Imperial Nature: The World Bank and Struggles for Social Justice in the Age of Globalization (Yale Agrarian Studies Series)
Yale University Press, 2006
384 pp., 59.92
The World's Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations
Penguin Press HC, The, 2004
480 pp., 29.95
Reading the World Bank
Few global organizations generate more controversy than the World Bank. For several weeks in April and May of this year it was impossible to open the world's marquee newspapers without confronting headlines and editorials on Paul Wolfowitz's fight to remain at the helm of the Bank. Why should The China Daily or Kenya's Daily Nation feature stories about palace wars on H Street in Washington? What warrants intensive politicking by finance ministers in Africa and Continental Europe, or veiled warnings from heads of state about the consequences, if Wolfowitz hung on to office? Why the delight in remote corners of the world when Wolfowitz surrendered to clamor for his removal?
The Bank matters to rich countries because they disproportionately finance its programs. The Bank focuses the attention of leaders in developing countries because its interventions are variously hated and loved for their intrusion into domestic politics and policy priorities. Situated a few blocks from the White House, in 2004-2005 the Bank extended loans in excess of $22 billion to more than 100 poor countries. Its investments in the private sector in developing countries exceeded an additional $5 billion.
The Wolfowitz controversy personified debate over a global institution with such massive stakes in the developing world. In Wolfowitz critics saw much they abhor about the institution itself. An architect of the Iraq War seemingly exemplified the bullying ways of an international organization widely resented for heavy-handedness. A man who made anti-corruption his watchword for draconian measures allegedly was corruptible himself. A leader who sought to export democracy to the Middle East failed to heed the opinions of his own experienced experts.
Wolfowitz thus became a lightning rod for bigger issues. World leaders critical of U.S. billions spent on an ill-conceived invasion of Iraq found it difficult to accept Wolfowitz's credentials as a peacemaker. Europeans saw his vulnerability to criticism as an occasion to weaken the U.S. grip on World Bank leadership. Developing nations grumbled more loudly about the lack of transparency and democracy in Bank decisions, not least the appointment of its leader.
All this contrasts sharply with the Bank's reading of itself. By its own account, the Bank's billions all flow to the same cause—working for a world where hundreds of millions of people might aspire to "a future without poverty, disease, and illiteracy." The Bank sees itself as an instrument of hope in a world beset by tragedy, inequality, and disaster. "Every week," states its 2005 Annual Report, "10,000 women in the developing world die giving birth, and 200,000 children under age five die of disease. More than 8,000 people die every day from AIDS-related conditions, and 2 million people will die of AIDS this year in Africa alone. As many as 115 million children in developing countries are not in school."
To arrest and reverse these gross injustices, the Bank commits itself to the Millennium Development Goals of "eradicating extreme poverty and hunger, achieving universal primary education," promoting gender equality and empowering women. It seeks to reduce infant mortality for children under five by two-thirds by 2015. In addition to drastically reducing maternal death rates, the Bank supports the combating of diseases, such as malaria and HIV/AIDS, and increasing sharply the access of millions to safe drinking water. Not least, it affirms the Millennium goal of a reformed global trading system, especially in its impact on the world's poorest countries.
A scan of the Bank's reports and its programs reveals an extraordinarily eclectic range of activity in every corner of the globe: getting girls into school in Egypt and poor children to school in the Kyrgyz Republic; combating tb in Africa and malaria in Eritrea; managing forests in Southeast Asia and fisheries along rural coastlines; rushing emergency teams to Indonesia, the Maldives and Sri Lanka after the tsunami of 2004 and rebuilding strife-torn Central Africa; killing agricultural pests in Central Africa and developing the garment industry in Cambodia; pushing for court reform in the Philippines and building the power grid in the Dominican Republic; creating housing reform in Mexico and road-building in Poland.
Not least, the Bank now combats the money laundering that could fuel terrorism. It demands transparency in governments and offers transparency for itself. Millions of dollars are committed to reducing government corruption and to building civil society groups. The World Bank Institute trains aid workers. The Bank teams up not only with governments but with the World Wildlife Fund and the Scout Movement for children, with Conservation International and the UN's Programme on HIV/AIDS.
How can this panoply of good works be read as anything else than a commitment to justice or a panacea to disease, disaster and despair? Michael Goldman's Imperial Nature and Sebastian Mallaby's The World's Banker present alternative readings, neither concordant with the Bank's self-portrait but both resonant of tones in the Wolfowitz controversy.
