Environmental devastation, poverty exacerbation, and human rights violations are the products emerging from the temple of international capitalism — the World Bank. Established in Bretton Woods, New Hampshire in 1944, with the goal of reconstructing war-torn economies and developing the non-industrial world, the World Bank's lending has grown to over $25 billion per year to governments of developing nations — over ten times the level of U.S. development aid. As the world's largest supplier of development capital to the public sector in the poor world, its policies are spearheading radical social, economic, and environmental transformations of the planet.
Responding to increasing criticism of its lending practices, the World Bank established numerous policies over the last decade that would help establish itself as a responsible global citizen, respectful of the environment and the world's social needs. Unfortunately, the overwhelming majority of all loan projects are approved and managed with severe violations of these policies.
In 1994, fed up with the social, environmental, and economic devastations they observed, several environmental and social justice organizations collaborated in drafting a platform called "Fifty Years Is Enough" which calls on the Bank to abandon its offensive behaviors, open its operations to scrutiny, and forgive a portion of its loan portfolio. Many organizations eagerly signed on, and the Sierra Club was the one hundredth organization to sign the platform and join the Fifty Years is Enough U.S. Campaign, which now has 168 member organizations. Internationally, there are over 340 organizations in over 50 countries. [Ed. note: Published article shows lower numbers from earlier draft; correction memo was lost.] Larry Williams, Sierra Club Director of International Projects, serves on the Steering Committee of the U.S. Campaign.
One of the largest and most controversial projects under consideration at the Bank is the Arun III Hydroelectric Project (the Arun Dam) in Nepal. This project has received criticism from environmental groups from Nepal and the rest of the world. These groups acknowledge the need for development in Nepal, a country where one child in eight dies before reaching age five and where the highest development priorities ought to be basic child health care and education, and agriculture for domestic consumption.
The scale of Arun III is ludicrously disproportionate to the needs of Nepal now and in the near future. The $1 billion project would cost more than the entire annual national budget and would involve constructing a 74-mile access road through a remote area, which would make likely the logging of the Arun Valley forest, one of the last intact forests of the Himalayas.
Understanding the need to develop water and energy resources on a smaller scale, the Nepal group Alliance for Energy has developed concrete proposals for small and medium scale dam projects, which could be brought on line sooner than Arun, and by virtue of their distributed layout, provide more electricity to needy rural communities.
The environmental impact of dams, including flooding upstream river valleys and interfering with fish migration, accelerates rapidly with the height of the dam. Reservoirs behind large dams also fill with silt more rapidly. The Alliance for Energy's alternative system of small dams would have smaller environmental impacts. To further reduce environmental damage, the Alliance selected sites near existing roads.
[Ed. note: this paragraph was edited out of the Yodeler.] In October 1994, the Arun Concerned Group, a coalition of Nepali organizations, filed the first-ever claim with the World Bank's new Inspection Panel. The Inspection Panel was supposed to be a body independent of pressure from Bank management. Despite attempts by Bank management to trivialize the complaint, the full investigation into whether the bank violated its own policies in planning the Arun Dam is now underway.
[Ed. note: a few days after this article was published, incomng World Bank President James Wolfensohn announced that the World Bank would not participate in the Arun Dam. This represented a significant victory for the anti-Arun Dam forces in Nepal, and the German organization Urgewald, which worked hard to build opposition to the Arun Dam.]
Given the wide range of voices calling for canceling Arun, or at least postponing the decision pending further study of the project and alternatives, why has World Bank management continued to promote it? The Bank is tripping over itself to answer that question. In 1992, the World Bank commissioned a Bank Vice President, Willi Wapenhans, to study the Bank and make recommendations for improvement. In his "Report of the Portfolio Management Task Force," Wapenhans characterized the Bank as having a "culture of approval." He observed that the careers of Bank staff depended more on the volume of loan money they got approved than on the quality of the actual projects. Project quality had declined to the point that over 37 percent of the Bank's lending went for projects in states of failure.
The "culture of approval" comes both from internal incentives on Bank staff, and also from external pressures from lending countries. For example, the Arun Dam, so disproportionate to the existing economy of Nepal, is far beyond the capacity of Nepali engineering and construction firms to get more than a tiny piece of the action. Most of the money would be paid to firms in the rich countries that control Bank lending.
The Alliance for Energy alternative projects would be within the capacity of Nepali firms, helping to develop their own economy — but denying profits to the larger firms in the developed world.
The Arun Dam is just one of many environmental disasters in the past and present of the World Bank. Many other large dams have been as detrimental. For example, in western India, the Bank promoted the Sardar Sarovar (Narmada) Dam and Power project. The Bank continued to approve and fund the project despite continued contract violations by the Indian national and state governments.
