New Internationalist

Globalizing Greenwash

Issue 365

After a string of environmental disasters associated with its projects and years of criticism, the World Bank promised in the early 1990s to clean up its act and become a lean green funding machine. Pamela Foster inspects the Bank’s track record over the last 10 years and isn’t convinced.

Karen Robinson / Panos / www.panos.co.uk
Anti-dam protesters in Domkhedi stand prepared to drown as the waters of the Narmada rise. Karen Robinson / Panos / www.panos.co.uk

For 15 days in 1991, Medha Patkar, social scientist and community leader, was effectively left to starve by those backing the construction of the giant Sardar Sarovar dam project in the Narmada valley in India. This slight woman was on a hunger strike until her protests, along with those of thousands of others opposing the project, were heard by the World Bank, one of the dam’s main backers. In an unprecedented move, the World Bank agreed to an independent review of the project.

Completed in 1992, the review substantiated the people’s claims about the negative environmental and social impacts of the dam. It found that the Indian Government’s calculations of the amount of energy that would be produced and the number of people affected were completely inaccurate. It also found the rehabilitation and relocation efforts of the Government to be insufficient and in violation of human rights.

Not long after this damning report, criticism again rained on the Bank – an internal review of the Bank’s loan portfolio was leaked to the public. It revealed that a large number of projects were unsatisfactory using even the Bank’s own narrow set of criteria. The report linked the decline in project quality to a ‘pervasive culture of approval’ for loans, whereby pressure to lend overwhelms all other considerations.

By 1993, it appeared that momentum might have been created for change. With clear signals coming from the Bank, India did not submit applications for further financing of the Sardar Sarovar project. The World Bank also created an independent Inspection Panel to address complaints related to Bank projects and the Bank’s failure to follow its own rules. This kind of accountability system was unique among financial institutions.

In 1995, following the first-ever Inspection Panel investigation, the World Bank dropped its commitment to funding the Arun-III dam in Nepal, another mega-project which would have had disastrous consequences for one of the world’s poorest countries. An editorial on the Arun-III dam in the Ottawa Citizen of 22 August 1995 said: ‘The World Bank has justly been criticized in the past for acting more like a bank than an aid agency. It has promoted mega-projects such as dams, airports and large-scale irrigation systems that wreaked environmental havoc and led countries into a spiralling debt while doing little to help the poor. Now the World Bank seems to have reached a turning point… As the Bank marks its 50th Anniversary, however, there appears to be a real shift in its attitude towards development.’ But nearly nine years on, has there been a real shift in attitude at the Bank?

Reigniting wars

Few are celebrating the 60th birthday of the World Bank. In 2003, it invested in an oilfield and pipeline development stretching across Central Asia. Regional and international non-governmental organizations (NGOs) investigating the Baku-Tbilisi-Ceyhan project have called attention to the fact that it would cause serious human rights abuses, could spark or reignite regional wars, would rob local people of their land and livelihoods, and would deliver yet more oil to already saturated Western markets, further contributing to climate change. An analysis by a coalition of organizations monitoring the project pointed out no less than 170 partial or full violations of the World Bank’s own policies. Yet the Bank approved it anyway, arguing that its involvement raises the environmental and social standards of the project.

The Bank used similar arguments to justify its financing of Exxon and Chevron for the Chad-Cameroon Oil and Pipeline project in 2000. On 10 October 2003, the date of the official inauguration of the Chad-Cameroon Oil Pipeline, a coalition of human rights associations in Chad called for a national day of mourning, arguing that the oil revenues ‘will only be another weapon in the hands of a plundering oligarchy to oppress the Chadian people.’

Since refusing to disburse further funds for the Sardar Sarovar dam in 1993, the World Bank had not funded any large dam projects in India. Yet, late in 2003, a senior Bank official told the Indian newspaper Economic Times that the process of funding hydro-power projects in India was already under way. This news is consistent with the ‘High Risk/High Reward’ strategy that the Bank adopted earlier in 2003. It renews the Bank’s commitment to mega-projects like large hydro dams with no explanation as to how the Bank will address their known negative impacts.

This development is particularly worrying because the Bank’s own policies intended to protect the environment and vulnerable social groups have been steadily diluted from day one. Introduced in the early 1980s, these so-called Safeguard Policies cover issues such as environmental assessment, forests, indigenous peoples and natural habitat. The Bank has been ‘reformatting’ them since 1996. Many NGOs fear that policies are being made so flexible that staff or borrowers can never be accused of having violated them. In 2002, the Bank changed its forest policy to allow it to support logging in tropical forests.

A report from the Operations and Evaluation Department of the World Bank that same year summarized its performance in the area of the environment. ‘Environmental sustainability was not integrated into the Bank’s core objectives? there has been a lack of consistent management commitment to the environment, coupled with a lack of consistent management accountability.’

