World Bank
Structural Adjustment

new internationalist
issue 214 - December 1990



The World Bank bills itself as the champion in the fight against
global poverty. Wayne Ellwood challenges the rhetoric.

[image, unknown]
Harald Schultz / Camera Press

Washington's Sheraton Hotel is inconspicuously perched atop a tastefully landscaped knoll near the city centre, a restrained pile of red brick set back from the bustle of Connecticut Avenue. Normally it might have escaped my glance. But today the place is a hive of activity. Merchant bankers, assorted government officials and a bevy of financial technocrats have settled in for a week of heavy drinking, glad-handing and strategizing. All in the aid of world poverty.

The Sheraton is the site of this year's World Bank-IMF meetings, a yearly gathering of the world's most powerful men. As I emerge into the sunshine from the deep gloom of the closest Metro station it is hard to miss the squadron of black stretch-limos tailgating each other around the hotel's circular drive.

Swarms of middle-aged men (my peers) are striding purposefully, attaché cases in hand, towards the Sheraton's revolving front-door entrance. All have photo-IDs hanging prominently on loops of chain around their necks. The brotherhood of the necklace.

Inside the halls are packed with close-shaven faces in pin-striped suits doing deals. There are a few people in national costume but scarcely any women. A knot of French-speaking Africans, briefcases open, have installed themselves in comfortable chairs in the lobby, puffing vigorously on Gitanes, calculators at the ready. An air of self-satisfied camaraderie seems to infuse the place. Thick, glossy magazines like Asian Finance and Euromoney litter the coffee tables. Serious people doing important business.

Later, at the morning's plenary session, I'm squeezed into the press area of the football-field size meeting room, surrounded by a virtual United Nations of hacks from the world's print media. There are several thousand relaxed, smartly-dressed bodies seated in the same room waiting to hear Michel Camdessus, the French Managing Director of the International Monetary Fund (IMF), and Barber Conable, the balding American head of the World Bank.

Both men give grandfatherly, calm, sometimes poetic speeches. I pay close attention to Mr Conable 's words since the World Bank is the special focus of my research. His delivery is polished and his speech writer has pushed all the right buttons. Women are a high priority for the Bank, he assures us. The Bank has done a lot to battle poverty and will do more, he says, by increasing loans for education, family planning and nutrition. The environment, too, will be a top priority. Eastern Europe also gets a nod as does the need for more overseas aid from Western donors. And the Soviet Union, late to the fold, is acknowledged for sending official observers to the meetings for the first time. In full literary flourish Mr Conable even quotes that hoary old British socialist George Bernard Shaw. 'The greatest of evils, and the worst of crimes,' he intones solemnly, 'is poverty.'

After Conable's words my press colleagues sprint back to their word processors in the hotel basement 'media centre' to feed their stories back to New York, Karachi and Sydney. Not constrained by deadlines (we magazine people have relaxed lead times), I wander over to the NGO briefing area which is hidden away in the lower foyer.

A global consortium of non-governmental groups (NGOs) has been stirring things up at Bank-IMF meetings for the past five years. This year 160 people from 38 citizens' groups have made it to Washington. A mixed bag of talented activists from as far afield as Burkina Faso, Peru and Thailand, they've come to share information and research on Bank activities in their countries and to lobby government and Bank officials. Unfortunately, only a handful of NGO representatives have actually been allowed into the meeting. The others have been refused accreditation by their home governments - a gesture which speaks volumes about the paranoid nature of authoritarian Third World regimes.

Greenwashing the public
Of the more than 400 journalists at the meetings, fewer than six show up at the NGO press conference. The activists are used to that. This is the first year they've even been allowed a space in the conference area, and it is little more than a closet tucked away in a forgotten corner.

Like Barber Conable, they also talk about the World Bank's impact on poverty, development and the environment. But their language is not so kind. In fact it's hard to believe they're talking about the same organization.

Life amongst the ruins: Bank projects devastate vast areas of Amazonian rainforest.
Michael Harvey / Panos Pictures

One after another the speakers at the press conference take the mike. They are angry and eloquent. Juni Kalaw, a young, articulate economist from the Haribon Foundation in Manila, says bluntly that the Bank's disastrous environmental record should disqualify it from helping run the newly announced Global Environment Fund. Then Chee Yoke Ling, a perky, exacting lawyer from the Malaysia-based Third World Network, slams the Bank for trying to 'greenwash' the public with its recent handwringing over the environment. Pat Adams, the seasoned, no-nonsense Director of the Canadian group Probe International, calls the Bank's consultation with NGOs 'erratic and by invitation only'.

