The World Bank Will Spread Misery and


By Johann Hari

March 18, 2005

It has shown time and again that it is more interested in neoliberal ideology than in ending poverty.

The World Bank has such a soft and reassuring name. It conjures up images of smiling cashiers serving the people of India, perfumed personal bankers offering mortgages to Guatemala, and a water-cooler in the corner for sub-Saharan Africa. Take a seat and do have a leaflet, sir - it's about "eradicating global poverty and promoting sustainable development". See the nice smiling pictures and our generous repayment schemes? Now, if you'll just sign here...

Let me take you on a tour of the real World Bank. Picture scores of shut-down schools for poor kids in Zambia. Picture indigenous people being forced from their land to make way for an oil pipeline. Picture the peaks of Mount Kilimanjaro, which are now - thanks to climate change - free of snow for the first time in 11,000 years.

The nomination of Paul Wolfowitz this week to head the Bank will bring the largest sheaf of column-inches the institution has commanded in decades, but most of it will focus on the ball, not the pitch. The personality of the Bank's leader is pretty irrelevant. You could put the Archangel Gabriel in charge of the World Bank as it is currently constituted, and it would make little difference. (And Wolfie is no Gabriel.)

It seems counter-intuitive to condemn an institution founded out of the ashes of the Great Depression, Nazism and world war to eradicate poverty. The Bank's original purpose - offering loans for the reconstruction of Europe - was certainly noble. But it turned out that the Marshall Plan did the Bank's work for it - so in the late 1950s, it shifted focus to the developing world. The problems set in when it began to offer ever-larger loans - and began to demand ever-more-extensive conditions.

By the 1980s, the Bank was - along with its twin, the International Monetary Fund - demanding that countries undergo "structural adjustment" in return for borrowed cash. And because they were accountable largely to US presidents and their proxies, the Bank's heads began to use their power to impose an unusual neoliberal ideology that has never been fully tried in a democratic country.

So if poor countries wanted any help - or even wanted simply to be able to maintain the huge debts they had already racked up to the Bank - they faced a lachrymose choice. They had to sell off their public sector, slash spending on schools and hospitals to the bone, and prioritise debt repayments to the Bank - or be declared an international pariah and receive no loans. It's as if - in order to keep up with your mortgage repayments - Barclays demanded you stop buying your children medicine, sent your spouse to work in a coal mine, and rented out your upstairs bedroom to a bloke of their choosing.

So what happened next? To give one example, in Zambia, the World Bank demanded that the state stop paying for health and education out of general taxation. As aid agencies had warned, infant mortality - a neat euphemism for the number of dead babies - piled ever upward. Average life expectancy fell from 54 to 40. Of course, there were other factors in this expanding Zambian graveyard - but few experts deny the Bank played a key role.

And - even though the Bank claims periodically to have learned from these deadly mistakes - the policies continue, barely altered, today. The Bank has shown time and again that it is more interested in debt repayment, neoliberal ideology and opportunities for transnational corporations than in ending poverty. This isn't because its executives are personally malicious; many of them honestly believe that short-term austerity leads to long-term gain. They continue to believe this because they are marinated in a hardline ideology that is impervious to evidence.

They are right to believe that markets must play an essential part of eradicating poverty - but they do not accept that markets have to be moderated by powerful states and democratic movements or they cause terrible harm. Imposing raw markets without democratic consent - and without social democratic states or trade unions - can be almost as disastrous as the opposite extreme of having no markets at all. Markets are like yeast. Without yeast, your bread won't rise. But if you only have yeast - and no other ingredients - then you have nothing but an indigestible fungus. The World Bank has been force-feeding its yeasty market fundamentalism to the developing world for three decades, and ignoring the mass poisoning that so often mysteriously follows in its wake.

And, even worse, when it comes to the biggest issue in the world today - man-made climate change - the World Bank is one of the most powerful institutions pouring petrol onto the global cooker. Over the past year, 94 per cent of World Bank energy lending has been for oil and coal extraction - the fuels that are causing global warming - and just 6 per cent for renewable energy sources. Building oil and gas pipelines already has terrible human rights consequences. According to the International Rivers Network, over 10 million people have been forced from their homes and their land to make way for World Bank-funded projects. (That's the equivalent to the complete cleansing of Scotland and Ireland). But now they are a double disaster because the same poor people will then bear the brunt of global warming.

Don't take my word for it. Just look at the World Bank's own research. In 2000, after megatons of pressure from democratic movements in the developing world and their left-wing supporters in the West, the World Bank was finally forced to undertake a review of its energy policies. It did its best to rig it, putting Emil Salim in charge. Salim was the former energy minister of the corporation-loving Indonesian dictator General Suharto, and he was even serving on the board of a coal company at the time he was appointed. But - to everyone's astonishment - Salim concluded that supporting oil and gas projects doesn't help poverty, damages the environment disastrously, and should be stopped altogether by 2008.

The Bank's response? It simply ignored its own report. Nadia Martinez - an expert on the World Bank with the Institute for Policy Studies - believes this scandal reveals the true nature of the Bank today. "The World Bank has repeatedly proved itself to be more concerned with the needs of oil companies than with the impoverished people it officially serves. It will not distinguish its goals and standards from the likes of Halliburton, ExxonMobil, Shell and other profit-driven institutions." The Bank feebly responds by saying that developing countries need more energy - but it knows perfectly well that 82 per cent of the oil and gas being mined by its projects is going straight to the US and Europe.

The solution to this will obviously not come from Paul Wolfowitz as he emerges, petrol-scented, from the Bush-Halliburton White House. But nor will it come from any other top-down leader. It's pointless to fix our vision solely on the Wolfowitzes at the top and pine for a more benign leader. Governments and institutions will very rarely be spontaneously benign. They have to be constantly pressured and harried by democratic movements. Right now, the head of the World Bank is answerable primarily to George Bush, who in turn answers primarily to his corporate paymasters. It's only when this chain is broken - and the head of the World Bank is answerable instead to the people over whom he exercises so much power - that less catastrophic policies will emerge.

But - hey! - George Bush says Wolfowitz is a "good, compassionate man". I'm sure that will be a great comfort to the people of the next "structurally adjusted" country as they close their schools, privatise their water supply, and feel the temperature slowly rise.

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