The World Bank is helping Third World governments
cripple their economies, maul their environments, and oppress their
people. From Benin to Zaire, the bank has spurred the nationalization of
Third World economies and increased political and bureaucratic control
over the lives of many of the world's poorest people.
The bank - officially known as the International Bank
for Reconstruction and Development - was organized by the United Nations
in the closing years of World War II. Its mission, according to its
Articles of Agreement, was to facilitate "the investment of capital for
productive purposes . . . to promote private foreign investment by means
of guarantees . . . and when private capital [was] not available on
reasonable terms, to supplement private investment. . . . "
Until the late 1960s, the bank was a conservative
institution that primarily funded infrastructure and other basics in
less-developed countries. Then, in 1968, Robert McNamara became bank
president, and dedicated the bank to continually rising loan levels.
Between 1968 and 1981, when McNamara resigned, loan levels increased
from $883 million to $12 billion, and have continued soaring since.
Bank officials are now leading a rhetorical crusade in
favor of the private sector. But, more than any other international
institution, the bank is responsible for the rush to socialism in the
Third World - the rise of political power over the private sector - and
the economic collapse of Africa.
The bank is seeking a $10 billion commitment from the
U.S. government to allow it to greatly expand its lending. Now is the
time to stop U.S. support - and to give struggling Third World economies
a better chance for survival.
The Assault on Human Rights
The bank has a long record of supporting human rights
violations. In the early 1970s, for example, the government of Tanzania,
with bank aid and advice, implemented a "villagization" program. The
Tanzanian army drove peasants off their land, burnt their huts, loaded
the people onto trucks, and took them where the government thought they
should live where they were ordered to build new homes "in neat rows
staked out for them by government officials." (Washington Post, May 1,
1976) The Tanzanian government wanted to curb the people's
individualistic and capitalistic tendencies and make them easier to
control.
In many cases, the new government villages were a great
distance from the farmers' fields, so the farmers simply quit tilling
the land. This, in no small way, has contributed to Tanzania's recurrent
hunger problem.
In August 1978, the bank loaned $60 million to the
government of Vietnam - even after widely circulated reports of massive
concentration camps and brutal repression. The bank indirectly paid for
the abolition of private farms and the creation of huge state
cooperatives. Many farmers who resisted the government's
"reorganization" were sent out in leaky boats. Thousands drowned.
The bank has loaned the government of Indonesia over
$600 million to remove - sometimes forcibly - several million people
from the densely populated island of Java and resettle them on
comparatively barren islands. Despite widespread reports of violence,
the bank continues lauding the project as "the largest voluntary
migration" in recent years.
The Indonesian Minister of Transmigration has
proclaimed that "by way of transmigration, we will try to realize what
has been pledged, to integrate all the ethnic groups into one nation -
the Indonesia nation. . . . The different ethnic groups will in the long
run disappear because of integration and there will be one kind of man."
(Washington Post, June 24, 1986) As Australian critic Kenneth Davidson
notes, transmigration is "the Javanese version of Nazi Germany's
lebensraum." (Melbourne Age,. June 1, 1986)
The World Bank is providing massive aid to the
Ethiopian Marxist regime of Mengistu Haile Mariam. In the midst of the
1984-85 famine, the government launched a "resettlement" program to
forcibly move hundreds of thousands of Ethiopians from the northern
parts of the country to the south. According to Doctors Without Borders,
a French medical assistance group, the resettlement program may have
killed more people than the famine itself. (Washington Post, December 3,
1985).
Mengistu is also committed to a villagization program
whereby the government forces people to abandon their private land and
live in government-controlled villages, complete with guard towers.
Three million Ethiopians already have been moved this way, and the
government claims that eventually it will resettle 33 million people in
government villages - three quarters of Ethiopia's population.
The Wall Street Journal recently reported (May 27,
1987): "Ethiopian soldiers seized their land, destroyed their mosques,
burned copies of the Koran and tried to force them to live in villages
and give their produce to a collective, in return for standard food
rations."
The villagization scheme is closely tied to the
government's plan to nationalize all agriculture.
Throughout this period, the World Bank has provided
massive aid to the Mengistu government. Bank commitments to Ethiopia in
1985 equalled roughly 16 per cent of the government's $1 billion budget.
