This week is the 50th birthday of the World Bank and the International Monetary Fund, but not everyone is celebrating. For the vast majority of people living in the Third World, these two enormously powerful institutions have brought economic hardship and ecological devastation.
The World Bank financed highways through the rain forests of northwest Brazil, accelerating their destruction. It backed Indonesia's policy of forcibly relocating people into its undeveloped eastern islands, causing extensive disruption of indigenous communities and of the forest that supported them.
The World Bank is also a big lender to India's electric utility, which is building open-pit mines and 15 new coal-fired power plants in Singrauli state. Already a major source of pollution, the plants will become the largest new source of greenhouse gas emissions in the world. The development has also forcibly displaced more than 50,000 poor people without proper compensation -- contrary to the bank's own rules.
The bank also ignored its rules when it financed a huge dam in India's northern Narmada Valley. No environmental impact study was done on the $4 billion project, which will force 250,000 people from their homes. Massive nonviolent resistance to the project finally forced the bank to withdraw.
Unlike the World Bank, the International Monetary Fund does not fund projects, but provides loans to countries in financial straits. The fund gained massive influence in the 1980s, when interest rates climbed and many poor countries could not repay loans to commercial banks. The fund became a global debt policeman, enforcing austerity measures that would enable the banks to recoup at least some of their money.
Both the bank and the fund began to make "structural adjustment" loans in the 1980s. In exchange, a country must agree to reduce food subsidies, cut public spending for social services, privatize state enterprises and open the door to foreign investors. These conditions hit the poor hardest. According to UNICEF, these loans bear a "substantial responsibility for lowered health, nutritional and educational levels for tens of millions of Third World children."
These loans also increased the need for foreign exchange, promoting the extraction of timber and minerals, expanded tourism and increases in chemical-intensive cultivation of export crops. The environmental consequences are devastating: bays and beaches polluted by oil, sewage and agricultural run-off; mountains laid bare by mining, logging and erosion; forests replaced by wasteland.
Few Americans know much about these two institutions that virtually rule the Third World. And few know that U.S. taxpayers are footing the bill. On average, 12 percent of the U.S. annual aid budget -- $1.3 billion in 1993 -- goes to the International Monetary Fund and the World Bank.
The U.S. should withhold this money until more democratic policies are implemented. Both institutions need to be overhauled to enhance their social and environ- mental responsibilities, beginning with these basic democratic tools:
* Freedom of Information: The World Bank restricts access to almost all information on its operations. The bank's new information policy should require the release of all project reports, and the fund should make all loan documents available to the public.
* Accountability: The bank and fund are not accountable to the public. Because they are self-regulating, an independent auditing mechanism should be created to investigate complaints developing countries.
* Public participation: Consultation with local people is required by the bank but seldom occurs. The bank should enforce this communication, and the fund should also find ways to engage communities affected most by its policies.
Fifty years is enough. The International Monetary Fund and the World Bank were created to become agents of international development. Without reform they will remain little more than loan sharks with passports.
Cam Duncan is an economist for Greenpeace.