Lends money for large development projects
Criticised for environmental impact of those projects
Accused of being tool of US policy
Controls the Global Environment Facility

The World Bank is the largest international development bank, lending $US25 billion in 1992. Its funds come from 151 nations who expect to get their money back with interest&emdash;as with any other bank. The bank has made a profit every year since 1947, and from 1980 to 1989 its profits increased by 86 per cent to $US1.1 billion. Voting power or control of the bank depends on the amount of money each country contributes. The USA, which contributes the largest amount of the bank's money, has the largest percentage of votes. The USA together with the UK, Germany, France and Japan, control about 45 per cent of the votes.

The World Bank has often been criticised by environmentalists for funding and overseeing very large projects in low-income countries without paying adequate attention to the environmental and social impacts of those projects. In 1989, the US Congress found that more than 1.5 million people were being displaced by World Bank projects. More recently, the bank itself has admitted in its internal documents that its projects have displaced tens of thousands of families in Brazil alone, as well as making the people they were supposed to help poorer, destroying the natural environment and depriving people of their land. (Rich 1990, p. 13; Pearce, F. 1992, p. 5)

The bank's preference for large projects takes a very large proportion of its development funds. These large projects are profitable to multinational companies, which supply much of the technology and expertise for them; but they are often inappropriate to the local area and end up being underutilised or grossly inefficient. These large projects also increase the debt of low-income countries.

A prime example is the $US2.6 billion loan to the Marcos Government in the Philippines for a nuclear power plant that was built by the US firm Westinghouse on an earthquake fault near a series of volcanoes, including Mt Pinatubo. It was found to have serious construction defects and has been found by nuclear safety engineer Robert Pollard to be unsafe and uneconomical (Dixit 1992, p. 14). It has never been used to generate electricity, even though it was completed years ago. Yet the Philippines is still paying off the debt. (See chapter 24 for more on World Bank projects.)

The bank has recently responded to years of criticism by environmentalists by introducing a number of environmental reforms. In 1987, it increased its environmental staff; in 1989, it introduced environmental assessments for its projects. It has also provided funds for a number of environmental projects and support for national environmental agencies in countries such as Brazil, Poland and Madagascar. Nevertheless, environmentalists are still critical. Bruce Rich, a senior lawyer with the US Environmental Defense Fund, argues that the World Bank is still causing unnecessary destruction and social disruption in the environment (1990, p. 12).

Rich points to several loans the bank has made to promote accelerated commercial logging in precious forests. These include a $US45.4 million loan to the Mexico Forestry Development Project to promote the logging of one of the last remaining temperate forests in Latin America, a $US80 million loan for logging in the Ivory Coast where forests are being destroyed and a $US23 million loan for a forestry and fishery project in Guinea. Each of these projects has been exempted from the bank's new environmental assessment guidelines, since the bank assumes they will be environmentally beneficial (Rich 1990, pp. 13&endash;14).

Environmentalists are also critical of the bank's energy projects, which favour large dams and coal-fired or nuclear power plants rather than energy efficiency programs. Rich argues that bank-financed, coal-fired power plants accounted for 7 per cent of the increase in carbon dioxide emissions from low-income countries in the 1980s. In 1991, the World Bank spent only 1 per cent of its billion dollar annual investments in energy projects in low-income countries on promoting energy conservation and efficiency, even though environmentalists claimed this would provide better, cleaner and cheaper energy for billions of people and could save more than $US2 trillion in low-income countries over the next forty years. A bank spokesperson, Gloria Davis, director of its environment department for Asia, agreed that the bank spent too little on energy conservation; she explained that such projects tended to be small-scale, requiring only small amounts of money and technical assistance, whereas countries go to the World Bank for large capital investments (Hunt & Saftaur 1991, p. 10).

In February 1992, the magazine New Scientist reported on a leaked World Bank memo which argued that it was better policy to pollute areas where poor people lived. In the memo, the bank's chief economist, Lawrence Summers, suggested the bank should be encouraging dirty industries to move to less developed countries&emdash;because wages were lower and therefore the costs arising out of death and illness (usually measured as wages forgone) would be lower. He is quoted as saying, '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 that' (Pearce, F. 1992i).

