BY SEAN HEALY
As protesters from around the world were gathering outside his Washington, D.C., office on April 16, World Bank president James Wolfensohn was rehearsing his riposte: you're not the defenders of the poor, he would tell his critics, we are.
He would point to the WB's shiny new "mission" ("fight poverty with passion and professionalism, for lasting results"); he would reveal how hard the WB is working to "build dynamic coalitions" with member-countries and non-government organisations; he would tell of how brand-new initiatives were going to create "a country-owned, holistic approach based on a long-term vision and strong partnerships, focussed on results".
Most of all, he would speak to them in the WB's new lingo — "civil society", "partnerships", "stakeholders", "social capital" — and hope they drowned.
Some were fooled. A group of non-government organisations (NGOs), InterAction, which includes Save the Children, World Vision and 18 others, wrote to Wolfensohn "deeply concerned at the impression created by some of our NGO colleagues in the streets this week that the World Bank and the IMF [International Monetary Fund] are at serious loggerheads with the entire not-for-profit community".
But most saw Wolfensohn's riposte for what it was: public relations babble.
In contrast to its "twin", the IMF, which unashamedly maintains its obsession with "macro-economic stability", the WB has, since Wolfensohn became president in 1995, made a serious attempt to repackage itself. Now it wants to be seen not as the funder of choice of Third World dictators, nor as the institution that unleashed the debt plague, but as "the world's premier development agency".
But the WB's mission still rests on a simple, false syllogism: "Sustained economic growth is essential for poverty reduction", "the private sector is the main engine of growth" and therefore, strengthening the private sector is the key to poverty reduction. The WB can thus be little more than a corporate welfare agency, one run by the world's richest countries in the interests of their business classes, with the leverage to interfere at will in the policies of its ever-poorer debtors and the funds to make sure they keep coming back for more (in the 1999 financial year, it lent or invested US$32.6 billion).
Adjustment
The World Bank Group is a complex of four conjoined financial institutions. Its two largest institutions are the International Bank for Reconstruction and Development (IBRD), which lends money to low- and middle-income countries for social infrastructure and "capacity building", and the International Development Association (IDA), which gives "soft loans" or credits to the very poorest countries.
The two other bodies deal exclusively with private investors. The International Finance Corporation (IFC) finances private investment in member-countries while the Multilateral Investment Guarantee Agency (MIGA) provides guarantees to private investors against loss caused by non-commercial risk.
The IBRD and IDA make two basic types of loans: structural adjustment loans, either to restructure particular sectors (SECALs) or to restructure economy-wide (SALs); and investment loans, which fund the building of specific infrastructure projects.
To qualify for a loan or credit, a country must be a member (the IBRD has 181 members, the IDA 160) and must agree to carry out whatever "conditionalities" the WB makes, up to and including signing a structural adjustment program (SAP) to radically restructure the entire economy in favour of "private sector-led growth", specifically Western capital.
In the 1999 financial year, IBRD/IDA adjustment lending (US$15.3 billion) for the first time exceeded investment lending (US$13.7 billion). Twenty eight countries received an economy-wide SAL and 18 received a sector-specific SECAL, all of which aimed at creating more "business-friendly" trade and investment regimes.
Such loans "helped" Bosnia-Hercegovina to privatise its banks, Morocco to deregulate every sector of its economy, Honduras to "restructure public institutions and employment to improve public finances" (sack public servants), Ghana to lure foreign investment by establishing a low-wage export processing zone, the Solomon Islands to deregulate after the collapse in prices for its export logs and Cote d'Ivoire to sell off its public roads authorities.
The WB claims that 69% of its adjustment lending in the 1999 financial year was "poverty-focussed", insofar as many loans sought to mitigate the disastrous social effects of its own economic dictates. In 1999, it lent Poland US$300 million to pay for redundancy packages for coalminers put out of work by WB-enforced privatisation policies and it lent Indonesia US$600 million to fund a "safety net" for those hit by its US$1.5 billion structural adjustment lending, which demands major cuts to government subsidies on basic commodities.
An internal WB study, leaked to the Financial Times, found that, in 54 SALs and SECALs made between July 1997 and December 1998, "The majority of loans do not address poverty directly, the likely economic impact of proposed operations on the poor or ways to mitigate negative effects of reform". The same study also found that fewer than 20% of adjustment loans included any environmental assessment.
Investment
The remainder of the WB's lending — investment lending — is even more directly aimed at Western corporate gain.
More than half of such lending goes towards projects designed to build the necessary infrastructure for the further penetration of Western capital: telecommunications, energy generation, water supply, roads, and oil and gas pipelines. The WB is the greatest single source of funds for large dam construction, for example.
