The Power of Protest
Critics Explain How People Can
Affect the IMF and World Bank

Multinational Monitor: What is the World Bank bonds boycott?
Neil Watkins: The World Bank bonds boycott is a campaign that is putting grassroots pressure on the World Bank to make fundamental changes.

It was launched in August 2000 by leaders of Global South economic and environmental justice movements. It has been spreading across the U.S. and other parts of the world for the past year.

The campaign is based on the fact that the World Bank gets about 80 percent of its funds by issuing bonds on the private financial market. These bonds are purchased by a wide range of institutional investors. We’ve been focusing on getting city governments, trade unions, churches, socially responsible investors and others to adopt policies against buying World Bank bonds. The campaign is organized very much in the spirit of the anti-apartheid divestment. We’re trying to build similar pressure on one of the main institutions that promote corporate globalization — the World Bank.

MM: Are you asking institutions and people to sell bonds?
Watkins: We are focusing our effort on getting institutions to make a commitment to not buy bonds in the future. So it’s not explicitly a divestment campaign, it’s a campaign asking for commitments against future purchase.

However, a number of institutions have decided to divest as part of this effort, including the Unitarian Universalist General Assembly, which voted to divest this summer, as well as the Marianist brothers and priests and a number of smaller churches and religious orders.

It is harder for a city government or university to divest, because of concerns about their fiduciary responsibilities. We want to get as many pledges from the broadest possible range of groups. That’s why we’re focusing on the boycott rather than calling for divestment.

MM: How widely held are these bonds?
Watkins: The World Bank issues about $20 billion in debt securities every year. The usual holders of World Bank bonds are large institutional investors — including public employee and other pension funds — who want to invest their money conservatively, because World Bank bonds are AAA-rated. They’re similar to U.S. Treasury bonds, and are perceived as very secure. We’re working to make investors perceive them as less secure, as a way to put pressure on the Bank.

MM: Are individuals who have some modest holdings in the stock market likely to have these bonds as part of a mutual fund?
Watkins: It is possible. Some of the largest, most popular mutual funds, including some managed by Fidelity and Vanguard, invest in World Bank bonds as part of their portfolios. It depends on where your investment money goes.

MM: Why is the Bank in the business of floating these bonds if it’s getting contributions from national governments?
Watkins: The historical reason for this was pointed out in the Brookings Institution’s two-volume, several-thousand-page history of the World Bank. Reading that, you find out that when the Bank was set up, there was a lot of concern about how to avoid meddlesome interference from groups like the U.S. Congress, which were at that time a bit skeptical of these international institutions. One of the reasons for making the Bank bond-financed was to avoid the kind of scrutiny that would come from having it solely government-appropriated.

There are two main branches of the World Bank that lend money directly to governments — the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The IBRD, which makes loans to low and middle-income country governments at rates that are slightly below market interest rates, is about 95 percent bond financed. In the IBRD you find most of the “structural adjustment” programs, which are the kinds of programs that have been of much concern in the Global South for years — programs that push governments to privatize industries, open up their economies to foreign investors with few restrictions and other measures. Right now about half of the IBRD’s lending goes towards structural adjustment.

IDA is financed by government contributions. IDA’s loans go to the very poorest countries at below market rates.

MM: If the boycott becomes successful and a substantial number of institutional investors agree to stop buying the bonds, what effect would that have on the Bank?
Watkins: The boycott is working to have two different kinds of effects. One is a political and moral effect. The other is a financial impact.

The campaign is based on the anti-apartheid divestment movement model. What worked in terms of generating public awareness and sensibility about the impacts of apartheid was the fact that thousands of churches and universities and city governments and a whole cross-section of the country over a number of years decided not to invest in corporations that did business in South Africa. There was an upsurge of political and moral pressure in that movement and we’re trying to create the same kind of pressure around the World Bank, which until very recently has not been a well-known institution — it has escaped the light of public scrutiny.

Over time, as we get more of the larger institutional investors, we think we’ll have a financial impact. We now have five city governments. As we get other city governments, state governments, other larger pension funds, we think we will start to have a larger financial impact.

We’ve already seen some indication that the Bank is concerned at a financial level. When we got the Calvert Group, one of the largest socially-responsible investment firms in the country, to adopt the boycott last year, we heard that the Bank’s financial department — the folks who have to worry about protecting the Bank’s AAA-rating — expressed some concern.

It doesn’t take too much to worry the Bank. A lot of what supports the Bank’s AAA-rating is psychological. If we can grow the campaign and get a wide range of institutional support, over the long term the bigger financial threat will create some leverage for change.

MM: What does it mean if the Bank loses its AAA-rating?
Watkins: The AAA-rating is the safest rating that a bond can have. If we’re able to create the kind of pressure that would cause the financial markets to perceive the World Bank as meriting a less than totally-safe rating, that would put real pressure on the Bank and limit its ability to actually raise funds on private financial markets. That would be an indication to them that they need to listen to the demands of the campaigns in the Global South and make some changes or else continue to face a financial threat like they haven’t faced before.

MM: What are the demands of the campaign?
Watkins: There are three demands. First is an end to structural adjustment and related policies. The reason we say “related policies” is that the World Bank is now calling structural adjustment a wide range of other things like “poverty reduction support credits” and “development support loans.” We want to target any kind of lending that is like structural adjustment.

The second demand is unconditional 100 percent debt cancellation for impoverished countries, following the demand of the global Jubilee movement.

Our third demand is an end to all environmentally destructive projects, especially oil, gas and mining lending from the Bank Group, as well as an end to lending for dams that have forced relocation as part of the package. Those are our central demands. We’re trying to make it clear that these are the demands of many of the groups around world that are fighting World Bank and IMF policies.

MM: Have you had any interaction with the Bank since launching the boycott?
Watkins: We have not yet been approached by the Bank or had any significant interaction, but every time anyone passes a resolution — whether it’s a union local in California or a church in Minnesota — we pass that along to the Bank. We also try to get their attention by doing press work any time anyone signs on to the campaign.

Their response has evolved over the year and a half since we launched the campaign. At first, their line to the press was that the campaign would hurt the poor and wouldn’t affect them. They’re now changing their tune a little bit. They’re finding out where city councils are considering the boycott and sending officials out to those cities to lobby against the resolution.

While they at first said “this doesn’t bother us,” it’s clear now that it does — they have either dispatched a representative or devoted staff time to trying to stop the resolution when it has been introduced in a number of cities, including Boulder, Los Angeles and Madison.

MM: Who in the Global South is supporting the campaign?
Watkins: The campaign was launched by way of a letter from leaders in the Global South. It was written by PAPDA, the Platform for Alternative Development in Haiti, and Jubilee South Africa. When we launched the campaign on April 10, 2000, we released a letter to World Bank President Wolfensohn signed by about 350 people from 35 Global South countries, representing a wide range of environmental and social movements and nongovernmental organizations working on these issues.

Now there’s an active international coordinating committee on the campaign with people from 11 countries, representing a wide range of issues, but mostly focused on debt, development or environmental issues. That group is really the group that is framing the political demands of the campaign.