Ricardo Reboucas, a gnome-like ex-banker from the Brazilian agency IBASE, is the final speaker. He bemoans the Bank's embrace of structural adjustment programs (SAPs). Austerity measures inspired by the Bank and the IMF have increased poverty and unemployment in Brazil, he says, while scarce investment capital is being pumped out of the country. In 1989 alone the World Bank took $724 million more out of the Brazilian economy than it put back in.

This is the same $22-billion-a-year organization that Barber Conable says is dedicated to 'sustainable growth' and 'poverty reduction' in the developing nations. The difference is that World Bank bureaucrats tend to look at poverty through the microscope of conventional economic theory. Reducing poverty, they say, means stimulating growth, supporting free trade and investment. This basic credo is repeated endlessly like a magic incantation in countless Bank documents. The NGOs look at the equation from the other side: poverty as seen through the eyes of the poor. As you might imagine the views are quite different.

But before we get deeper into these contrasting views let's step back for a moment and look at some more basic questions. Just what is the World Bank? What is it supposed to do? And why should we care?

First of all, it's not really a bank, at least not one you and I could use. Initially it was conceived as one of three post-World War Two institutions designed to steer the global economy on a steady course between the rocks of depression and the whirlpool of currency mayhem. Its main job (inscribed in the original 1946 articles of agreement) was to stimulate the flow of global capital and to facilitate the expansion of free markets. Until the early 1980s it did this by lending money to the Third World, mostly for mega-projects - mines, hydro-electric dams, roads, bridges and the like.

The Bank generally pottered along in this until about 15 years ago when an awakening organization's preoccupation with grand schemes. As the NGOs dug, they unearthed one disaster after another.

· In 1980 the Bank loaned $304 million to Brazil to build an iron mine at Carajas, an 890-kilometre railway to transport the ore and a deep-water port at Ponte de Madeira. The Carajas Iron Ore Project threatens the lives of 10,000 native people and may devastate an area of the Eastern Amazon bigger than France and Germany combined.'1

· In 1985 the Bank loaned $156 million to Indonesia for the Kedung Ombo Dam in central Java. More than 25,000 people in 37 villages were to be resettled due to flooding. When the affected families refused to accept compensation offers the military moved in; protesting locals were arrested and jailed as 'communist subversives'. The Government expropriated the land, but more than 1,500 families stayed on as the waters rose, clinging to their homes from boats.

· In the early 1980s, the Bank loaned India nearly $200 million for 'social forestry' but then ran into stiff opposition from the very people the scheme was supposed to benefit - the rural poor and the landless. Villagers were not allowed onto common lands after the forestry department planted eucalyptus plantations on them.

In Karnataka state small farmers actually pulled up tree seedlings in exasperation, claiming the eucalyptus would mainly benefit local lumber interests. In addition the fast-growing trees were planted in semi-arid areas where they made conditions worse by draining water tables and further exhausting already marginal soils.2

Besides environmental damage NGOs found several other common threads running through World Bank projects. The first, contrary to Bank rhetoric, was that big projects rarely reduce poverty and usually make it worse. This is now accepted as fact by most NGOs. According to UK aid critic Teresa Hayter, 'it's impossible for outsiders to fundamentally alter the relationships and power structures in the communities where they are working'.3 So whether it's Sudan or Brazil, the local elites always seem to get the most out of World Bank projects.

The other common thread is the anti-democratic nature of decision-making on project funding within the Bank. Time and time again local communities are ignored. Misconceived, harmful development projects are dropped in their laps without consultation and the people of the industrialized countries, who bankroll most of the Bank's activities, are asked to pay the bill: The Bank's financial stability rests on the commitment of public funds from member countries, yet its policies and operations are private. It is this bald 'unaccountability' that so riles critics.

Bank President Conable: orthodox economics.
Photo: Camera Press

'The Bank needs its own glasnost so that informed public debate can take place,' says Probe International's Adams. 'Decision-making,' she adds, 'should be returned to the people who have to live with the physical consequences of the decision; they're the people with the best judgement about what risks to take with their environment.'

As NGOs from around the globe were beginning to disclose the Bank's lamentable record on the environment, the Bank itself was shifting into territory more usually occupied by the LMF. When Third World debt became a full-blown crisis in the early 1980s the World Bank waded into the waters of 'structural adjustment'. This year nearly a third of the organization's $22-billion budget will go into SAPs. Designed to whip flabby Third World economies into line through the discipline of the market, these programs are now in place across most of the debt-strapped developing world.

Economic straitjacket
To qualify for these loans Third World nations are forced to accept a package of stiff economic conditions aimed at making their exports internationally competitive. Social services are slashed, public industries privatized and the local currency devalued. In turn real wages fall, unemployment soars and the price of imported manufactured goods skyrockets.