Many of these projects have devastating social and environmental impacts: dams flood peasant villages without proper compensation, freeways cut through urban slums and multiply car pollution, and roads allow easy access to untouched rainforests.
The WB-funded Chad-Cameroon oil pipeline, for example, involves drilling 300 oil wells in southern Chad and constructing a 1300-kilometre pipeline through forests inhabited by indigenous pygmy people to Cameroon's Atlantic Coast. It crosses major rivers 17 times and yet has no oil spill management plan. There are no plans for any of the wealth created to be reallocated to indigenous social development.
The prime beneficiaries of these investments are Western transnational corporations. The Chad-Cameroon pipeline is a joint venture with oil giant Exxon, which has annual profits four times the budget of Cameroon and 40 times that of Chad. A natural gas pipeline being built through the world's largest wetland, the Pantanal, on the Bolivia-Brazil border, is a joint venture with Enron and Shell.
The IFC is even more obvious in its approach. The largest source of direct investment in private sector projects in the Third World, in the 1999 financial year the IFC led private consortiums into 79 countries, investing US$3.6 billion of its own funds and mobilising much more in private funds.
These investments have included such "poverty reduction" projects as luxury hotels in Egypt, goldmines in Kyrgyzstan, Papua New Guinea and Guyana, oil exploration in national parks in Guatemala and Domino's Pizza franchises in South Africa.
In 1995, Lawrence Summers, now US Treasury secretary and then Treasury undersecretary for international affairs, testified in Congress that for every dollar the US puts in the WB's coffers each year, it gets $1.30 in procurement contracts for US transnationals.
Even when the project is not directly to the benefit of foreign investors, it rarely benefits local people.
Brazil's Movement of Landless Rural Workers (MST), has claimed that a much-vaunted WB "market-based land reform project" has resulted in increased land prices, widespread corruption and greater power for the landowner-dominated local and regional governments which administer the project.
The "China Western Poverty Reduction Project", to which the IDA and IBRD have lent US$160 million, will transfer 58,000 Chinese farmers into a Mongolian and Tibetan autonomous area, reducing the Mongol population from 69% to 4.5% and setting up an inevitable land conflict between the farmers and the nomadic Mongols.
Master plans
The one significant area of WB lending policy which has changed is a greater emphasis on society-wide "development" strategies, in part a response to criticism that it didn't take into account poverty indicators other than gross domestic product per capita.
In 1999, the WB announced two new initiatives: the "poverty reduction strategy papers" (PRSP), to be designed jointly between itself, the IMF and the member-country, and the "comprehensive development framework" (CDF), to be designed by the member-country as an all-rounded "matrix" of economic and social policies. The emphasis in both is supposed to be on wide consultation with "stakeholders", including NGOs and local communities.
The CDF is still in the pilot stage and shrouded in rhetoric. The PRSPs already negotiated, however, show that they simply reproduce the "policy framework papers", the master plans by which the WB and the IMF used to coordinate the policy prescriptions contained in their structural adjustment programs.
Tanzania's interim PRSP, for example, commits it to "maintaining the gains in macroeconomic stability of recent years" ("gains" which have reduced school enrolment from 93% in 1993 to 66% now), privatisation of its water and electricity companies, pro-business tax reform and the "transformation" of the Tanzania Investment Centre, which regulated foreign capital, into "an effective service centre for investors".
The PRSPs contain further dangers, however. By extending their focus from economic policy to social policy, and by requiring member-countries to sign them as a precondition for any loans, the PRSPs extend WB powers to interfere in virtually all aspects of government under the cover of "ensuring good governance", "technical assistance in public management" and "anti-corruption strategies".
As part of reforms which "reduce opportunities for corruption" in Madagascar, for example, the WB has taken from the government the power to allocate rights and licences in the mining, fishing and tourism industries, making the granting of such licences "less discretionary and more automatic".
The poster boy for these new "holistic" initiatives is Bolivia, which is one of 12 pilot countries developing a CDF and is supposedly well-advanced in the negotiation of its PRSP. The WB loves the Bolivian government.
The Bolivian people feel somewhat differently. In spite of the "consultations" the government was supposed to have held with all sectors of Bolivian society as part of its CDF and PRSP process, on April 8 its president declared martial law.
For the previous week, Bolivians had marched, demonstrated and struck against the sale of part of the country's water supply to a joint US-Italian company. The privatisation had been one conditionality of the WB's loan assistance to Bolivia; the people obviously saw this particular "poverty reduction strategy" quite differently from the World Bank.