Why the World Bank Must Be Reformed and How We Can Do It http://www.globalexchange.org/resources/wbimf/origins 1. ( 1 ) The global ization of market forces, vigorouslypromoted by the World Bank, creates greater inequality. 2. Over the past 30 years, theglobalization of the economy--led by the World Bank, the International Monetary Fund andtransnational corporations--has proceeded at a quickening pace. These institutions havepressured governments to remove barriers to the cross-border flows of money andproducts. Advances in telecommunications and computer technology have made itpossible for trillions of dollars in finance capital to zoom around the world,24 hours a day, searching for the highest rate of interest. 3. This globalization of market forceshas greatly increased inequality. Just 150 years ago there was not greatinequality between the standards of living of people in the global north andthose in Africa, Asia and Latin America. Nowthe richest 20 percent of the world's population receives 83% of the world'sincome, while the poorest 60% of the world's people receive just 5.6% of theworld's income. The richest 20% of the world's population in northernindustrial countries uses 70% of the world's energy, 75% of the world's metals,85% of the world's wood, 60% of the world's food, and produces about 75% of theworld's environmental pollution. 4. (2) The World Bank is wrong in arguing thateconomic growth will solve the problems we face. 5. World Bank officials keep reassuringus that if we can just get economic growth rates high enough, these problemswill be solved. We regularly hear the refain, "a rising tide floats allboats." But for those who don't own boats or have leaky boats, a risingtide means greater inequality between them and the more fortunate. The datashows that during a period of significant growth in world trade (1960 to 1989),global inequality got significantly worse: the ratio between the richest 20%and poorest 20% of the world population went from 30 to 1 to 59 to 1. We shouldalso remember that unrestrained growth is the ideology of the cancer cell. 6. (3) The real function of institutions such as theWorld Bank is not to promote "development" but rather to integratethe ruling elites of third world countries into the global system of rewardsand punishments. 7. Because direct colonial control ofthe third world is no longer tolerated, northern elites need an indirect way tocontrol policies implemented by third world governments. By getting the elitesonto a debt treadmill and promising them new cash if they implement policieswritten in Washington,the World Bank can effectively control third world policies. You can see theeffects right next door in Mexico .For more than a decade, Mexican elites have followed the "Washingtonconsensus" of policy reforms designed by the World Bank. This has createdsome billionaires, yet for most of the 85 million Mexican people life is moredifficult now than it was ten or twenty years ago. If the ruling PRI party didnot control the police and military, its blatant corruption and disastrouseconomic policies would not be tolerated for long. 8. (4) Evidence from many countries shows that thepolicies promoted by the World Bank are disastrous. 9. Whether you look at poor countriessuch as Somalia , Rwanda and Mozambique or well-endowed countries such as Ghana , Brazil and the Philippines ,the policies pushed by the World Bank have worsened conditions for themajority. Evidence from dozens of countries under World Bank tutelage shows asimilar pattern: structural adjustment policies may help countries pay offtheir foreign debts and may create some millionaires but the majority of thepopulation suffers lower wages, reduced social services and less democraticaccess to the policy-making process. 10. (5) The World Bank's emphasis on expanding exportshas been disastrous for the environment. 11. As part of the standard structuraladjustment package, the World Bank encourages countries to expand their exportsso they will have more hard currency (dollars, yen) to make payments on theirforeign debts. But this leads countries to overexploit their natural resources.They cut down their forests, which contributes to the greenhouse effect. Theypump chemicals onto their land to produce export crops such as coffee, tea andtobacco, thus poisoning their land and water. They rip minerals out of theground at a frantic pace, endangering human lives and the environment in theprocess. They overfish coastal and international waters, depleting a resourceof the global commons. 12. (6) The "free market" economic modelbeing pushed on third world governments is not one the industrial countriesused to develop themselves. 13. All the wealthy countries--the USA,Japan, Germany, England, France and the recent success stories such as Taiwanand South Korea--useda heavily state-interventionist model that had government play a strong role indirecting investment, managing trade and subsidizing chosen sectors of theeconomy. The United States was in many ways the "mother country" of protectionism, showing otherwealthy countries how to do it. Would we have a big electronics industry ornuclear power industry were it not for the massive government subsidy programcalled the Pentagon? 14. (7) Globalization-from-above is being rejected andmillions of people all over the world are struggling to buildglobalization-from-below. 15. Globalization-from-above iscontrolled by wealthy elites and driven by a hunger for more wealth and power.But there is another form of globalization made up of grassroots alliances ofhuman rights activists, trade unions, women's organizations, environmentalcoalitions and farmers organizations. This people-centered form ofglobalization does not have the amount of money or guns possessed by the elitesbut it does have moral authority. Just think about the contrast between thedominant system's focus on greed and our focus on meeting human needs. Thisalternative vision calls for more openness and accountability by institutionssuch as the World Bank and transnational corporations. It calls for raisingwages, health and safety standards in the third world to bring them up to firstworld levels, rather than driving first world standards downward. It calls forstewardship of natural resources that will preserve something of theenvironment for our grandhcildren to enjoy. It seeks to redefine self-interestso that it is more in line with the common interest of humanity. The problemconfronting us is how to get the leaders of the World Bank to listen to ourdemands for reform. An Easy Way to Pressure the World Bank for Change 16. The World Bank gets most of itscapital by selling bonds to wealthy investors. If we could pressure largeinstitutional funds (e.g., university endowments and state worker pensionfunds) to stop buying World Bank bonds as a way to protest the Bank'sdestructive policies, we could exert serious pressure on the Bank. 17. Just think about the huge impact thedivestment campaign had on South Africa 's white minority rulers during theclosing days of apartheid. The divestment struggle also raised a key question:who controls how capital is invested and why isn't it a more democraticprocess? 18. Many institutions such asuniversities and retirement funds purchase bonds issued by the World Bank. Thename appearing on the bonds will be the World Bank's formal name: InternationalBank for Reconstruction and Development. These are fixed rate securities whichare sold by underwriters such as Goldman Sachs, Fidelity, First Boston, CreditSuisse and many Japanese banks. The bonds pay a good rate of return and areconsidered safe investments because they usually carry a triple-A rating. Theyare not officially insured by the U.S. government but, as one bond trader told us, the U.S. government would not stand byand let the World Bank default on its bonds. In other words, the U.S. taxpayer is the ultimate insurer of thesebonds--justas we were forced to bail out the Wall Street speculators and Mexicanfinanciers during Mexico 'scrash in early 1995. Exercises: I . Reading Comprehension: Judge whether thefollowing statements are true (T) or false (F) based on what you have read inthe passage. 1. With poorer people living a better life,the globalization of economy has helped reducing global inequality. 2. The global economic growth does notnecessarily mean that all countries and people get a share in its risingtide. 3. The author thinks that World Bank is akind of indirect way by the U.S. to control developing countries. 4. Though polices promoted by the World Bankhave proven disastrous in some poorer countries, it is undeniable that other developingcountries benefit from the globalization polices advocated by World Bank. 5. Countries are destroying theirenvironments while expanding their exports. 6. Based on the successful history of freemarket in the wealthy countries, this “free market” model is thus suggested todeveloping countries. 7. The author believes that the“globalization-from-below” is more people-centered. 8. The author suggests that to persuade largeinstitutional funds to stop buying World Bank bonds would be an easy way topressure the World Bank to change. 9. The author implies that if the World Bankbonds default, the tax payers in the U. S. would suffer a loss. Why the World Bank Must Be Reformed.docx