million loan to China for a project
that will resettle 60,000 people in an area that was once a province of
Tibet. The Dalai Lama, Tibet’s spiritual leader, has called it
“cultural genocide.”

Last week, the project took another blow when an internal evaluation
was leaked to the press. The bank’s independent inspection panel found
that the bank had violated most of its own safeguards in considering
the loan. For example, the bank had failed to adequately consult with
the people affected by the resettlement. Nor did it consider
alternative sites or other options–a major violation of the bank’s own
guidelines.

The bank’s latest embarrassment follows a very disturbing resignation
last month by Ravi Kanbur, the Cornell University economist who was
lead author of the World Bank’s influential 2000 World Development
Report. Kanbur quit because he came under pressure, reportedly from the
U.S. Treasury Department, to alter the manuscript so that it would
conform to the IMF/World Bank/Treasury’s orthodoxy on globalization.

That orthodoxy maintains that opening markets to international trade
and investment is the most important policy that governments can adopt.
Challenges to this view have been gathering momentum over the last few
years in both developed and underdeveloped countries.

Kanbur’s resignation is looking like a sequel to that of Joseph
Stiglitz, who was the bank’s chief economist until December of last
year. He was forced out after he criticized the International Monetary
Fund’s costly mistakes in the Asian financial crisis and in Russia.

The World Bank and the IMF insist that they know what’s best for every
country and that their policies promote growth and development. These
claims are generally accepted at face value, in many cases even by
their opponents. In fact, critics often accuse the bank and the IMF of
being overly concerned with economic growth and ignoring the needs of
the poor and not protecting the environment.

Yet their record on economic growth is their most spectacular failure.
Over the last 20 years, low- and middle-income countries throughout the
world have implemented the economic policies of the World Bank and the
IMF, often under the threat of economic strangulation. The worst
disaster has been in Russia and the states of the former Soviet Union,
which lost more than 40% of their national income in the 1990s. This is
worse than our own Great Depression.

Income per person in sub-Saharan Africa has declined about 20% over the
last 20 years. In Latin America, it has barely grown–maybe 7% over the
whole two decades.

By contrast, both of these regions showed vastly superior economic
growth in the previous two decades, before the IMF and World Bank’s
“structural adjustment” policies became the norm. From 1960 to 1980,
income per person grew 34% in Africa and 73% in Latin America.

The only region that has grown rapidly over the last 20 years has been
South and East Asia. But this region had similarly rapid growth in the
previous two decades. And these are the countries that have most
disregarded Washington’s instructions. China, which quadrupled its
national income over the last 20 years, does not even have a
convertible currency.

In short, there is no region in the world that the bank and the IMF can
claim as a success story, while their failures have been widespread and
devastating. That is why their top officials, when pressed to defend
their policies, will point to an individual country’s economy over a
relatively short period of time.

For example, in a recent news article, U.S. Treasury Secretary Larry
Summers cited Uganda and Poland as success stories for their economic
model. But Uganda, despite seven years of growth, is still 30% below
its per capita income of 1983. And Poland is very unrepresentative of
the IMF’s work in Eastern Europe and the former Soviet Union. Sadly,
most of the 19 “transition economies” in that region are still far
below their 1989 levels of income.

With such unchecked power, an incredibly long string of failures and no
serious reform in sight, perhaps the attention of reformers should turn
to downsizing these institutions. The simple slogan of the protesters
who gathered outside the World Bank and IMF headquarters last April may
turn out to be the best strategy for reform: “More World, Less Bank.”