Britain’s development minister Hilary Benn recently withheld World Bank funding in protest at the policies of its president, Paul Wolfowitz. What’s going on? Simon Wilson explains
Why is the World Bank in the news?
The Washington-based World Bank, which provides loans and grants to developing countries on behalf of its 184 member countries, recently got a new president, Paul Wolfowitz – the neo-conservative best known as the architect-in-chief for the 2003 invasion of Iraq. He has certainly been ruffling feathers in Washington and around the world with his vigorous new drive against corruption.
So what has Wolfowitz done?
He has suspended hundreds of millions of dollars in loans to India, Bangladesh, Kenya, Chad, Argentina and Uzbekistan. Wolfowitz also suspended debt relief to the Republic of Congo after bills showed its president, Denis Sassou-Nguesso, had spent £169,000 on putting up himself and an entourage of 50 at the Palace Hotel in Madison Avenue, New York; anti-corruption groups pointed out that oil wealth benefited the elite and not the country’s poor, who live on less than £1.15 a day. He was also far from happy with the audits of the state oil company.
Why is this controversial?
It was Wolfowitz’s predecessor, the highly-respected and popular president James Wolfenshohn, who started the Bank’s anti-corruption drive a decade ago. But Wolfowitz’s more extreme positions – such as denying countries aid unless they (for example) privatise state-run monopolies – have angered some of the Bank’s key shareholder nations, especially in Europe.
What do they say?
Britain, Germany and France believe that Wolfowitz is taking too much of a hard line. Their position is that if you cut off loans to corrupt regimes, you simply penalise the poor of that country. As Nick Cohen points out in The Observer: “If you send aid, the odds are that the elites will steal money meant for others. If you don’t, you lose the chance that some at least will get past the thieves.” Hilary Benn, Britain’s development minister, said in a speech: “Why should a child be denied education; why should a mother be denied healthcare; or an HIV positive person Aids treatment, just because someone or something in their government is corrupt?” And Lila Rajiva of the Daily Reckoning adds: “The World Bank merely takes money from middle-class taxpayers in the rich countries in order to give it to rich kleptocrats in poor ones.”
What have the protesters done?
Two weeks ago, Christian Aid marched on Whitehall, calling for the Government to suspend its contributions to the World Bank. And Benn has now withheld £50m of Britain’s funding in protest at his tactics in what could be seen as a significant victory over Wolfowitz. In a move that seems to have chastened Wolfowitz, the Bank’s board of governors (largely the finance ministers of member nations) will in future oversee and control the president’s anti-corruption measures more closely.
Aside from this, has the Bank been a success?
According to the Bank itself, yes. For example, life expectancy in developing countries has jumped by 20 years over the past four decades. In the past 30 years, adult illiteracy has almost halved to 25%. In the past 20 years, the number of people living on less than a dollar a day has dropped for the first time, despite overall population growth of 1.6 billion people. And over the past decade, economic growth rates in the developing world have outpaced those in rich countries. But whether the World Bank can claim credit for any of this is open to argument.
What do its critics say?
From an ‘anti-globalisation’ perspective, the World Bank and IMF are little more than tools of American neo-colonialism – and all the more dangerous, thanks to the clever structure that cuts other nations just enough slack to stop them rebelling. From a more mainstream viewpoint, many critics argue that the World Bank is too wedded to the idea that free markets are the solution to every problem – and that rigid market-based reforms are not always appropriate for nations torn apart by conflict, or that have long been subject to dictatorship or colonialism, or lack stable political systems. “The World Bank only helps to keep corrupt officials in power and keeps poor people poor,” says Rajiva.
Should the World Bank fight corruption by imposing conditions on aid?
YES
1 If strict conditions help to stamp out corruption, this will help poor countries in the long run.
2 Conditions on aid can help persuade undemocratic regimes to protect human rights.
3 The World Bank is ultimately spending taxpayers’ money – governments must not allow it to do so recklessly.
NO
1 Conditions on aid wrongly force poor countries to adopt high-risk reforms such as privatising essential services, including water.
2 They threaten countries with arbitrary punishment in a way that puts at risk the Bank’s long-term mission to cut poverty.
3 They punish ordinary people for the misdeeds of their corrupt political rulers.