Among the more egregious violations was of the Bank's Resettlement Policy, which requires that populations forced to relocate be given alternative lands and incomes at least as good as they had before. The populations of many displaced villages are still awaiting their new homes and communities. Others have moved into lands which proved to be far more marginal than their original holdings. Still others have crowded into the urban slums, aggravating the overloading of the urban infrastructure. The basic steps of resettlement — identifying the affected populations (numbering over 150,000 persons in villages in three Indian states), and planning for their relocation — were supposed to be done in 1985, before construction began.
After eight years of protest from Indian and international NGOs, the World Bank commissioned an independent review of the project. The Morse Commission's report in June 1992 severely condemned the project. Months later, in March 1993 the Bank abandoned the Narmada Dam project as it neared completion.
Despite international criticism and ongoing domestic protest, the national government of India is continuing to build it.
Although the World Bank's rules require it to enforce the provisions of its original loan agreement, the violations of environmental and resettlement conditions continue. Families are staying in some of the villages which will be flooded during this year's monsoon, some in defiant refusal to leave their homes and villages; others, though willing to move on, remain simply because the Indian government has failed to provide satisfactory alternatives. Many of the people who resettled 5 to 7 years ago are now demonstrating, protesting, and even returning to their original and soon-to-be-flooded villages, or, if already submerged, as close as they can get to them. Contrary to government promises, they were never provided with adequate housing, drinking water, and arable or irrigated land.
The World Bank's environmental mismanagement isn't limited to large dams. The bank aggressively promotes non-renewable energy projects rather than promoting energy efficiency and conservation, or sustainable energy alternatives such as wind and solar. Programs to offset the environmental degradation are microscopically funded compared to the massive energy development. For example, in China, the $650 million for coal-fired power plants and other fossil-fuel projects is over 300 times greater than the $2 million for reducing CO2 emissions.
The model of agriculture that the Bank is promoting isn't based on small farmers growing food for their own people using natural pest control. To the contrary, it is based on large-scale culture of export crops using toxic pesticides.
To increase export earnings, the World Bank encouraged Ghana to grow more cocoa. The government of Ghana cooperated and invested almost as much in cocoa as all other agricultural products combined. Food security declined as rice farmers lost business to cheaper imports. Although these countries were already net importers of grain, in the 1960s, the World Bank promoted cotton for export rather than grain for domestic consumption in Senegal, Mali, Burkina Faso, Niger and Chad — which contributed to the Sahel famine of the mid-1980s.
For over twenty years World Bank presidents and senior management have constantly repeated that "poverty alleviation is the Bank's overarching objective." The World Bank's prescription for alleviating poverty is to encourage countries to reform their economies through Structural Adjustment Policies (SAPs), but these SAPs lie at the heart of their worsening plight.
To reduce government spending. SAPs could require borrowing countries to restrain military expenses, subsidies that benefit the wealthy, and perquisites for holders of high office. But instead, SAPs are forcing governments of poor countries to cut support for education, health care, and basic food subsidies. Meanwhile, under the terms of Structural Adjustment Loans, worker rights are being decimated. The Bank's recently-released World Development Report 1995: Workers in an Integrating World (WDR) rejects linking internationally recognized worker rights — including the rights to form free and independent unions, to bargain collectively, and to strike — to international trade and investment agreements. WDR declares that in the developing world, "monopolistic" unions have more bargaining leverage than transnational corporations, and that inflexible labor markets, minimum wage laws, and workplace health and safety programs are primary causes of unemployment.
Mexico was, until recently, the World Bank's showcase success story. While foreign investment helped spur economic growth, this growth was concentrated in the hands of the richest sector. Serious problems brewed below.
The Mexican government implemented virtually all of the Structural Adjustment Policies promoted by the World Bank, including reducing health care expenditures. During the 1980s, health spending declined from 4.7 percent to 2.7 percent of the budget. As a result, between 1980 and 1992 infant deaths due to nutritional deficiencies almost tripled. And in the past few months, the bubble has burst, and the Bretton Woods Institutions are working to bail out foreign investors of Mexican government bonds.
To help gather the money for this bailout, the World Bank is contemplating a large cut in the Northern Border Environmental Project. This $368 million project is designed to mitigate and clean up pollution generated along the U.S. border, caused in part by the maquiladoras. President Clinton helped secure votes for NAFTA by promising just this kind of environmental project, now in danger of cancellation in order to finance the bailout.
Of course, many countries suffer from economic inefficiencies that can and should be reformed. (We should start here in the U.S. by reducing our uneconomical overdependence on automobile transportation.) "President" Mobuto Sese Soko of Zaire, for example, has 11 country getaway homes in Belgium and France and 51 Mercedes-Benzes. To comply with the terms of structural adjustment, rather than selling off some of this vast estate, he fired 7000 teachers — in a country where only half the primary-school-aged girls are actually enrolled.