The bank has provided millions for the Ethiopian Ministry of
Agriculture, despite its involvement in the villagization scheme. One
disgruntled bank employee, who wished to remain anonymous, described the
bank's Ethiopian policy as "genocide with a human face." (personal
interview, August 6, 1987)
A Record of Failure
As the bank's 1987 annual review noted, 75 per cent of
its African agricultural projects have failed, bank projects in Latin
American and Africa routinely collapse because the governments don't
repair the bank--financed roads and infrastructure, and World Bank
officials have suffered from "an unseemly pressure to lend" to Third
World governments. (Twelfth Annual Review of Project Performance
Results, World Bank, 1987).
World Bank money has probably had its biggest impact in
Africa. Between 1973 and 1980, the bank plowed $2.4 billion into African
agriculture. For almost 15 years, the bank has concentrated on boosting
food production; in the late 1970s and early 1980s, 92 per cent of bank
projects were designed to increase food production. (Tenth Annual Review
of Project Performance Results, World Bank, 1985) Yet, per capita food
production has fallen almost 20 per cent since 1960.
A 1981 Bank analysis of Africa concluded that "Much of
the investment in agriculture, especially the domestic component, has
gone into state farms, big irrigation schemes and similar
capital-intensive activities. These have turned out to be largely a
waste of money; their impact on output has been negligible in most
cases." (Insight, February 9, 1987)
World Bank aid and advice helped African governments
launch a flood of new public enterprises. But, as a 1986 bank report
concluded, these enterprises "present a depressing picture of
inefficiency, losses, budgetary burdens, poor products and services, and
minimal accomplishment of the noncommercial objectives so frequently
used to excuse their poor economic performance." Moreover, "the overall
performance of public enterprises is so poor that even those African
governments most philosophically committed to socialist principles are
now openly voicing concern. " (John R. Nellis, "Public Enterprises in
Sub-Saharan Africa," World Bank, 1986)
Bank support of African state-owned enterprises
undercuts the private sector in other ways. A 1987 bank study notes:
"Another prevalent weakness in African trade regimes is the granting of
import duty exempts to government enterprises and foreign aid financed
projects. This practice subjects private enterprises to unfair
competition and retards the development of domestic industries capable
of making the same products, especially when such exemptions coincide
with currency overvaluations and heavy domestic tax burdens on local
producers." (Keith Marsden and Therese Belot, "Private Enterprise in
Africa," World Bank Discussion Paper no. 17)
Even though World Bank studies and spokesmen repeatedly
insist that the private sector is inherently more efficient than the
public sector, the vast majority of Bank lending is still going to shore
up foundering state-owned enterprises, government credit institutions,
and political and bureaucratic control of Third World economies.
But such aid works against real private-sector-oriented
reform. As Alan R. Walters, former chief economist for the Agency for
International Development, notes, "Foreign aid . . . gives enormous
resources and control apparatus to the local administrative elite and
thus sustains the authoritarian attitudes corrosive to the development
process. " (Washington Times, March 6, 1987) P. T. Bauer of the London
School of Economics recently observed, "Third World rulers' policies,
which have been supported for decades by official Western aid, accord
with their own interests. They will modify them only if continued
pursuit promises to result in economic breakdown threatening their
political survival." (The New Republic, June 15, 1987)
Bankrolling Communism
Loans to communist governments have been the fastest
growing part of the bank's portfolio in the 1980s. An aid agency
desperate to find new recipients has found them in the worst managed
economies in the world.
The bank has plowed over $4.7 billion into Yugoslavia.
Today, the Yugoslavian economy is in shambles, inflation is over 120 per
cent, and the economy is so rigid and controlled that the different
states of Yugoslavia have almost no trade with each other.
Since Hungary joined the World Bank in 1982, the bank
has given it over $1.3 billion in subsidized loans. Hungary recently
received a $140 million loan to "help the government maintain the
momentum of the reform process and the restructuring of industry." (Bank
News Release, June 15, 1987) But Hungarian reform is largely an illusion
and a failure. (See James Bovard, "The Hungarian Illusion," The Freeman,
September 1987.)