Summers also argued that underpopulated countries in Africa are 'underpolluted' because they have clean air that is not being used to assimilate wastes and therefore 'their air quality is probably vastly inefficiently low compared to Los Angeles'. He said it was a pity that such countries could not sell their clean air for the purpose of soaking up pollution and use the extra money to improve their welfare.

The World Bank has also been criticised as being a tool of US foreign policy. Walden Bello, executive director of the Institute for Food and Development Policy, points out that the US Treasury Department, in a study of whether the bank was indeed promoting US interests, found in 1982 that the US 'was able to impose its view in 12 out of 14 of the most significant policy debates at the World Bank' (Bello 1991&endash;92, p. 21), including cutting aid to Afghanistan and assistance to Vietnam.

Although the USA only has 16 to 17 per cent of the votes on the World Bank (it originally had 42 per cent when the bank began), it still has the right of veto over major lending decisions and it appoints the bank's president. The bank is housed in Washington in the USA and therefore employs a high proportion of US citizens, including those at senior management level. Bello (1991&endash;92, pp. 20&endash;5) argues that the USA uses the Bank in three ways:

• to punish dissident nations and reward allies

Two of the most celebrated examples of this influence is on the politics of Chile and Nicaragua. The World Bank cut off funds to Chile while Salvador Allende was president, creating an economic crisis that led to a coup by General Augusto Pinochet. Pinochet's dictatorship was then supplied with plentiful World Bank funds. In Nicaragua, loan applications were frozen in 1982 as part of the USA's program of economic and political destabilisation.

Bello also argues that the USA used the bank to lead some countries away from communism and to fortify strategic allies. These allies included Argentina, Brazil, Indonesia, Mexico, Morocco, Pakistan, the Philippines, Thailand, Tunisia and Turkey.

• to integrate low-income nations into the international economy

Bello argues that the goal of integrating low-income countries 'more tightly into a US-dominated international capitalist economy' is in conflict with the development of those countries in terms of achieving economic independence and directing their economies for their own benefit and welfare. These countries were encouraged to aim at export-oriented growth and to open their markets to imports from other countries rather than fostering local manufacturing enterprises aimed at meeting local needs.

• to protect US banking interests

Following the onset of the debt crisis in 1982, the US Government used the World Bank to ensure that money owing to US banks would be repaid, despite the costs to people living in low-income nations. The USA therefore pushed the bank to move away from lending for projects and towards lending for structural adjustment. Structural adjustment loans involved the imposition of conditions on countries wanting to reschedule their debts or get new loans. These required low-income countries to cut welfare spending, lower wages, remove restrictions on foreign investment, lower barriers to imports, devalue the local currency, raise interest rates and cut subsidies for local industries. (These structural adjustments will be discussed further in the next section.)

A fourth objective of the US Government could be added to this list: to prevent low-income countries generating environmental problems that may affect the economies of high-income countries. In 1990, the World Bank launched its Global Environment Facility in conjunction with the United Nations Environment Programme and the United Nations Development Programme. Its stated aim is to provide money and expertise to low-income countries to help prevent global warming, pollution of international waters, destruction of biological diversity and ozone depletion.

At the Earth Summit in Rio de Janeiro, in June 1992, it was decided that this facility should be the conduit for funds pledged by individual nations to help low-income countries meet their environmental obligations under international treaties and conventions. This decision was met with horror by environmental groups who are not only critical of the World Bank's record in the area of environment and social equity, but also of the record of the fledgling Global Environment Facility (GEF). Greenpeace International (1992c) argued:

"The GEF, under World Bank control, has the same critically flawed approach as the Bank. It is run undemocratically, its project information is secret, and its decisions are taken without consultation with locally affected people or non governmental organisations (NGOs). Many of its proposed projects have the potential to be environmentally destructive. Sixty percent of GEF projects are tacked onto existing or proposed Bank loans, which may be used to mitigate the environmental damage of the original project rather than contribute significantly to solving environmental problems."

Greenpeace concluded by arguing that the GEF could not substitute for the required changes in the international system of finance and aid, including debt relief to low-income nations.

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