Dissenting most strongly from the Bank's view of itself, sociologist Goldman subtitles his book "The World Bank and Struggles for Social justice in the Age of Globalization," but he quickly avows that justice, if it is to be found, will not be from the Bank. For decades, major infrastructure projects were at the heart of Bank programs. Dams, electrical grids, ports, and highways have a tangible character that appeals to Wall Street bankers, national leaders, and Bank economists alike. Managing water has a special appeal. If water can be contained and manipulated, nature's "waste" can be harnessed so that farmers can irrigate fields, manufacturers will obtain electricity, urban dwellers enjoy clean water, and residents along river banks will be protected from flooding. Investment, agricultural production, environmental control, health benefits—water projects promise them all.
Goldman had some reason to doubt these promises before he began his principal case study, the Nam Theun 2 Dam Project on the Mekong River in Laos. In the Thar desert of northwest India, the World Bank had invested in a massive irrigation canal system to pour Himalayan water into a harsh arid environment. Wealthy landowners turned land along the main arteries of the canals into export-producing farms. But along the minor arteries water disappeared. Systematic theft of cement left canals too porous to deliver water. In other places channels were sand-clogged, and adjacent land was waterlogged and salinated. Driven into debt, poor farmers were forced off their land and into part-time labor, indentured servanthood, or sharecropping.
Further south, in 1990, thousands of villagers set off on a "long march" to protest their forced resettlement to make way for a dam in the Narmada Valley. Local authorities were not impressed. Protesters did, however, disturb the Bank, which faced disconcerting international publicity about the refusal of its officials to heed hydrological and engineering reports that drinking water would not get to where it was promised, entire fisheries could be lost, and irrigation schemes would fail. As a result the Bank pulled out. Shortly after he became President of the Bank in 1995, James Wolfensohn canceled another large dam project in Nepal, fearful that growing protests would spur another "Narmada effect."
Heeding these setbacks, the Bank learnt a lesson: solicit environmental impact statements before committing to any new infrastructure project. The massive Mekong River projects became a litmus test of the Bank's response to its critics. Situated on a tributary of the Mekong in Laos, the Nam Theun 2 Dam project promised far more. The dam would simultaneously generate hydroelectricity for energy-hungry Thailand while earning hard currency for Laotians. Around this centerpiece the Bank planned linked projects—experimental farms, sustainable logging, eco-tourism, harvesting the forest, and protecting wildlife. More expansively, the Nam Theun project and its cluster of other "green" initiatives would require "new regimes of law, regulation and management," the restructuring of government agencies, and the readjustment of the national budget, all enabled by the Bank as the lead lender.
No less than three waves of environmental studies followed. The first, by Australian consulting firm Snowy Mountains Engineering, offered a positive appraisal, but critical NGOs pointed to serious flaws in the report and to a conflict of interest the firm had with the contractors for the dam. A second evaluation, by a Thai consulting firm long-connected to the Bank, met a similar fate when international activists mobilized to contest its findings and auspices. In 1995, the Bank tried again, this time with two long-standing consulting firms, one German, one American, but also, unusually, with two international NGOs, the World Conservation Union and CARE International. Consultants headed into the jungle to interview remote tribes. Ichthyologists carried out fishery impact studies on the Mekong. Anthropologists evaluated the impact of resettlement of ethnic peoples.
On closer examination, Goldman finds that the illusions of neutral evaluation belie reality. The quality of appraisals fell far below scientific standards. Consultants were given impossibly tight timetables to elicit complex information about the impact on the Nakai Plateau tribespeople or on fisheries below the dam. Terms of reference excluded pertinent issues. Inconvenient data about resettlement were suppressed by the World Conservation Union and overly independent consultants fired. More significantly, consultants regularly yielded to pressure from the government of Laos, contracting firms, and the Bank to give them what they wanted. Meanwhile, as the reports accumulated, forests were cleared for the dam reservoir, project financing put in place, and government agencies retooled for resettlement and construction.
In constructing markets and reshaping the environment, the Bank has become arguably the most potent agent of state reconstruction in the world. In Laos, says Goldman, the "greening of Laos" required the building of an "environmental state." Ministries thrived if they had a hand in the giant infrastructure projects; they shrunk if they served only health, education, or welfare. The Bank gave the ruling Pathet Lao a superb alibi to continue its "ethnocidal 'Laocization policy,'" in which some 900,000 non-Lao speaking peoples would be forcibly resettled and "Laocized." At least fifty foreign bilateral and multilateral agencies, governments, and banks hover over every decision of government, influencing its laws, investments and policies. The Laotian state, Goldman implies, is more responsive to "transnational capital" and global experts than to its own citizens.
