The World's Most Powerful Institution?


What's the most powerful institution in the world? No, not the United Nations. And, as gleeful politicians and warlords from Singapore to Beijing to Mogadishu can testify, it's definitely neither the Pentagon nor the White House. Some hints: It's not the least bit democratic. It has more gold than Croesus. And hardly anybody knows very much about it. Of course: It's the World Bank.

The bank and its sister organization, the International Monetary Fund, are 50 years old this year, and those who don't like the way they do business are baking a special cake.

The theme of the party is "50 Years Is Enough." It's an apt slogan for such a diverse coalition of activists. Some think half a century of one sort of promoting development is enough, and it's time for a fundamental reorganization of the bank. Others interpret the slogan as a call for the bank to disappear completely -- somewhat wishful thinking, since it's directed at an institution that's deeply embedded in the world's economy and that grants itself the sort of immunity from control that is usually enjoyed only by the filthy rich.

The campaigners have many complaints about what the World Bank has done in the past five decades, but most can be summarized in two sentences: It has spent billions upon billions of dollars, but it has not done what it was supposed to do. In fact, it has made matters worse.

The groups sharing that view come from a wide spectrum of the community known as nongovernmental organizations (NGOs). They are environmentalists, clergy, economists, partisans of indigenous populations, proponents of better lives for women, backers of sustainable agriculture.

A society of Catholic priests wants the bank to be more accountable to the people whose lives its policies affect. Another group wants the bank to stop pushing chemically intensive agriculture. An organization that once worked for the bank wants governments to withhold funds from the institution until it reforms. Another NGO, the Community Action International Alliance, conducts "reality tours" for people who want to investigate important issues at ground level -- a polluted river, an inadequate transportation network -- and is planning a tour for the World Bank's Washington headquarters later this summer.

The "50 Years" campaign will run throughout the year and around the world, with symposiums, conferences, books, reports, manifestoes and other efforts to educate the public about the bank's harmful effects on the planet. In September and October, when the bank holds a big 50-year conference in Madrid, Spain, the NGOs plan to be there, holding their alternative meeting -- a sort of truth squad for the richest 'N institution on Earth.

Some signs have already emerged that the campaign is rattling the bank's cage. The bank's president, Lewis T. Preston, acknowledged last week that the institution had made some mistakes and needs to rethink its priorities.

The object of all this attention was born in July 1944, at the United Nations Monetary and Financial Conference in Bretton Woods, N.H. The bank, formerly named the International Bank for Reconstruction and Development (IBRD), opened for business June 25, 1946.

The idea behind the new agency was that with the end of World War II, many nations would be hard pressed to find financing for reconstruction. The bank would borrow money on world markets and lend it at attractive rates to countries that needed it.

* Over the years, evidence has accumulated that things haven't gone the way the Bretton Woods planners envisioned. At the heart of the problem, say many of the critics, are "structural adjustment programs." This term, so leaden that only an economist could love it, boils down to the time-honored quid pro quo: I'll give you the money if you promise to do things my way.

A more dignified version is that in exchange for bank cash, the strapped countries promise to cut government spending and subsidies, lower exchange rates and remove barriers to trade.

Structural adjustment programs, say the critics, also mean that the borrowing countries, in playing by the bank's rules, are feeding their addiction to foreign trade and investment. Indigenously grown crops that before had sustained the local populations are abandoned for monocultures that leave the countries at the mercies of the global market and more dependent on pesticides and other chemicals; the government must then pay world prices to import the foods that their people once produced themselves.

Those who want to bring the World Bank under control include the wild-eyed, the moderately critical and everything between.

Some would dismantle the bank totally. One of the publications timed for the 50th birthday celebration is called "Perpetuating Poverty," edited by Doug Bandow and Ian Vasquez. The book makes it clear that its publisher, the libertarian Cato Institute, thinks "50 Years Is Enough" means really enough.

The bank's half-century, say the editors, has produced few benefits, if any. "Instead of growth," they write, "the Third World has experienced social disintegration, economic stagnation, debt crises and, in some regions, declines in agricultural production and incomes."

Whatever the Bretton Woods institutions may be, they are not places where soul-searching, dissent and self-criticism are forbidden. Consequently, a lot of information gets leaked to the outside. The most formidable leak to date sprang from an internal report on bank portfolio problems. In 1991, it said, nearly a third of the bank's mature projects were in trouble. The rate was even greater in food, water supply and sanitation programs; 42 percent of the agriculture projects were substandard.

An "approval culture" at the bank, said the report, values the act of lending money more than the project itself. Bank project designers hang numerous bells and whistles onto their programs, knowing that this is the key to approval back at the bank and to promotion for themselves. The list of problems was extensive.

