| ECONOMICS - LOOKING GLASS NEWS |
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Fact sheet: The World Bank: In Whose Interest? |
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from Center for Economic Justice
Entered into the database on Monday, April 04th, 2005 @ 23:28:15 MST |
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The World Bank is one of the most powerful financial institutions in the world.
Founded in
1944, the Bank.s initial mandate was to provide loans to support European reconstruction
following World War II. Since its early days, however, the World Bank's purview
and power
has expanded dramatically, and it is now active in more than 100 countries.
The World Bank Group is comprised of five branches: the International Bank for
Reconstruction and Development (IBRD), the International Development Association
(IDA), the
International Finance Corporation (IFC), the Multilateral Insurance Guarantee
Agency (MIGA), and
the International Center for the Settlement of Investment Disputes (ICSID).
The IBRD, the Bank.s
largest branch, provides loans to developing countries at near-market rates
and raises nearly all of
its funds by issuing bonds on the private financial market. The IDA provides
loans to the poorest
nations at concessional rates, and it is funded by contributions from the U.S.
and other rich country
governments. The IFC and MIGA provide loans directly to the private sector in
developing
countries and for political risk insurance, respectively, while ICSID mediates
disputes between
investors and governments.
Power and Governance The World Bank is comprised of 184 member governments. In practice, however,
rich country
governments dominate the institution. The United States is the largest shareholder
of the World
Bank and controls more than 15% of the voting shares on the institution.s Executive
Board. As 85% approval is
required for major changes in Bank policy, the U.S. has veto power at the institution.
By comparison, all the
countries of sub-Saharan Africa combined control less than 7% of the vote.
Their [IMF and World Bank] policies have not only failed to bridge the gap
between rich and poor and achieve greater equality, but rather contributed to
a widening gap, the virtual exclusion of an increasing number of the poor and
widespread social disintegration.. --Rev. Dr. Konrad Raiser, General Secretary,
World Council of Churches; Letter to Kofi Annan, June 28, 2000 The World Bank and its partner organization, the International Monetary Fund
(IMF), occupy a
central place in the global economic system. If impoverished countries do not
agree to IMF/World Bank policy conditions, which almost always include austerity
measures and privatization, the IMF can effectively cut the country's access
to credit. Following an unwritten but universally acknowledged agreement, the
World Bank, regional
development banks, and even private creditors will generally not lend to countries
unless they have
received a "seal of approval" from the IMF. This arrangement gives
the institutions tremendous leverage in impoverished countries.
Debt Another important way that the World Bank and IMF have influence over the
economies of
impoverished nations is through international debt. For the world.s poorest
nations, the IMF
and World Bank are the largest creditors. Because the institutions are "preferred
creditors",
countries must pay them back before all other lenders. The external debt burden
of sub-Saharan
Africa has increased by nearly 400% since 1980 to more than $200 billion today.
External debt per
capita for sub-Saharan Africa (not including South Africa) is $365, while GNP
per capita is just
$308. Many nations have already paid their debts time and again. The debt crisis
set in when interest rates skyrocketed and compound interest made repayment
impossible. For example, Nigeria borrowed $5 billion from official and private
creditors, paid $16 billion to date, and still owes $32 billion!
The World Bank and IMF.s Heavily Indebted Poor Countries (HIPC) Initiative debt
relief
program has not provided sufficient relief to enough countries, with only six
countries graduating
from the program as of January 2003, and even these countries are still burdened
by unsustainable
levels of debt. Moreover, many countries, including Zambia, Malawi, and Nicaragua,
have been
denied additional relief because they have not undertaken policies of privatization
and liberalization
fast enough. Many countries in Sub-Saharan Africa still pay more to service
their debts to the IMF
and World Bank than on their entire health budget. Meanwhile, the IMF and World
Bank resist calls
from the Jubilee movement for 100% debt cancellation, despite the IMF.s approximately
$30 billion
in gold reserves and the World Bank.s $2 billion profit in 2002.
Structural Adjustment and Policy Conditionality
An exchange for loans, the IMF and World Bank insist that countries undertake
economic
reforms. Some of the policies countries undergoing so-called "structural
adjustment" must enact
include: The World Bank has now renamed its adjustment loans (now calling them "Poverty
Reduction Support Credits" and "Development Support Loans").
But the content of the loans has
shifted only slightly, with heavy emphasis still placed on privatization, trade
liberalization, and
private sector involvement. Short shrift is given to the environmental and social
impacts of this type
of lending, which comprised a record 64% of all IBRD lending in 2002.
World Bank Projects and the Environment
The World Bank continues to lend for controversial and environmentally harmful
projects.
The World Bank Group has provided $24 billion for fossil fuel projects (oil,
gas, and coal)
since 1992, compared to just over $1 billion over the same period for renewables..
The nonprofit
advocacy group Sustainable Energy and Economy Network has also shown that World
Bank
financing of fossil fuels since 1992 has leveraged enough fossil fuel production
to generate almost
double the amount of carbon dioxide that was emitted globally in the year 2000,
contributing
significantly to global warming.
In June 2000, the World Bank Group joined three of the world.s largest oil
companies to finance the Chad-Cameroon Oil Pipeline in central Africa. The $3.5
billion project is disrupting fragile ecosystems and putting the people and
wildlife
that depend on them at risk. Moreover, the World Bank has historically been the largest single source of
funds for large dam construction worldwide. Since its inception, the Bank has
provided almost $75 billion for 538 large dams in 92 countries which have displaced
more than 10 million people from their homes and land, caused severe environmental
damage, and pushed borrowers further into debt. Though lending for large dams
has decreased as a percentage of Bank lending in recent years, the Bank proposed
in 2002 to increase its support for "high risk" water infrastructure
projects such as dams. |
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