So why would any Third World country straitjacket itself in this way? According to Charles Abugre, a Ghanaian activist now working with ACORD in Uganda, there was no choice. In the 1980s the prices of most Third World commodity exports like coffee, cotton and sugar had fallen dramatically. And private lending from nervous Northern banks dried up after the 1982 debt scare.

'There was no money available anywhere, even bilateral aid, until the Bank and the IMF gave the green light,' Abugre claims. 'It would have been foolhardy not to accept structural adjustment.' And perhaps just as foolhardy to accept it. In Uganda, he says, the belt-tightening can go no further. One-third of the public sector has been laid off, bribery is endemic and the north of the country now runs on a barter economy.

Structural adjustment has cut a deadly swathe through the Third World - and drawn heavy fire from critics. So much so that UN agencies like UNICEF have castigated Bank-IMF policies for destroying the basic human capital on which poor nations must build their future. Schools have closed, infant mortality is on the upswing, malnutrition is growing and preventable diseases are spreading.

Where people have resisted this erosion of living standards, governments have unleashed their armed forces and clamped down on dissenters. Dictatorial regimes from Sudan to Bolivia have a soft spot for military spending; it's one area that never seems to feel the pinch of austerity. This is one of the great ironies of the World Bank's embrace of free markets - the policies needed to put the system in place end up increasing repression and sabotaging democratic freedoms.

Others claim that SAPs have effectively undermined the political sovereignty of their countries. Delegates at a conference sponsored by the Institute for African Alternatives blasted the Bank and the LMF for spearheading the 'recolonization' of Africa. The African scholars charge that the two agencies 'are the bridgehead of a new imperialism', effectively controlling the economic destiny of dozens of African countries. 'They approve national budgets as well as monetary, trade and fiscal policies; they appoint representatives to Ministries of Finance and Trade and they provide a seal of approval for other foreign lenders.'4

Structural adjustment may have failed on social grounds but it has succeeded famously for the private banks. The Third World has continued to ship out cheap resources to the industrialized nations even as their value on international markets has fallen. And they have continued to service their debts - even though the principal has hardly been touched. In fact total Third World debt creeps ever upwards: the meter has now topped one trillion dollars and is still ticking. Countries like Ghana, whose debt burden has doubled from $1.5 billion to an estimated $3 billion since 1983, are actually worse off after taking the World Bank's medicine.

And the net flow of capital from South to North, in the form of profits and interest payments, has turned into a virtual torrent. This annual tribute has now topped $50 billion. Bank President Barber Conable may wax eloquently about development being 'a slow process, a constantly moving tapestry'. But in the face of this massive South-North subsidy the Bank's high-flown commitment to fighting poverty is reduced to meaningless blather.

All this fuels the outrage of NGO groups who keep nipping doggedly at the Bank's heels. They are determined to bring the organization's actions and policies before the court of public opinion. And they will keep appearing at these World Bank-IMF annual gabfests, buttonholing officials and asking embarrassing questions. Because at the end of the day there is one embarrassing question whose answer seems clear: who is aiding whom?

1 Funding Ecological and Social Destruction: The World Bank and the lMF Bank Information Centre, 1989.
2 Bruce Rich, Environmental Defense Fund and National Wildlife Federation, Statement to the Subcommittee on Foreign Operations. Committee of Appropriation, US Senate, July 1990.
3 Exploited Earth, Teresa Hayter 1989.
The lMF; the World Bank and African Debt, Bade Onimode, Vol 2, Zed Press 1989.

Worth reading on... THE WORLD BANK
Two classics are Cheryl Payer's The World Bank (Monthly Review Press, 1983) and Aid: Rhetoric and Reality by Teresa Hayter (Pluto Press, 1985). For an up-to-date summary from the Bank's activist critics send for a copy of the Position Paper of the NGO Working Group on the World Bank (c/o ICVA, 13 rue Gautier, 1201 Geneva, Switzerland). Less challenging and more readable is a chilling summary of Bank activities across the Third World called Funding Ecological and Social Destruction (Bank Information Centre, Washington, DC, 1989) - another collaboration from the NGO community. As general background on the Bank, the debt question and the global economy don't miss Recolonization or Liberation (Ecumenical Coalition for Economic Justice, Toronto, 1990) a perceptive and thoroughly researched little pamphlet. In the same area and also highly recommended is George Ann Potter's Dialogue on Debt: Alternative Analyses and Solutions (Centre of Concern) Washington, 1986). From the Bank's side take a deep breath and struggle through this year's World Development Report - Poverty (World Bank, Washington, 1990)

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