This article was last modified on January 22, 2010.

Empire Strikes First: World Bank

Last month, we briefly examined the history and criticisms of the International Monetary Fund (IMF). This month we will be similarly dissecting its sister institution, the World Bank. As with the IMF, keep in mind that economics is a complicated field and can hardly be summed up in one or two newspaper columns. I strongly urge readers with an interest in the global economy to further explore these and other issues. In particular, I recommend “Masters of Illusion: The World Bank and the Poverty of Nations” by Catherine Caufield.

Ostensibly, the World Bank is committed to funding developing nations that are trying to expand and modernize their local economies, particularly in the areas of education, health, infrastructure, communications and government reforms. Certainly, this is not untrue in the general sense, and giving them the benefit of the doubt we can accept that their intentions are just. Any country can become a member so long as they are already a member of the IMF; today, 186 nations are signed on.

One concern is that the World Bank president is traditionally an American, as the United States is the bank’s largest shareholder. This makes sense, but creates an obvious problem: if the World Bank is heavily influenced by American economic policies, what is to stop them from pushing these policies on countries that would not otherwise see things in the same light? One solution would be to have the Bank’s twenty-four directors, who are divided equally around the globe, elect their own president or have such a leadership position be rotated. The current leader of the World Bank is Robert Zoellick, President Bush’s Deputy Secretary of State with ties to Goldman Sachs and Enron, and a very pro-Wall Street background.

Projects sponsored by the Bank have not always been to the benefit of the people. Following what is called the “Washington consensus”, World Bank tends to favor privatization of resources and deregulation. This opens up a country’s economy to corporate interests, often foreigners, who are not in the business of improving the quality of life. One of the biggest concerns today, and one that will only grow, is the privatization of water. Obviously, water is a necessary part of human life, and if any resource should be controlled by the government in order to keep costs down, water would be on top of that list. However, through World Bank initiatives, it has been placed more and more often in private hands for profit. As water grows scarce, the costs will naturally increase, and the poorest people will be the first to suffer, sparking disease that will harm a country as a whole, rich and poor. Some have speculated that in the near future wars will break out over water access in the same way they do today for petroleum. That topic could easily encompass an entire article and will not be addressed.

The projects often cause people to relocate, which is for the benefit of the investors and not the people moving. A dam in India saw 240,000 people moving to a location with poor land, unclean water, and no electricity. Another area of India had it worse when coal mines were dug. Pollution was released that tainted the water, food crops, and fish. 300,000 people were relocated, this time to slums without basic sanitation. Brazil has seen great swaths of rainforest logged to modernize the country, with one occasion resulting in a loss of forest the size of Great Britain. In Bangladesh, a project was set up to stop flooding, without consulting the people in the flooded region. Unknown to the Bank, the locals relied on seasonal floods to provide the proper soil for rice fields. They were able to stop flooding, but destroyed a primary food source in the process.

The icing on the cake is that the World Bank claims, and is granted, what is called “sovereign immunity”. In essence, they put themselves above the law and once a project is approved there is no recourse for a country if things go awry. The World Bank cannot be sued or appealed to, and there is no higher authority to turn to. The low-interest loans may seem beneficial, but if the long-term impact of the fine print is not considered, a country’s people may be losing their most basic human rights legally and without a voice or knowledge.

The Bank defends its policies and points out that despite a completely successful record, the overall trend in developing countries shows increased income, jobs, literacy rates and life expectancy. To what degree the Bank can take credit for these improvements is debatable. Certainly they are not the only organization committed to helping the less fortunate. With regards to current events, it should be noted that the World Bank did agree to provide Haiti $100 million in credits, a generous donation. What conditions, if any, are attached, I do not know.

Next month, a retrospective on one of America’s greatest unsung heroes: Helen Keller.

Gavin Schmitt ( fears that the problems that face us everyday come from the Rumsfeldian unknown unknowns.

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or another one of the writings of Gavin.

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