* The internal findings echo those of many of the NGOs that are taking part in the "50 Years" campaign. Others include these:

* The bank and IMF frequently ignore the long-range effects of development on biodiversity and the natural resources, and make a hash of the relationships of indigenous people and their environment.

* Bank-sponsored projects in the decade ending in 1994, according to the bank's own numbers, have forced about 80 million to 90 million residents of developing countries out of their homes to make way for dams, transportation and other projects. One of the most notorious examples of forced resettlement began in 1985, when about $450 million in bank funds started flowing into the Sardar Sarovar dam project in northwestern India's Narmada Valley. The effect was to kick at least 100,000 people off their homelands, with vague promises of resettlement.

* The World Bank is the premier financier of highway construction in developing countries. Rarely are the new roads accompanied by public transportation projects. One result is that the residents of much of the developing or recently-developed world breathe horribly polluted air.

* The bank employs the rhetoric of sustainable agriculture and forestry, but it continues to push forms of food production and logging that often are environmentally and socially destructive.

* Many of the critics of the Bretton Woods institutions deplore the banks' records on social justice and human rights. The bank, they feel, perpetuates the well-to-do world's exploitation of the less-well-off world.

* The bank's reply to all this complaining is gentle by comparison. Its public relations people push the line that, well, these criticisms may have been justified in the past, but we've changed. The World Bank's official response to the campaign, issued early this summer by chief spokesman Tim Cullen, was:

"The World Bank welcomes debate on development. The '50 Years Is Enough' campaign provides another opportunity to consider development priorities. We are always willing to engage in a constructive dialogue, and we work with a wide range of development NGOs in rich and poor countries. The bank's operations and policies have greatly benefited from this dialogue and work. Unfortunately, many of this campaign's proposals are misconceived -- starting with its title -- or have been overtaken by recent changes at the bank. We are happy to provide further information on request." (Well, maybe not completely happy. A request for comments from Mr. Cullen for this article went unanswered.)

By last week, the bank seemed to willing to admit that some of its own undertakings were misconceived. President Preston, at a news conference, said, "The mistake the bank has paid the highest price for is not recognizing the importance of the environment."

To some of the bank's critics, this brought satisfaction in the knowledge that the campaign was hitting home. But long-term bank watchers also note that the institution frequently reacts to criticism by admitting wrongdoing -- and then forgetting to undertake reforms.

"They see their problems as a public relations problem," says Ross Hammond, one of the coordinators for the "50 Years Is Enough" campaign and the communications director of the Development Group for Alternative Policies, a Washington-based NGO that once did consultant work for the World Bank.

Mr. Hammond noted that the bank had hired New York public-relations man Herb Schmertz, who was chief flack for Mobil Oil during its take-no-prisoners era of response to criticism, to help with its birthday celebration.

Not that the bank doesn't need help in the public relations area. In 1991, the bank's chief economist wrote an outrageous memo to his staff: "Just between you and me," mused Lawrence Summers, "shouldn't the World Bank be encouraging more migration of dirty industries to the [less developed countries]?" He listed several reasons why life in, say, Africa was less valuable than life in the industrialized world, and noted, "I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to it."


The coalition that has formed against the World Bank agrees that if the institution can be forced to change its behavior, it will be because of challenges to its checking account. Already, NGO pressures have persuaded Congress to tie its donations to environmental reform at the bank. A year ago, a move in Congress to cut off all donations to the bank and IMF failed by only two votes. Efforts are under way in Congress to tone down the U.S. donation.

International pressure from NGOs on bank directors led to the agency's withdrawal from India's Sardar Sarovar project last year.

What are the chances that the birthday party celebrants will really bring change to the world's most powerful institution? We may have a better answer next fall, after the summer's attempts to educate the public and policy-makers. We do know that the bank's perceived arrogance doesn't help it win any friends; nor does the fact that nothing it does can be termed "democratic" -- as any of those millions of involuntarily "resettled" people can testify.

The administration in Washington, which controls the World Bank's largest bloc of votes, is at least nominally more friendly to the NGOs' positions than it has been for decades. But coalition members are not by any means placing all their chips on Bill Clinton, who has demonstrated gold-medalist talent in the moral back flip department.

The lesson to be learned, say the bank's critics, is that the proponents of Third World exploitation, of economic growth at the expense of the environment, of cold-blooded resettlement of powerless people -- they never give up. For example: The builders of India's Sardar Sarovar dam, undaunted by disapproval of their plans, recently closed some of the sluice gates. India's southwest monsoon has started, and the rains are filling the reservoir. The forced resettlement of villagers and tribal people in the Narmada Valley has already started. Some villages are already under water, and the police have brought barges in to forcibly move people out of their homes.

Fred Powledge is a free-lance writer living in Maryland.

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