Pagina Principal


2. The World Bank Under Suspicion

By Monica Dias Martins*

Photo: Paul Van Wouwe

For more than half a century the World Bank has actively promoted the expansion of capitalism with ideas, and above all, with loans. The capitalist economic system is being universalized under the logic of accumulation, commodification, the maximization of profit, and competition, penetrating multiple aspects of human life and nature.

The World Bank has defined the concept of Development and the strategies to achieve it. Its macroeconomic policies, imposed as conditions attached to its loans, are dictated by the interests of the market economy. They promote economic concentration, inequality, injustice, instability and competition. The Bank's directives, implemented by governments who must assume the full risks, benefit multinational corporations more than working people and their communities.

Inappropriately called a multilateral institution, the Word Bank is a powerful instrument for the promotion of the ideology of modernization of the third World. The loans that the Bank makes increase the external debt of client countries, which reduces their ability to make productive public sector investments and leads to cutbacks in social services as funds are redirected toward servicing the debt. As a result, unemployment, poverty, hunger and violence all grow.

The influence of the World Bank goes well beyond its financial (some $30 billion per year for projects), and human resources (8,000 employees), and its purview (4.8 billion people in 100 countries). The Bank exercises political leadership among other international agencies, and influences governments, intellectuals, the media, businessmen, and some non-governmental organizations (NGOs).

Today protests against the World Bank are intensifying and diversifying. A former director of the Bank recently admitted that the countries that most reduced poverty had ignored the Bank's neoliberal policy measures called the "Washington Consensus." In the USA the organizers of the "50 years is Enough" campaign have carried out boycotts and pressured for institutional change in the Bank. Every year there are massive protests alongside the Bank's annual meetings, and well-founded critiques of the Bank are increasingly finding echo in the news media. Opposition led by Via Campesina (the global alliance of peasant and farmer organizations in more than 60 countries) to the Bank's so-called "market-led land reforms," is becoming generalized.

The Bank as an Institution


The World Bank Group, based in Washington, DC, is composed of five institutions under a single presidency: the International Bank for Reconstruction and Development (IBRD) (founded in 1946), The International Finance Corporation or IFC (1956), the International Development Association or IDA (1960), the Multilateral Investment Guarantee Agency or MIGA (1988), and the International Center for Settlement of Investment Disputes, or ICSID.

The creation of the latter two entities makes the mission of the World Bank Group very clear; attract and, above all, provide guarantees against catastrophic losses or conflicts for private foreign investment. In the field of international relations, the Bank acts as the arbitrator of disputes between foreign capital and host countries.

The IFC works exclusively with the business sector, and has a structure, staff and norms that are separate and different from the IBRD and the IDA, which together make up what is commonly referred to as the "World Bank." With 198 member countries and with activities in some 100 developing countries (4.8 billion people), the Bank restricts its loans to countries that are members of the International Monetary Fund (IMF). The annual meetings of the World Bank and the IMF are held jointly, revealing the consonance of thought and action between these two financial institutions.

In formal terms the maximum authority in the World Bank is the Council of Governors, which is made up of the Finance Ministers of the member countries. In practice, however, decisions over budgets, new loans, operating costs, and assistance strategies are made by the 8 countries (USA, Japan, France, England, Germany, China, Russia and Saudi Arabia) who have the permanent seats on the 24 member Board of Executive Directors. The remaining countries, grouped into 16 blocks, elect representatives for two year terms.

Voting is proportional to the monetary contribution of each country (in quotas required for membership), in marked contrast to the "one nation, one vote" principal that rules the United Nations (UN) system. Since the principal stock holder, at 17.87%, is the government of the United States, this gives the USA the final say on the most important issues, those that require 85% for approval, the ability to veto any decision, and the right to designate the President of the Bank who traditionally has been an American with a background on Wall Street. The Bank President maintains direct communication with the U.S. Congress and the Secretaries of the Treasury, State and Commerce Departments, the President of the Federal Reserve Board, and the Export-Import Bank of the United States (EXIM).

Currently the World Bank is led by James Wolfensohn, a former Wall Street investment banker, who is serving his second term. Nevertheless, the power that the USA exercises in the Bank is more due to its overall economic, political and military power than by its number of votes, although it is the latter that gives the USA the veneer of the legality of the decision-making process at the Bank.

In a text posted recently on the Internet, called "What we do," the Bank proclaims itself to be the number one source of development assistance. According to the Bank, they use their financial resources, highly qualified staff and extensive knowledge base to assist each developing country to follow a path of stable growth, which is sustainable and equitable, and thus permits them to combat poverty.
Financial Resources

The funds used by the Bank to fund individual and sectoral projects in both the public and private sectors, largely come from international capital markets, and are obtained by selling bonds. In theory anybody can acquire World Bank bonds. The central banks of the member states also contribute by paying quotas, in amounts that vary according to the economic status of each country, as measured by GDP. During the 70s and 80s, almost half of the money raised by the World Bank came from petroleum exporting nations like Iran, Saudi Arabia and Venezuela.
Nevertheless, the USA maintains control over the policies and the activities of the World Bank in other countries. Although they may participate financially, other countries have little real say in the decisions about project execution and supervision.