Disarming through dialogue

What the Bank has done is insist on privatization, liberalization and exploitation of natural resources, despite overwhelming evidence that this approach results in poverty, environmental degradation and increasing inequity.

Whereas the Bank used to dismiss its many opponents, it now attempts to disarm through dialogue. Consultation processes initiated by the Bank are proliferating, but with no corresponding changes in policy or practice.

In 1998, for example, at the urging of communities around the world, the Bank appointed an independent World Commission on Dams (WCD). The WCD comprised 12 representatives of industry, government and dam-affected peoples including community activists like Medha Patkar. After 30 months of intensive study and consultation, the WCD released a report that developed new standards and policies for guiding future projects. The Bank has yet to adopt its recommendations.

Instead, the Bank adopted a Water Resources Sector Strategy in 2003 that embraces high-risk dam projects and the privatization of water services, a strategy that has been shown to lead to further impoverishment of the poor as the private sector prices essential services out of their grasp.

The World Bank also continues to justify investments in fossil fuels as ‘development’ projects. From mid-1992 to June 2002, the World Bank supported 226 fossil fuel projects with over $22 billion in financing despite its self-affirmed commitment to combat climate change.

In the name of poverty alleviation, the Bank has entered into partnership with some of the most notorious producers of hazardous pesticides, again undermining its stated policy commitments to the environment. Personnel exchanges routinely occur between the World Bank and major pesticide companies – companies whose misdeeds have included illegal toxic shipments, chemical dumping and accidents, exposing humans to high levels of toxins and false advertising.

When presented with this evidence, the World Bank relies on its own External Affairs and Publications departments to manage criticism. Since the Earth Summit in 1992, the Bank’s External Affairs department budget has increased 52 per cent.

While the World Bank’s External Affairs department globalizes greenwash, its Publications department greenwashes globalization. The flagship document of the World Bank is the annual World Development Report, which the Bank uses to provide an ‘intellectual framework’ for describing its work as development. Positioned as ‘secular bibles’ on current development thinking, its two World Development Reports on Environment were published in 1992 and 2003 in order to influence outcomes of the World Summits on Sustainable Development. Defining development largely as growth, the reports avoid addressing contradictions between particular approaches to growth and poverty eradication, environmental protection and reductions in inequality – in other words, justifying business as usual.

In 2002 the evaluations department of the Bank again warned: ‘Unless and until… the environment becomes part of the Bank’s core objectives? the tension between the Bank and its stakeholders that has characterized the past decade will continue and probably intensify.’

Probably? The Bank has shown itself consistently to be unwilling to or perhaps incapable of change.

Pamela Foster is co-ordinator for the Halifax Initiative, a Canadian coalition of development, environment, labour, human rights and faith groups deeply concerned about the international financial system and its institutions. info@halifaxinitiative.org

IMF and the Environment

‘Only sustainable economic growth – a central aim of the IMF’s policy advice – can generate the additional resources needed to address environmental problems. Ideally, the environment benefits from virtuous circles in which sustainable economic growth reduces poverty, increases resources available to improve the environment, and is itself reinforced by these trends.’ IMF Factsheet on the Environment 2003

The IMF claims its goal is to increase financial resources available to governments. Laudable as this is, IMF loans and policy advice exploit natural and human resources to increase the pool of money available for, among other things, repaying debts countries owe it, the World Bank and their largest shareholders. The outcome is that there remains a net flow of financial, natural and human resources from the South to the North.

The IMF approach to growth involves pressuring countries to:

• reduce government spending

• promote export-led growth

• increase foreign investment.

Each of these planks has an enormous negative environmental impact and, at best, mixed economic impacts.

Reductions in government spending reduce financial resources needed to enforce environmental regulations. Budget-cutting for an IMF loan in Russia led to a 40-per-cent reduction in funding for protected areas, increasing poaching and illegal logging. An IMF loan after the 1999 financial crisis in Brazil led to a 90-per-cent cut in the largest official programme for the protection of the Amazon.

To promote export-led growth in the mid-1990s, the IMF prevailed upon Cameroon to devalue its currency and cut export taxes on forest products. This made logging more profitable and by 2000, over 75 per cent of the country’s forest cover had been or was scheduled to be logged.

Restrictions on foreign investment are seen as barriers by the IMF, rather than legitimate policy tools of national governments. In the Philippines, the IMF advised the Government to put in place new laws to facilitate foreign ownership in the country’s mining sector, resulting in few benefits for local communities and increased social and environmental stress.

The IMF claims that it is too difficult to link a particular outcome to a particular policy. It has a small team in its Fiscal Affairs Department with special responsibility for following environmental issues relevant to its work. It also relies on the World Bank, ‘given the Bank’s substantial expertise in the area of the environment.’ A vicious not virtuous circle, indeed.

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