The Mekong projects signify far more than the deep intrusiveness of the Bank into a country's affairs. For Goldman, the big story concerns not the Bank's financial capital, which is massive enough, but its intellectual capital. The Bank's fundamental power is not of the purse but of the pen. With its unparalleled staff of professional experts, overwhelmingly economists, and its hydra-like capacity to absorb consultants and experts the world over, the Bank has crafted an ideology that not only controls the prevailing worldview of development but limits the questions that can legitimately be asked. In the environmental field the Bank has created a "green neo-liberalism" that fuses the financial neoliberalism of privatization, downsizing the state, and free enterprise with a "liberal society agenda of social justice and environmentally sustainable social justice." This fusion produces "a frame of mind, a cultural dynamic, an entrepreneurial personality type, and a rule of law" that is virtually impossible to escape. The power of the pen controls minds, forecloses options, excludes questions, predisposes answers. In green neoliberalism, "neoliberalism" eclipses "green."
To the argument that international civil society presents a counterpoint to the Bank, Goldman warns us to look again. On the much-contested issue of water privatization, where the United States and the Bank have urged, even pressured, governments to cede everyday responsibility for water supply to private corporations, a global consensus emerged quickly. Investigation reveals that consensus arose not from below, from concerned citizens and environmental groups, but from a combination of the Bank's interventions from above, and predominantly from private sector groups closely aligned with the companies that offer these services. Not surprisingly, their diagnosis was that the public sector had failed, privatization was the only answer, and the Bank and the imf could ensure this by making privatization a condition of their loans to poor countries. The results? When the poor did not get the better services they were promised, or costs rose beyond their ability to pay, a strong backlash broke out in many countries. Eventually public protests have led to the redrawing of contracts and, in some cases, the withdrawal of private firms.
Ultimately, says Goldman, it is naïve to expect the Bank to be environmentally responsible, let alone an agent of social justice. The Bank answers to the institutions of global finance, to the interests of small consulting firms, major contractors, cash-starved political élites, international bankers, Wall Street, and its largest stockholders—the world's richest nations. Look not to the Bank for sympathy or understanding for the poor, the voiceless, the excluded and marginal. Look through the Bank's rhetoric to its actions. Weigh them against its predations—and that will constitute the measure of the Bank's commitment to poverty, social justice, and democracy.
For Sebatian Mallaby, this reading, through the lens of water politics, is much too monochromatic. The World's Banker does not disagree that the Bank has fallen short on any number of criteria, not least former director Robert McNamara's goal to defeat global poverty by the end of the 20th century. The Bank's structural adjustment policies, whereby it has demanded stringent financial belt-tightening in already impoverished countries, have triggered riots across Africa and Latin America, eliciting almost universal loathing. The earlier refusal of the Bank to consider debt relief for desperately poor countries meant that vastly more of their national budgets were spent on loan repayments than social services. Oxfam pointed out to Wolfensohn in the mid-1990s that Uganda spent $2.50 per citizen on health annually compared to $30 per citizen for debt repayment. Like many other multilateral organizations, the Bank was woefully slow to recognize and combat the catastrophic effects of the AIDS pandemic.
Bank officials often had themselves to blame for negative publicity. A hubris born of the power to alter the fates of nations breeds arrogance. Bank recipes for success came and went—in one period, infrastructure, in another, investment in people, and then back to infrastructure again. Theories of development seemed like one passing fad after another—physical capital in the 1940s and 1950s, human capital in the 1960s, social capital in the 1990s. One moment the priority might be poverty, then macroeconomic structural adjustment. Too often the allegations of critics had been correct: the Bank forged pacts between its own bureaucrats and national autocrats.
Bank policy and decision-making was dominated by the nations that paid in most capital—its richest investors. Their views of global priorities—and national interests—got imposed on hapless countries on the periphery. The processes of approving projects too often had been too slow or too fast, too ready to ignore reports that didn't agree with Bank priorities. Evaluation as well was difficult at best and controversial at worst. The best laid schemes went awry. "Clinics got built, but there were no medicines to put in them. Roads were constructed, but were later not maintained." Corruption siphoned off 10 percent or 20 percent or even 30 percent of loan moneys, as was alleged in Indonesia. No wonder NGOs mobilized outside the Bank annual meeting in 1994, chanting "Fifty Years is Enough." The "overweening confidence" of these global mandarins was matched only by their "manifest incompetence."
