The Multinational Monitor


G L O B A L   N E W S W A T C H

Letters to the Editor

McNamara and Clausen: cut from the same cloth

Dear Monitor,

In your November issue, you ran an article entitled "The U.S. pushes the World Bank and IMF to be supports for global corporations" which claimed that, with the advent of Ronald Reagan as president of the United States in January 1981, and A.W. Clausen, formerly of the Bank of America, as president of the World Bank in the following July, regressive policy changes are underway in the global financial institution. Such an analysis exaggerates the changes of 1981.

The World Bank bureaucracy is dominated by the president, and a new president certainly will bring changes in both style and substance. To hold that A.W. Clausen is more devoted to the interests of multinational capital than Robert McNamara, however, would be unjust to both men. Clausen has not, to my knowledge, uttered one word of criticism of McNamara's presidency or politics. His first annual address to the Board of Governors displayed both his willingness to oppose right-wingers in Congress and in the Reagan administration on two key questions, the Bank's proposed new energy affiliate and the importance of IDA, and his adoption of the McNamara rhetoric on poverty. In a later speech Clausen vowed that the Bank would refuse to finance projects that "seriously compromise health and safety," or cause serious environmental problems. He also pledged the Bank would not finance a project that "displaces people without adequate provisions for resettlement." While such pledges must be taken with as much skepticism as similar pronouncements by McNamara, they are in the same liberal tradition.

McNamara, on the other hand, would be indignant at any implication that he saw a conflict between the needs of multinationals and the needs of the poor. It would be hard indeed to make the World Bank any more responsive to the interests of international capital than it was under McNamara, who joined the board of Royal Dutch Shell upon stepping down from the World Bank presidency. In the last years of McNamara's presidency the Bank had already begun to shift its emphasis away from so-called "poverty-oriented" lending to programs-structural adjustment lending and energy in particular-which would more directly aid international capital by helping to meet the debt crises of its borrowers.

What we are seeing under Reagan is a marked change in the rhetoric of Bank public relations to meet the criticism of right-wing opponents. The ultimate irony is that all that needs to be done is to strip away the public facade of concern for the poor and begin boasting of what they have been doing all along. Clausen's emphasis, in his first annual address, on the role which private capital has to play in economic development does not represent any break at all with past policy. Similarly, his praise of the International Finance Corporation, his call for increased financing with private banks, and his emphasis on finding new forms of political risk insurance for private capital are all extensions of Bank policy and practice under McNamara. Clausen will certainly be a faithful servant of international capital, particularly finance capital, as an to World Bank president must be, but to suggest that McNamara was not one, or that he was more sincerely concerned with the fate of the poor, is not justified by the record.

- Cheryl Payer
University of Hawaii at Manoa

(Payer recently completed a book on the World Bank, which will be published by Monthly Review this spring.)

We did not suggest that "McNamara was not a faithful servant of international capital nor did we imply that McNamara "saw a conflict between the needs of multinationals and the needs, of the poor"- nor did we hold that

"A. W. