Is The World Bank A World Menace?


By Bruce Rich

Beacon x 376pp x $29

In 1944, amid war and economic collapse, delegates from 43 nations meeting in Bretton Woods, N.H., created the World Bank to help spur global recovery and growth. Today the bank is the world's largest engine for economic development, lending $24 billion a year, mostly in poor nations.

In Mortgaging the Earth, Bruce Rich, an Environmental Defense Fund attorney and an expert on international development policy, offers a withering critique of the bank's 50 years of lending. This badly needed analysis exposes the destructive alliance between the bank and national governments that, in the name of progress, has plundered natural resources and impoverished millions. Drawing on case studies, official--and leaked--bank and government documents, and his own experience, Rich makes a compelling case not only that World Bank-style development often fails to deliver its promised economic payoff but also that it has been "a prime accomplice in a quiet war against the diversity of humankind's cultures and our planet's biological inheritance."

In Rich's view, the bank's damaging course was set during Robert McNamara's 1968-81 tenure as president. By 1981, he says, McNamara's grandiose agenda to help the world's rural poor consumed some 31% of the bank's annual loan commitments. During the same period, the bank adopted "a technocratic approach" that pushed large-scale, capital-intensive technologies--such as dams--and implemented a top-down planning process to set lending priorities.

Rich presents ample evidence that by the late 1980s the fruit of these innovations was failure and environmental havoc. Poverty projects that opened lands for export-oriented agriculture, commercial forestry, and cattle ranching destroyed millions of acres of tropical forests. Many projects failed because they promoted technologies and development schemes unsuitable for local social and economic conditions. Indeed, in a 1989 bank review of 82 agricultural projects approved mostly between 1975 and 1982, 45% did not meet their goals.

Rich also documents how dams, highways, and export-agriculture projects from Thailand to Brazil have displaced millions of poor and tribal peoples, locking them in poverty and degrading the environment. In India alone, he says, official development projects have uprooted some 20 million since 1947.

Rich portrays the bank bureaucracy as arrogant, secretive, and determined to lend at all costs, even when loans violate its social and environmental policies. He cites outside reviews and anecdotal evidence that the bank has repeatedly pumped money into projects against its own experts' advice; deceived its own board, which approves loans; and failed to enact promised reforms.

Indeed, Rich contends that despite a much-heralded "greening" forced on the bank in the mid-1980s by environmentalists and indigenous peoples, the bank is still hooked on destructive, big-tech projects. For instance, only 1% of its 1991 energy lending backed energy-efficient projects. Moreover, a 1993 internal review of the bank's $140 billion portfolio found 37.5% of recently evaluated projects didn't adhere to social and environmental policies or failed to meet performance goals, up from 15% in 1981.

Rich blames a variety of internal and external pressures. Developing countries often seek loans and projects that serve their own political agendas and elites. And since the early '80s, industrial countries, which control the board, have pushed for more lending to help poor nations bolster exports--often natural resources and commodity agriculture--to reduce their balance-of-payments deficits.

More fundamentally, Rich argues, centralized, large-scale development--the bank's model--doesn't relieve poverty or create ecologically sustainable development. He points to a variety of small aid programs, well known among experts, that show that successful aid to the poor requires projects and low-impact technologies tuned to local social, ecological, and economic conditions.

How to shape up the bank? First, says Rich, slow down lending, to minimize damage. Create a competitive network of alternative agencies, with yearly budgets as low as $50 million, to make small loans to communities, businesses, and farmers. Make the bank more open, accountable, and responsive--perhaps by creating an outside commission to look into complaints of human rights and environmental abuses and issue binding recommendations. Industrial countries, Rich adds, must stop using the bank to address the debt crisis and forgive debt instead.

Mortgaging the Earth is loosely organized and, in spots, loosely reasoned. It too often slides into jargon or hyperbole. And a section on the philosophical basis of modern development beginning with Descartes and Bacon is but one place where Rich seems out of his depth. Still, this merciless evaluation should help provoke an overdue debate about the bank's future. (Bank officials are preparing a rebuttal.) Given its influence over the destiny of millions, as well as global environmental pressures, the World Bank needs far greater scrutiny.

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