According to the Bank's statutes, loans are independent of the political regime of each country. But in practice there are sanctions for socialist and nationalist governments, though not against countries that violate human rights. Cuba has been absent from the World Bank since the year after the revolution that overthrew dictator Fulgencio Batista. Brazil was embargoed between 1958 and 1964, Chile during the Allende administration, and Poland, Czechoslovakia, Vietnam, Laos, Cambodia, Angola, Mozambique and Uganda during the Cold War period.

It is no coincidence that the best clients of the World Bank are the countries with the worst income distribution. Although the Bank speaks glowingly of "poverty alleviation" in it documents, there is no sign of this if one looks over the list of countries. What leaps out is the obvious preference of the Bank for governments that offer better conditions for foreign investors-like abundant, cheap and disciplined labor-and who have a good credit history (that is, they pay the interest on their foreign debt), and offer tax breaks, 'flexible' labor laws, few unions, and weak protection for the environment and domestic industry.

World Bank loans are generally linked to specific projects of diverse types. These range from energy (i.e. petroleum and natural gas) to mineral exploration, transportation, telecommunications, irrigation, agriculture, rural development, health, education, municipal services, to small businesses and tourism. For every dollar that enters a country, there is a required counterpart amount in local currency from the national government. This can be so much in terms of the national budget that the end result is that the national government spends its limited budget resources following World Bank formulas. The Bank has a special bulletin which is sent to large corporations, listing all upcoming Bank projects, so they can get their bids for contracts in on time.

The project funds that typically pass directly into the coffers of the foreign corporations who win the contracts to provide services, generates a multi-billion dollar market which is critical to maintaining world capitalism. This systematic passing of resources to multinational corporations is detrimental to debtor countries, who then find themselves importing products that could have been produced by their own domestic industry.

Brazil is a case in point. During the 1970s, national industry supplied the equipment needed to build and maintain hydroelectric dams. Twenty years later more than 80% was imported, as a result of projects financed by World Bank and Inter-American Development Bank loans.

It is imperative, for its very survival, that the World Bank continually expand its lending, to guarantee at any cost that countries keep paying the interest of their debts, to avoid catastrophic loss of confidence in international financial markets and in the member countries. The USA has shown clearly what its interest is in supporting international agencies-"without them we would be facing revolution"-said an American ex-President of the Bank.

Recruitment and Training

Since the Reagan administration, the management of the World Bank has been in the hands of a generation of "Chicago School" economists, with their neoliberal strategies, their quantitative models, their project cycles, and their market terminology (product, client). According to this ideology, the commonplace failures of projects funded by the Bank are not the consequence of structural adjustment, but rather are the fault of the recipient countries, because of their clientelism, cronyism, corruption, and influence peddling.

In 2000 the World Bank had 8,000 employees of 140 nationalities, most located at the headquarters in Washington and the rest in 67 local offices. The Bank staff enjoys prestige in academic and technical circles, in the public and private sectors. Their performance is judged by criteria of speed and efficiency, since the number of projects processed annually has grown from 20 in the 1950s to more than 300 today. The short time lines permitted for project design and bureaucratic procedures only allow for simple technocratic solutions to the complex problems of poor countries.

With a façade of neutrality, seriousness and objectivity, the Bank gives off the aura that its projects are subject to rigorous selection, show great productivity, and are carefully supervised. The project cycle, a bureaucratic routine created in the 80s and still in place, has six stages: project identification, preparation, initial approval, negotiation, supervision, and final evaluation. Bank staff typically follows these steps by rote.

In reality, this appearance of serious, uniform action is for show. What it hides are fierce disputes between Bank staff and local government entities over who will control the projects, and serious differences concerning the relative roles of the State and the market in achieving development. These differences have been on-going throughout the Bank's 50 years of existence. They also include differences in how poverty itself is conceived-for some it is a simple matter of a few quantitative economic indicators, while for others, poverty is both qualitative and multidimensional.

The Power of its Ideas

The central nucleus of World Bank thought consists of three goals and/or assumptions inspired by neoliberalism. They influence the guidelines, orientation, procedures and norms of everything the Bank does. These are:
1) The downgrading and minimization of cultural identity, values, customs and traditions;
2) The dismantling and delegitimation of national societies and policies, and of the idea of the sovereignty of the State;
3) Notions of market fundamentalism, namely that the Market is the vessel that carries within it socio-political rationality, and it is the principal agent of social welfare.

The Bank produces and disseminates ideas that become consensus, like the idea that underdeveloped regions require external assistance. In each country it is the Bank that determines the agenda of priorities to be addressed, the problems that must be overcome, their possible solutions, and the parameters by which the economy will be judged. The Bank's proposals are based on a toolkit of recipes that are virtually identical for all countries. They are always based on the private appropriation of natural resources, communal property and public resources, whether they are forests, rivers, oceans, land or minerals. Another key element is the emphasis on enhancing productivity through the intensive use of labor-saving technologies. According to the Bank, the poor people are an obstacle to development: they neither benefit particularly from its outcomes nor do they contribute much to obtaining it.

