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Why disinvest from the World Bank?

Economic conditionality pushes countries into poverty and undermines democracy

Most of the World Bank loans, aid or debt relief come with conditions that describe what a poor country must do in return. These policy prescriptions are fairly standard in all countries: Strict monetary policy, strict fiscal policy, trade liberalisation, privatisation or greater private sector involvement in water, electricity and public service provision, investment deregulation, capital account/financial liberalisation, agricultural liberalisation and increased labour market flexibility, i.e. weakened labor rights. (1) As a result, costs in education and health care in developing countries have risen beyond the reach of many ordinary people after cuts in government expenditure. Rushed privatisation has resulted in the laying off of tens-of-thousands of workers in many post-socialist countries. Whether you look at poor countries such as Somalia, Rwanda and Mozambique or well- endowed countries such as Ghana, Brazil and the Philippines, the policies pushed by the World Bank have worsened the living situations for the majority of the population. Evidence from dozens of countries under World Bank tutelage shows a similar pattern: structural adjustment policies may help countries pay off their foreign debts and may create some millionaires but the majority of the population suffers from low wages, reduced social services and less democratic access to the policy-making process. bmpharmacy.com

In order to receive a loan from the World Bank, a country must first draw up and implement a Poverty Reduction Strategy Paper, PRSP. Previously known as Structural Adjustment Programmes, PRSPs supposedly set out a government's strategy for reducing poverty over a three-year period, and in theory are developed in consultation with civil society in a country. However, in most countries both civil society, parliaments and even governments are ignored in the creation of PRSPs and often overruled when they have opposed IMF or World Bank policies. As external aid is dependent on passing the document, parliaments are unable to insist on major changes at the end of the process. By contrast, World Bank and IMF representatives can influence the content throughout the process. (5)

World Bank refuses to cancel the debt of impoverished countries

The World Bank is the largest single donor for the countries classified as "least developed". It holds more than 200 billion of debt given to heavily indebted southern governments and is not willing to cancel them. Many of the debts were originally contracted by corrupt regimes or dictators. As Southern countries have to pay debt service to wealthy countries of the North, they are short of funds for the provision of basic services such as clean water, health care or education to the citizens. Debt relief initiatives of international financial institutions have to date covered only a very small part of the total amount of debt leading to persisting poverty in the South. Worse, the debt relief initiatives come with conditions that hurt the poor, for instance by requiring countries to cut spending on health care, food subsidies and education

The World Bank fuels climate change

The World Bank invests between $2 to $3 billion a year in greenhouse gas-producing projects, which fuel climate change and fail to help the world's poor. The poorest one-third of the planet get less than one-tenth of the World Bank's energy investments while bearing most of the environmental and social costs of fossil fuels. Fossil fuel projects financed by the Bank between 1992 and 1997 will add carbon dioxide emissions to the Earth's atmosphere equivalent to 1.3 times the total amount emitted by all the world's countries in 1995 over the next 20 to 50 years. (2) Eighty per cent of all Bank oil projects are designed to export petroleum to wealthy countries, rather than to meet the energy needs of the world's poor. (3)
The World Bank plays an important role in the climate change dialog. For more than ten years now, the Bank has been advocating CO2 trading as a solution to climate change. As a result, the institution has become the largest public broker of carbon purchases, with up to $1 billion in its carbon credit portfolio. Trading with emissions is a market-based solution to the reduction of emissions. Northern countries were granted pollution credits with which they can currently trade. Thus instead of making efforts towards a lowering CO2 emissions, corporations and banks are actually given the opportunity to make profit out of the trade in pollution rights.

Increasing Corporate Profits

Development projects undertaken with World Bank financing typically include money to pay for materials and consulting services provided by Northern countries. For every U.S. dollar the United States contributes to international development banks, U.S. exporters win more than U.S.$2 in bank-financed procurement contracts. The World Bank has an interest to finance bigger, more expensive projects which require the materials and technical expertise of Northern contractors and ignores smaller-scale, locally appropriate alternatives. (9)
For instance, World Bank energy financing guarantees lucrative projects for Northern oil companies, with the US-based oil and gas company Halliburton leading the list. Between 1992-2004, the company received $ 2575.8 million funding from the World Bank and expanded its operation dramatically. Other beneficiaries include the world's largest oil and oil service companies such as Shell, ChevronTexaco and ExxonMobil.(4)

The Bank's decision-making process remains secretive and undemocratic.