China is now the bank's second largest borrower, after
India. The bank rushed into China as soon as Beijing announced that it
would consider accepting foreign loans, and the bank has been searching
for justifications for its China binge ever since. In a 1984 statement,
a bank official asserted, "If China is to maintain a reasonable growth
rate and manageable debt service payments, it will need to obtain the
necessary additional foreign capital at an average interest rate below
the market rate. " (Helen Ericson, "World Bank to Boost China Loans,"
Journal of Commerce, January 6, 1984) In other words, the Chinese
economy is so poorly managed that it needs subsidized loans.
Now the Soviet Union appears to be on the verge of
gaining World Bank membership and subsidized loans. World Bank president
Barber Conable has stated that he would be "happy" to consider Soviet
membership, and Undersecretary of State John Whitehead has said that the
U.S. "would like to see the Soviet Union become a member of" the World
Bank, the International Monetary Fund, and the General Agreement on
Tariffs and Trade. (New York Times, March 6, 1987)
World Bank projects have often caused great
environmental harm.
In Kenya, the World Bank has invested over $29 million
in the Bura irrigation project. But, when President Moi toured the site
recently, he found "eroded irrigation canals, abandoned plots, poor
crops, tumbledown and unsanitary housing, zebra grazing on irrigated
land, and an air of general desolation and decay." According to African
Business, "a confidential World Bank mid-term evaluation reported at the
beginning of 1985 that Bura's tenants, aside from being so disaffected
that a fifth of them had deserted their plots, suffered mortality and
morbidity [rates] several times higher than the national average." Even
though the project had invested almost $50,000 per family, the bank
report noted severe and widespread malnutrition among "beneficiaries."
(Barbara Gunnell, "The Great Bura Irrigation Scheme Disaster," African
Business, April 1986)
The bank recently made a $450 million loan to Brazil
for hydroelectric projects, even though the bank's president conceded
that one of the dams was "an ill--conceived project which has had
substantial negative effects on the environment and on the AmeriIndian
population." (A. W. Clausen letter to Bruce Rich, June 26, 1986) Hugh W.
Foster, U.S. representative to the Bank's Board of Executive Directors,
complained that the loan is "pure folly," that it will finance "a series
of environmental disasters," and that resettlement efforts are sure to
bring "extensive human suffering and bitter recriminations." (Statement
to the Board of Executive Directors, June 19, 1986)
The bank is spending almost half a billion dollars to
dam up the largest westward-flowing river in India, a massive scheme
that will displace over two million people, flood 900 square kilometers,
and destroy 33,000 hectares of the country's dwindling forest cover,
including some of its best teak and bamboo. A study by the Indian
Council of Science and Technology predicted that the dam will result in
increased malaria, cholera, viral encephalitis, and other water-borne
diseases. (Ashish Kothari, "This Dam Spells Doom," Express Magazine
(India), September 22, 1985)
Conclusion
After scores of World Bank loans, most less developed
countries still have policies that would qualify them for an economic
insane asylum. If the bank has not straightened out Third World economic
policies after disbursing over a hundred billion dollars in loans and
handouts, what chance is there that increased bank lending will correct
the problems in the future?
The World Bank claims that adjustment requires
austerity, and we must give governments extra aid to help them adjust.
But, in most cases, what is needed is not belt-tightening but simply
that governments loosen the noose around their own economies.
Western governments cannot wrap themselves in a cloak
of virtue because of their World Bank donations. At the same time
Western aid to Third World countries has increased, the United States
and Europe have raised new barriers against Third World imports. First
we give them money to make them more productive, and then we refuse to
allow them to sell us what they produce.
It would be more beneficial, and far more effective at
encouraging healthful Third World economic policies, if we simply
stopped giving handouts and simultaneously abolished trade barriers
against Third World imports. Dominican Republic farmers, for example,
would benefit more from open access to our sugar markets than from a
handout to their government. And Americans, instead of being taxed to
underwrite boondoggles in Timbuktu, could buy goods at lower prices.
Free trade would mean less waste and more efficiency here and abroad,
rather than higher taxes here and more government intervention
throughout the world.
At the time of the original publication, James Bovard
had written on foreign aid for The New York Times and The Wall Street
Journal. This article is based on a study he prepared for the Cato
Institute.
Reprinted with permission from The
Freeman, a publication of the Foundation for Economic Education, Inc.,
May 1988, Vol. 38, No. 5.
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