The World Bank – For the Journey

The World Bank are said to be amongst the relative good guys in the global economic structure. I say relative because very few financial institutions set up and mandated by the Western powers are really on anyone else’s side. Their job is to fund political stability (not democracy) and financial opportunity (not fairness).

There are two famous institutions in this field. The IMF is the lender of last resort for countries unable to pay their bills. Obtaining money from the IMF involves accepting their SAPs, Structural Adjustment Programs. You can have a guess how states are meant to adjust their structure. It doesn’t take much to understand the structure and its elements must be opened up for investment, that positive term which in reality means selling the silver. After all, it makes no sense to invest in something that gives no return. And that is the problem with the IMF. Its a bank and expects to be re-paid fully and with interest.

The World Bank which sits across the road from the IMF in Washington is meant to be different and a relative guy in theory. It invests in development, infrastructure, education and health which sounds far more healthy doesn’t it? A poor country applies for a grant, the World Bank checks it out for sustainability, financial soundness, legal competence and environmental impact and then hopefully approves the plan, doling out significant cash to try and redress some of the inequalities in the world. Sounds exceptional.

Naturally, as you might expect, it sounds too good for two reasons. Like the IMF, the World Bank requires some structural reform. The conditions of the loan come from the Washington Consensus, essentially ‘recommending’ trade liberalisation that are convenient to the US in return for loans.

The second bone is these huge projects need contractors to develop and build them and who better to do so than embedded Western intellect? So the contracts are signed with Western companies who fly out there, build the dam or hospitals, use their international deals to bring in the materials necessary and then return home with a fat back pocket. You hear Colombians similarly complaining about the ‘benefits’ of the Plan Colombia deal.

Of course they employ some local labour there so there is some benefit. But the labourers will also earning just above local wages rather than the lavish ex-pat contracts. But you could say, those ex-pats have to stay in hotels which is true but who do you think owns 5 star hotels? And more than likely they will stay in a compound anyway.

The World Bank is in a tough position. It must reward its donor countries with lucrative contracts while at the same time pretending to be neutral. Its a pretty bad actor. By agreement, Great Power agreement, the boss of the World Bank is always an American while the IMF job goes to a European. Its list of chairmen include Paul Wolfowitz, the hawk who forged the ‘peace’ in Iraq. That might give you a clue!

However, in the end, the impoverished state does get a new road or dam or hospital, so they can’t complain too much can they? Whether the people really needed it or its simply convenient to the sitting government (moving people off land is a real money spinner at times) or to the Western construction companies. At least the devil is not just in the small print! But like the IMF, the World Bank expects to be paid in instalments that go on for years. We get paid twice, for the construction and the debt. They really will be there for the journey.

For further reading, try;

Masters of Illusion – Catherine Caufield

Globalisation and its Discontents – Joseph Stiglitz (former WB chief economist)

Life and Debt – film about Jamaica under an SAP


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s