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The World Bank

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The World Bank Since the 1950 s the World Bank has had an indifferent, to say the least,

affect on the Third World. The actions of the Bank have always come under severe scrutiny because of the important role it plays in many lives of Third World peoples. This paper will outline the role of the Bank, some of the arguments against its policies, power, and influence, reasons why the Bank has found it difficult to achieve favorable outcomes in its policies; and whether it has in fact been beneficial to the people it claims to help. The World Bank was set up initially as an aid organization to help foster the reconstruction of Europe, and later guarantee loans made by private banks for projects in the poorer, developing countries 1. The former of the objectives never eventuated to the extent of its founder's hopes. The World Bank otherwise known as The Bank was subjugated to a minor role in the post war reconstruction of Europe, due to the more robust influence and attraction of the Marshall Plan. Of the 41.8 billion in loans, made in the decade after the end of the war, only 497 million was disbursed from The Bank. This was a result of the war-torn countries needing rapidly disbursed grants and concessional loans for balance of payments support and imports necessary to meet basic needs. 2 The Bank, on the other hand, provided loans for specific projects that required lengthy preparation. Thus, the Banks diminished role in Europe, lead it to focus its lending to Third World countries, and this became the core of its operations from the 1950 s. The World Bank's goals reduce poverty and improve living standards by promoting sustainable growth and investments in people. 3 This has been challenged by many, who all see the role of the Bank being either detrimental to the economy s of the countries it is supposed to help, or the social cost being too high for the economic programs being put in place. A number of arguments, have been developed that make light of the Banks preponderant shortcomings and it s many social inequities. It must be said that a full analysis of the Bank shortcomings could include thousands of pages. This paper will, however, take only a representative few, which it is hoped can suffice a fair and broad analysis. These are described below. The World Bank, in the opinion of Yunus 4 , has single-mindedly pursued growth until other issues such as hunger; women, health; the environment, etc. distract it. The Bank then tries to adapt itself to these considerations without giving up its basic goal and adopting these issues as rhetoric, but they are seldom put into action. This ineffective action may be explained by two factors. Firstly, the article framework within which the Bank operates does not assign any urgency or primacy to poverty reduction; thus its pronouncements only get prescribed through humanitarian add-ons, such as safety-net programs. Secondly, Bank staff was not employed to eliminate poverty, but for qualities that may not have immediate relevance for poverty reduction; meaning they are not the right people to undertake such sensitive social projects as the World Bank does. Susan George, a long time critic of the World Bank, sees the role of the Bank being purely to make sure the debt of Third World countries is being serviced. 5 She claims that the Bank presides over a net outflow of capital from the Third World, which will continue to further, drive their economies into ruin and poverty. At the same time the Bank has enforced structural adjustment programs that have cured very little at all. George believes that these economic policies have caused untold human suffering and widespread environmental destruction, emptying debtor countries of their resources and rendering them less able each year to service their debts, let alone invest in human capital. The policies inherent in creating such harmful effects are, according to George, the result of a capital intensive, energy-intensive, unsustainable Western model of development, which is only favorable to Third World elite s, Northern banks, and multinational corporations. Susan George believes that the World Bank has induced social and economic outcomes, which ultimately affect the Western world in adverse ways. These outcomes she describes as debt boomerangs, 6 and is described below. The first boomerang is debt-induced poverty. This causes Third World people to exploit natural resources in the most profitable and least sustainable way, causing an increase in global warming and a depletion of genetic bio-diversity, thus affecting all citizens of the world. Secondly, the illegal drug trade for heavily indebted countries, like Peru, Bolivia, and Colombia, is their major export earner. Thus giving them little alternative, but to condone such activities. The social and economic costs of drug consumption in the US alone have cost 60 billion. Thirdly, Western governments have allowed their banks tax concessions so they may write off so-called bad debts from Third World countries. However this has not reduced the real debts of poor countries, and in the case of the UK has cost the government 8.5 billion. Fourthly, there have been lost exports to Western countries from the Third World due to the burden of high debt servicing costs. It has been estimated that this accounts for one fifth of total US unemployment. Fifthly, legal and illegal immigration from the Third World has resulted in100 million economic refugees, resulting in enormously high economic costs to Western nations. Lastly, conflict that is often an effect of the strain put on debt burdened Third World countries; this may be seen as possibly an influence for Iraq s invasion of Kuwait. The World Bank is often seen as being party to disbursing funds to malicious and repressive regions that often use these loans to further entrench their power. An ardent critic of this aspect of the Banks operations is Patricia Adams. Adams argues that there are large amounts of debt owing to the Bank that are very odious in nature. 7 Odious debts may be defined as any debt that has been incurred by a government without the informed consent of its people, and one that is not used in the legitimate interest of the State. 8 Many of the activities that Third World governments undertake are often not in the interest of the people that they represent; this can be seen by the treatment of the Penan people of Sarawak, whose forests are being traded away for the benefit of others. Much of the above debate has been structured around the effectiveness of the World Bank s structural adjustment programs, which were developed to force the borrowing countries into macroeconomics discipline. These policies have resulted in huge social and economic changes, which have caused much hardship to many of the countries citizens. For example, Oxfam, a British charity, released a study 9 recently on Latin America, which suggests



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