Despite all this, Mallaby does not settle for simplistic, moralistic judgments. In fact, the Bank could rightly point to notable achievements. When a U.S. Indonesian specialist alleged that 20-30 percent of Bank moneys were going astray in Indonesia, the Bank could retort that thanks to its interventions, Indonesian poverty rates had dropped from 60 percent in 1966 to 11 percent in the mid-1990s. When a hostile Bush Treasury Secretary asserted the Bank hadn't made any impact on world poverty, it fired back with a powerful rejoinder: since 1960, life expectancy in poor countries had risen from 45 to 64; since 1970 world illiteracy fell from 47 percent to 25 percent; since 1980 the world population had increased by 1.6 billion but poverty had fallen by a net 200 million. For all these advances the Bank could reasonably claim some credit, although parsing out its precise contribution would never be uncontested.
It is true that the Bank—not alone among institutions or countries—took a long time to respond to the AIDS pandemic. But when it awoke, around 1999, its influence was decisive in several places, not least India, where a pact with the government saved millions of lives. Until Wolfensohn's presidency, the Bank steadfastly resisted calls for relief from the crippling debt held by the most impoverished countries. But once Wolfensohn heard and heeded the cry, the force of Bank leadership propelled international financial institutions and the G-7 into one and then another wave of debt forgiveness—although even some ifi officials question whether the programs were well-conceived or executed.
Critics have no difficulty finding cases up and down Africa where the Bank's loans have disappeared into a sinkhole of waste, corruption and monument building. But look at the story of Uganda. Ravaged by Idi Amin's brutal dictatorship in the 1970s, and later Obote's one-party rule, Uganda fell towards the bottom of the world's poverty league. In 1986 a coup brought Yoweri Museveni to power. Joining forces with the Bank to stimulate economic development, together they lifted average income by 40 percent in a decade. In the eight years from 1992 to 2000, poverty dropped from 56 percent of the population to 35 percent. Thanks in large part to Museveni's sophisticated finance minister, Uganda created a poverty eradication action plan across the broad front of economic, health, and education policies. In a campaign against corruption, the Bank pressed the government to rationalize a budget that would be transparent to the public, allowing even civil society groups to monitor expenditures on social services. A $155 million Bank loan for universal free primary school education doubled enrollment in elementary schools.
The Bank could also be a peacemaker. The Bank's willingness to move fast and effectively to rebuild Bosnia helped to complete a peace agreement in an atmosphere of recrimination and suspicion. At the Dayton negotiations it showed Serbs, Croats, and Bosnians that concessions on their part would capture the imagination of a world community ready to springload reconstruction. As a multi-lateral institution, the Bank was able to coordinate donor nations and international organizations in a comprehensive effort to reconstruct the financial system, write a new constitution, rebuild schools and medical clinics, to name a few. The Bank could act as a "neutral" broker, not obviously party to any of the adversaries.
Similar refrains can be heard in other domains. Yes, many infrastructure projects—roads, dams, electricity grids—had delivered far less than they promised. But the Bank could learn. Building river banks in Bangladesh flood zones protected villagers. Building roads brought markets closer. Building an oil pipe line in the Chad offered a sliver of hope for state-building revenue. Fighting poverty, said Wolfensohn after 9/11, fights terror.
Goldman and Mallaby agree that Wall Street and the U.S. administration of the moment have a tremendous influence on World Bank priorities and resources. But beyond that their accounts diverge. If there is an immense disjunction between the Bank's mission and what it delivers, how is this to be explained? Goldman blames an amalgam of global capital, a triumphalist U.S. attitude riding on the back of an ideology created from neoclassical economics, and the coincident interests of Bank development specialists, contractors, and consultants, and some Third World élites. Eliminating poverty is less the real goal than a rhetoric to justify rivers of money and to maintain a hegemony of experts in Washington and the Bank's field offices. Ironically, Mallaby, the financial journalist, looks instead to the sociology of the Bank for an explanation. For Mallaby the Bank concentrates enormous resources that can be mobilized against "the greatest outrage of our times—the persistence of extreme poverty." Yet even if its leadership were willing—and this has not always been the case—the Bank itself is riven with contradictions that would subvert the best-intentioned organization.
On any project at any moment, the Bank can find itself caught in a vise of contradictory expectations. Compare three often mutually colliding constituencies. Shareholders, most notably the rich nations of the North, advance their own agendas, which twist and turn as their administrations change (cf. the Clinton Administration's priorities on education and the Bush Administration's initial skepticism of the Bank) and as global realpolitik dictates. 9/11 redirected substantial new resources to combat terrorism through anti-money laundering campaigns.