Seats and votes in the World Bank are allocated to countries according to their economic size and historical significance. Forty-nine low-income countries that represent half of the world's population have altogether only nine per cent of all votes, whereas the G8 countries have nearly half of the votes. Of all the member countries only the US government has a veto on decisions requiring a super-majority. Furthermore, the the agenda and minutes of the World Bank and IMF Board meetings are never made public, nor are the positions of member countries disclosed. The leaders of the World Bank and IMF are selected in a non-transparent process which limits applications on the grounds of nationality. The European countries nominate the IMF Managing Director while the US nominates the World Bank President and the IMF Deputy Director. Richer countries continue to dominate the institutions despite the increasing levels of income to the Bank and Fund from borrowing country loan repayments. Millions of people all over the developing world have taken part in protests against World Bank and IMF imposed policies. Nobody elected the World Bank, it is not accountable to the people whose lives it is affecting and is therefore immune to public disaffection.

World Bank projects lead to human rights violations

Projects financed by the World Bank have a record of fundamental human rights violations. Large dams, mines, oil and gas pipelines favored by the Bank have proved to have an extremely detrimental impact on the environment and people. These projects are pushed forward in the name of development and poverty alleviation, but it is the poor who are the most likely to be forced off of their land and made homeless to make way for them. They are ones most likely to end up in polluted surroundings and the least empowered to demand fair compensation. One recent controversial Bank-funded project is a $45 million loan granted to Canadian company Glamis Gold Ltd to build a gold mine in Guatemala. Indigenous communities living in the area of the mine have objected to the mine and raised concerns that mining will harm natural resources and violate their religious and cultural rights. In early 2005, local people protested by blocking roads leading to the building site. The military broke up the protests, injuring 11 people and killing one. Human rights violations are still ongoing in the area. The World Bank's support in this case was significant in the development of the gold mining project. (6) (7) Some research suggests that World Bank and IMF policies and conditionality can even contribute to the emergence of violent conflict. World Bank and IMF free market measures have been linked to creating the conditions for war in Sierra Leone and the genocide in Rwanda. Even World Bank research has argued that it would be "particularly helpful" in preventing war if the poorest countries could "diversify out of dependence on primary commodity exports", while the Bank has had a significant role in pushing countries into dependence on a few commodities.(8)

World Bank's emphasis on expanding exports has been disastrous for the environment.

Debtor countries are encouraged by the Bank's structural adjustment to expand their exports in order to create more hard currency in order to repay their foreign debts. This leads countries to overexploit their natural resources. Countries are encouraged to cut down their forests, harming forest-dependent peoples, and to move towards intensive, chemical-dependent agriculture to produce export crops such as coffee, tea and tobacco. Large-scale projects such as dams, mines and gas and oil pipelines that the Bank has funded have proved to have an extremely detrimental impact on both people and environment.

1. http://www.wdm.org.uk/democracy/enews.htm
2. Sustainable Energy & Economy Network (2003). The World Bank and Fossil Fuels: At the Crossroads
3. A Wrong turn from Rio: The World Bank's Road to Climate Catastrophe www.seen.org/PDFs/Wrong_turn_Rio.pdf
4. the Energy Tug of War www.seen.org/PDFs/Tug_of_war.pdf
5. Tim Jones & Peter Hardstaff (2005). Denying democracy: How the IMF and World Bank take power from people.
6. http://www.oxfamamerica.org/newsandpublications/news_updates/news_update.2005-09-23.3194264505
7. www.caoombudsman. org/pdfs/CAO-Marlin-assessment-English-7Sep05.pdf
8. The BrettonWoods Project
9. Fifty Years Is Enough http://www.50years.org/updates/questions.html

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