Over one billion people on earth live in absolute poverty, defined as the inability to afford the basic needs of life, including food, shelter, clothing and heath care. If we could take one country and increase the incomes of the poor to the point where they could afford life's basic needs, while assuring that the incomes of the non-poor didn't fall, then necessarily, the average national income (per capita GNP) of that country would have to increase.
From this obvious fact of arithmetic, the World Bank leaps to the converse conclusion: that steady increases in per capita GNP are necessary in order to alleviate poverty. As a result, the Bank promotes GNP growth, while stumbling over the uncomfortable fact that GNP is not a measure of economic well-being of an economy or the individuals in it. GNP does not reflect the depreciation of depleted and degraded natural resources. To increase GNP, the Bank promotes unsustainable resource extraction of minerals and forest products. This impoverishes the people by destroying the forest ecology including wildlife, and shuts off future sustainable resource use.
Most significant economic activity is financed by debt. People buy homes for 10 or 20 percent down, and pay off their mortgages for most of their working lives. Corporations sell bonds or borrow from banks. Sometimes people or corporations make mistakes, or are unlucky, and their ventures prove unprofitable. When a corporation goes bankrupt, its assets are liquidated, and creditors, including the banks that lent it money, get pro-rata shares. This gives the banks incentives to scrutinize loan applications to reduce the risk of default.
But the World Bank is different. If any project fails to produce economic return, the borrowing country is obliged to use its sovereign power of taxation and force its citizens to pay. Several times, countries have threatened to stop paying back World Bank loans, but so far, no country has carried out that threat. Each time there's a crisis, the Bank and the nation's economic leaders get together and work out a new arrangement where short-term obligations are rolled over into longer-term debt.
The World Bank has two threats against would-be defaulting countries: First, the Bank is a "Good Housekeeping Seal of Approval" and other lenders are more likely to lend money to countries that are receiving and paying back World Bank loans. The Bank has persuaded the world's finance ministers that if they default "nobody will lend you money again." Poor countries, ever in search of development capital, haven't dared find out if this is true.
But there's a second threat that isn't as obvious. Zaire's Mobutu isn't the only leader living high while his people suffer in poverty. Leaders of countries purporting to be more democratic than Zaire are also deeply involved in misappropriation of international capital from project loans to their personal consumption. In the intense crisis negotiating sessions, the Bank can threaten to expose the corruption and bring down these regimes. The leaders capitulate and promise yet another round of austerity measures.
Most of the World Bank's ideas for lending projects come from its own staff or from suggestions from the wealthy countries that contribute to it. Although the World Bank's own accounting shows that over 37 percent of its loan portfolio is in varying states of economic failure, the Bank has never said "Sorry we suggested that dam to you. Looks like it didn't produce any electricity. Let's forget the whole thing." No. The Bank has always held the borrowing country responsible for its own mistakes.
Even if we didn't care about the people who are forced to take their daughters out of public school, because their government cut educational subsidies in favor of keeping interest payments flowing, we should still care about the problem of third world debt, because it is hurting us in measurable ways.
Even poor people are customers for U.S. goods. In 1992, sub-Saharan Africa (the world's second-poorest region) imported $6 billion worth of merchandise from the U.S. Each $1 billion corresponds to about 20,000 jobs in the U.S. If these countries were not spending so much of their money just paying interest, they would have more money to buy U.S. products and create more jobs.
Debt also hurts us environmentally. As noted above, to help "solve" the debt crisis in Mexico, the World Bank is considering cancelling loans to mitigate the pollution generated by maquiladoras near the U.S. border.
Of the World's 24 most indebted countries, 16 are rapidly cutting down their forests. Brazil, the most indebted developing nation, is deforesting at a rate of 2.3% per year. Deforestation causes more than one sixth of global greenhouse gas emissions, resulting in global warming. And much of the world's biodiversity lies in the tropical rainforests being slashed to pay interests on international debt.
So if debt is hurting the world's poor, the environment, U.S. exports and jobs, who is benefiting? To find the answer, look who controls the World Bank. The World Bank's Board of Governors, which set its overall policies, are responsible to the Departments of Treasury and Finance Ministries of the wealthy nations.
These departments and ministries in turn respond to the wishes of the Wall Streets and the Bourses. Eventually, some country is going to default on its World Bank loans, and the world won't come to an end. But the Bank is trying to keep the interest payments flowing, and put that day off as long as it can.
Debt cancellation would not require any changes in the World Bank's bylaws. All it would require is a new approach by bank management.