Clients, developing countries, too often present no easy options to the Bank. The price of Indonesia's sharp reduction in poverty seemed to be tolerance of rampant corruption, a siphoning off of World Bank moneys into bottomless private pockets. Behind the Uganda success story lies an authoritarian ruler, Museveni, who tolerated an election in 2006 by throwing his primary opponent into jail. And who are the Bank's true clients? The government officials and their retinues of consultants, the regional administrators who "tax" the World Bank disbursements to line their pockets, or the rural poor and slum-dwellers, struggling for a daily meal or a modicum of dignity? And if the last, how to find out what they truly need? And once that need is identified, how to get money into the hands of those who most need it?
And then there are the activists. On this Goldman's and Mallaby's readings of the Bank concur. There is a naïve view that NGOs are the parties of virtue in the face of Bank and donor vice. Goldman maintains that some of the most reputable environmental groups—the Wildlife Conservation Society and the Worldwide Fund for Nature, for example—were co-opted by the Bank in the Mekong Delta projects. Mallaby ranges farther and wider, on the one hand applauding Wolfensohn for reaching out to NGOs, but on the other hand castigating the "Stankoist" fringe that smashed windows and burnt vehicles at the Seattle annual meeting of the Bank and Fund. The Bank story is replete with episodes where tiny groups representing unknown constituencies were given more credence than governments, where NGOs reacted in knee-jerk opposition to Bank projects without doing their homework. Goldman shows that international NGOs with innocuous names are often fronts for economically self-interested industries which scramble for lucrative Bank contracts. Heeding civil society is a welcome practice for the Bank, but without prudent understanding of who NGOs represent and how much credence they should be given, Bank decision-makers do well to be wary. And putting international NGOs before the interests of citizens in borrowing countries requires special caution.
If this three-way squeeze were not enough, the Bank itself is a tribal society where those at headquarters clash with those in the field, where long-term technocrats resent the transient politicians brought in to lead them, where the prevailing ideology of a certain economics clashes with anthropologists and other social sciences. Managing directors from Bank investors breathe down the necks of managers. And high-paid officials who travel Business Class, stay in 5-star hotels, and obtain benefits seldom available in their countries of origin will fight fiercely to stay in their offices and protect their small fiefdoms.
Add to this mass of contradictions the impossibility of its mandate, as politicians and NGOs unload onto the Bank every intractable problem, it seems, that the world doesn't know how—or lacks the resolve—to solve. We can affirm with World Bank President Robert McNamara that "the extremes of privilege and deprivation [in our world] are simply no longer acceptable." Who will disagree with recent World Bank President Wolfensohn that "poverty alleviation is the single most important problem" for the world? But as we saw in Lyndon Johnson's bold vision to eliminate poverty in American cities, a noble mission and political will are no guarantee that money and expertise can deliver.
Everything must be resolved at once since everything is interdependent. But comprehensive plans look too much like lack of focus. Too focused and programs die from lack of context; too comprehensive and energies and resources dissipate. In short, the complexity of the Bank's mission demands that critics and champions alike should be modest enough to admit that economic or development theory—or, for that matter, any social science theory—are inadequate at present to provide definitive programs. And unwitting adoption of prevalent ideologies surely is no answer.
In the Bank's case Goldman and Mallaby adduce enough evidence to remind us that institutions, like individuals, may be corrupted—by major powers using the institution for national benefit, by local political leaders using it to maintain their grip on power, by NGOs that make shrill claims to rise over the clamor of competing organizations, by bureaucrats more concerned with personal ambition than mission attainment, by the organizational imperatives for staff to show "results," however flawed their outcomes, by scholars intent on preserving their disciplinary ascendancy.
The answer is not despair. Dismantling the Bank hardly seems sensible, although constantly asking how its money might be better channeled seems wise, if nothing else to keep it accountable to citizens as well as our leaders. Wolfensohn's tenure shows it can be changed, if not easily. Even so, it behooves us to constantly subject this enormously powerful institution to precisely the kinds of searching critique offered by Goldman and Mallaby, to listen to discordant voices, to confront directly the contrasting visions sketched by Mallaby: a World Bank that partners primarily with Northern NGOs and governments, versus a Bank that keeps its mission focused on "the least of these," the poor countries it is charged to help. Let the Bank continue with its experimentation, but demand that it listen to alternatives, engage in self-critique, and most of all, show evidence that indeed it is creating a world "free of poverty." We would all do well to heed the still-bracing words of World Bank President George D. Woods (1963-1968): "the plight of developing peoples—two-thirds of humanity who are striving to cross the threshold of modernization—is the central drama of our times."
Terence Halliday is Co-Director, Center on Law and Globalization, American Bar Foundation and University of Illinois College of Law. He is currently completing books on connections between globalization, law, markets, and political freedom. He has consulted with the World Bank on China.
Copyright © 2007 by the author or Christianity Today/Books & Culture magazine.
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