A case in point is Colombia. In 1950, the World Bank Chief of Mission for the country survey team, Lauchlin Currie, recommended providing incentives for family farmers to abandon rural areas, so these resources could be devoted to large-scale extensive cattle production to supply the growing U.S. market for animal protein. The principal brake on economic growth in Colombia, he implied, was the excessive number of campesinos (peasants), and there were only two ways to resolve this situation: either attract them to the cities, or expel them from the countryside via 'shock therapy.' He went so far as to say that while an economic policy could be designed to trigger the exodus of farmers from the countryside, a war could achieve the same purpose. It was ideas like this that guided subsequent government policies, according to economist Héctor Mondragon in his agrarian study of contemporary Colombia. He concludes that it is not so much that there are so many displaced people in Colombia because there is war, but rather that there is war precisely to displace people.

Beginning during the mid-1980s, the World Bank began to focus on interfering in local economies to facilitate so-called globalization. The various versions of this concept all share the premise that we are experiencing rapid changes in relationships between countries, driven by technology, the market, multinational corporations, and international agencies. The archetype of such World Bank interference is the "Structural Adjustment Program" (SAP), characterized by the imposition of deregulation, flexibilization, privatization, and a minimalist role for the State. The outcome is invariably greater dependence and growing poverty.

It is also the inverse of the path to development taken earlier by countries like England, the United States, France, Germany and Japan, which included the protection of national industry and agriculture, was largely based on the utilization of domestic capital and technologies, and strengthened the earnings of their populations and their internal markets.

Despite its formal status as a specialized unit of the UN system, the World Bank behaves independently of the UN. Since their inception, the ambition of both institutions has been to assume the leading role in formulating global economic policy. But the World Bank was able to achieve greater expansion of its ideas, activities, credit operations and personnel, thanks to generous financing by the economic superpowers, economic intimidation, political pressure tactics, and the use of financial reprisals. Thus the Bank was able to seize the role as the main arbiter of development policies.

The regional development banks for Latin America, Asia and Africa all operate under World Bank guidelines. The influence of the Bank also extends to the bilateral aid programs of Scandinavia, the Netherlands, Great Britain, and Canada, as well as private sector banks and investment funds.

The relationship that has developed between powerful Bank bureaucrats and government officials, businessmen, and more recently, NGOs, makes it possible for the Bank to have an unprecedented level of influence on the directions of economic and social policy. Project negotiations directly affect the internal and external decision-making of nations. The World Bank in effect determines the priorities reflected in public expenditures, and in this way, governments that have been democratically elected stop attending to the vital problems being faced by their citizens.

The World Bank in the Looking Glass

The past few years have seen growing and diversifying protests of the legitimacy, credibility and competence of the World Bank. The Bank has suffered criticism and pressure from its ex-employees, and from governments, intellectuals, journalists, social movements, human rights organizations, and NGOs.

For example, former Bank Vice President and Nobel laureate in economics, Joseph Stiglitz, said the structural adjustment imposed as conditionality for loans has impeded economic growth in recipient countries, driving them deeper into poverty. Economist Ravi Kanbur, who was in charge of the team that wrote the Bank's annual reports on development, said that inequality between countries is on the rise. A U.S. Congressional committee, lead by Rep. Allan Metzer, even proposed drastically cutting the funding and activities of the Bank.

During the 3rd World Social Forum, Jean Ziegler, Special Rapporteur for the UN Human Rights Commission, declared that the Bank has been destroying whatever small progress had been achieved by Third World countries. In fact, in the majority of the sessions at the Forum, the favorite target was the unilateralism of the development model being imposed by the international financial agencies.

The opposition to the Bank has been organized by networks like "50 Years is Enough," which brings together dozens of organization and carries out mobilizations, boycotts and educational campaigns. Lately the Bank's normally tranquil annual meetings have been marked by street protests in various cities around the world, which have even been covered by mainstream TV news. In some newspapers, like the prestigious Le Monde Diplomatique, it is now commonplace to find stories and opinion pieces critiquing Bank programs and their negative impacts.

Via Campesina, a global alliance of farmer and peasant organizations in more than 60 countries, has been organizing resistance to the Bank's "land market" policies. Direct action and mass protests by peasant movements in South Africa, Brazil, Colombia, India, Mexico and Thailand reveal the growing opposition to the "market assisted land reforms" imposed by the Bank.

* Monica Dias Martins is Professor at the State University of Ceará, Brazil, and researcher of the Social Network for Justice and Human Rights, also in Brazil, and the Land Research Action Network (LRAN). This text summarizes her presentation at the World Tensions Symposium held in Fortaleza, Brazil, in 2003.


3. The "Traps" inherent in Land Market Policies

4. Brazil

5. Colombia

6. Guatemala

7. India

8. Mexico

9. South Africa

10. Thailand

11. Zimbabwe

12. Positions of Via Campesina

13. Bibliography

14. Table of Contents