Some members of the Fifty Years is Enough community believe that the World Bank is beyond reform and should be shut down ("abolitionists"); "reformers" including the Sierra Club disagree, suggesting that the private capital sources that would replace the Bank would be even less sensitive to social and environmental concerns, and less open to public input. Within the tension between these viewpoints, the Bay Area Coalition is working to generate publicity, educate the public about the Bank and lobby Congress, the Executive Branch, and the Bank directly. We have met with the Members of Congress and their aides representing districts from Monterey to the North Bay. Thanks in part to our lobbying pressure, California Senators Feinstein and Boxer and most Bay Area representatives signed an international parliamentarian sign-on letter to new World Bank President James Wolfensohn, calling on the Bank to abandon policies which aggravate poverty, and move to protect the rights of workers and children. We have held teach-ins, briefings, and other events at U.C. Berkeley and San Francisco State, and La Peņa Cultural Center. For more information about our meetings and events, please call the hotline at 510-464-xxxx.[Ed. note: This hotline is no longer available.]
Witness for Peace is spearheading a Fifty Years is Enough Coalition "BAP the Bank" campaign. "BAP" refers to Beans, Aspirin, Pencils — symbolizing the world's major development priorities: food, health, and education.
On October 9, during the annual World Bank Summit in Washington, D.C., Fifty Years is Enough will put on a series of demonstrations and media events at the Capitol, in front of the White House, and by the Sheraton (the World Bank's conference hotel) to draw attention to the World Bank from the perspective of indigenous peoples and others affected by the Bank. The delivery of the Beans, Aspirin and Pencils will be part of the colorful alternative festivities to draw attention away from the Bank's glowing reports of its success.
Beans remind the Bank that growing beans for domestic consumption is more important than growing coffee, cocoa, or strawberries for export, and challenge Bank policies that support agriculture for export while denying credit to farmers who grow basic food crops.
Aspirin reminds the Bank that health is a prerequisite for all economic productivity, and that inadequate health care contributes to the deaths of 35,000 children every day, and symbolize{+s+} rejection of Structural Adjustment Policies that force massive spending cuts for health care programs that benefit the poor in developing countries.
Pencils remind the Bank that investment in education, especially for girls, is essential to sustainable development. Each additional year of schooling for a girl in a poor country leads to a 10% reduction in her lifetime fertility rate, a 10% reduction in the death rate of her children, and a 10-20% increase in her future income. Pencils symbolize denunciation of policies that balance budgets by laying off teachers, closing schools, and imposing tuition fees for public elementary school students — causing families to withdraw their children.
Participating in BAP: The Campaign encourages you to organize, host, or attend a local house party or church meeting on or before September 18, and collect beans, aspirin, and pencils for delivery to the World Bank October 9, during the annual Bank Conference. For information on how to organize a BAP the Bank house party, religious or educational event, or participate in the delivery of the BAP to the Bank in October, please contact Witness for Peace, 110 Maryland Ave NE, Suite 311, Washington DC 20002 or call 202-544-0781, or contact the Bay Area Fifty Years is Enough Coalition at 510-464-xxxx.
What you can do: The San Francisco Bay Chapter of Sierra Club has committees on many issues, but none currently focus on the World Bank or international multilateral financial institutions. If this topic interests you, why not create a committee, study group, or task force within the Sierra Club?
The Bay Area Fifty Years Is Enough Coalition has several standing committees, including Action, Education, and Advocacy, which welcome your support. For more information on these and other opportunities to participate, please call 510-464-xxxx.[Ed note: The Bay Area Fifty Years Is Enough coalition is now known as Economic Justice Now.]
The Fifty Years is Enough Campaign is organizing "Alternative Meetings" to the 51st Anniversary World Bank meetings in Washington DC. There will be street demonstrations, lobbying visits, presentation of the BAP the Bank, and other educational and media-genic activities. For more information, call the U.S. Campaign office at 202-IMF-BANK.
To receive action alerts suggesting timely, targeted letters to write to public officials or to the media, call the U.S. Campaign office at 202-IMF-BANK.
For more information on the World Bank:
International Rivers Network publishes BankCheck Quarterly, which reveals the World Bank's doings in terms one can understand without being a development expert. Annual subscriptions are $25 for individuals and NGOs, $50 for institutions, $15 limited income. Make checks payable to BankCheck and send to BankCheck, 1847 Berkeley Way, Berkeley, CA 94703. phone: 510-848-1155. [Ed. note: BankCheck is no longer published.]
There are dozens of excellent books on the World Bank. 50 Years Is Enough: The Case Against the World Bank and the International Monetary Fund, edited by Kevin Danaher of Global Exchange, and available in many Bay Area bookstores, includes a suggested reading list of 24 books.
Oakland-based Institute for Food and Development Policy (Food First) publishes and distributes several titles on the World Bank through Subterranean Press. For more information, please call Subterranean Press at 800-274-7826.
Joel Rubinstein is a volunteer with RESULTS, the grassroots citizen's political action movement for ending hunger and poverty.