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:

• User fees on health care and water, when these
services were previously free;
• Privatization of state-run industries and basic
services such as electricity, water, health, and
education;
• Removing worker protections, large-scale
layoffs, and privatizing social insurance
systems;
• Opening markets to cheaper imports, decimating
entire domestic industries; and
• Budget cuts, increased interest rates, and the
restriction of credit which is essential to the
survival of many small business and farmers.

The World Bank and IMF have been promoting these policies for more than twenty years. In the period since 1980, when the IMF/World Bank had the most power over economic policy, income per person has fallen by 20% in Africa and grew just 7% in Latin America. By contrast, during the previous era from 1960-1980, income per person increased by 34% in Africa and 73% in Latin America. Structural adjustment has failed to promote economic growth in these regions. Moreover, non-governmental organizations that were part of a five-year, eight-country review of structural adjustment policies called the Structural Adjustment Participatory Review Initiative (SAPRI) concluded in 2002 that these policies have exacerbated rather than reduced poverty and environmental degradation. Despite the record of failure, the World Bank and IMF continue to pursue these policies today.

..Nearly 40 countries south of the Sahara have over the past two decades adopted the free-market reforms . .structural adjustment programs. in development jargon . prescribed by such lenders as the World Bank and International Monetary Fund. But in the generation since independence, sub-Saharan Africa has never been so poor.. -- Jon Jeter, Washington Post,
4/22/02

In May 2001, a World Bank adjustment loan to Ghana required that water fees be nearly doubled, and more fee hikes are planned as the system is readied for privatization. The increases in costs have put clean water out of the price range of the poor and have led to cholera outbreaks that have killed hundreds, as people are forced to drink contaminated water.

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.


Sources for More Information
Cheru, Fantu. .Effects of structural adjustment policies on the full employment of Human Rights,.
United Nations Economic and Social Council, Commission on Human Rights, 24 February 1999.
http://www.unhchr.ch/huridocda/huridoca.nsf/Documents?OpenFrameset
Friends of the Earth, Environmental Defense, Sierra Club, International Rivers Network, Rainforest
Action Network, .Not in the Public Interest: The World Bank.s Environmental Record,. 2001.
http://www.foe.org/res/pubs/pdf/wb.pdf
International Financial Institutions Advisory Committee (Meltzer Commission), Final Report,
March 2000. http://www.house.gov/jec/imf/meltzer.htm.
Mkandawire, Thandika and Charles C. Soludo, .Our Continent, Our Future: African Perspectives on
Structural Adjustment,. Trenton, NJ: Africa World Press, 1999.
Structural Adjustment Participatory Review Initiative Network (SAPRIN), .The Policy Roots of
Economic Crisis and Poverty: A Multi-Country Participatory Assessment of Structural Adjustment,.
September 2002. http://www.saprin.org/global_rpt.htm
Weisbrot, Mark, Robert Naiman, and Joyce Kim. .The Emperor Has No Growth: Declining
Economic Growth Rates in the Era of Globalization,. Washington: Center for Economic and Policy
Research, September 2000. www.cepr.net/IMF/The_Emperor_Has_No_Growth.htm
World Bank, www.worldbank.org.

Non-Governmental Organizations
50 Years is Enough Network: www.50years.org
A SEED Europe: www.aseed.net
Africa Action: www.africaaction.org
Bank Information Center: www.bicusa.org
Bretton Woods Project: www.brettonwoodsproject.org
Center for Economic Justice: www.econjustice.net
Center for Economic and Political Research for Community Action (Mexico): www.ciepac.org
Center for Economic and Policy Research: www.cepr.net
Development Gap/SAPRIN: www.developmentgap.org
Focus on the Global South: www.focusweb.org
Friends of the Earth International: www.foei.org
Global Exchange: www.globalexchange.org
Halifax Initiative: www.halifaxinitiative.org
Insaaf International (India): http://www.geocities.com/insaafin/
Institute for Policy Studies/Sustainable Energy and Economy Network: www.seen.org
Jubilee USA Network: www.jubileeusa.org
Jubilee South: www.jubileesouth.org
Third World Netowrk: www.twnside.org.sg
World Bank Bonds Boycott: www.worldbankboycott.org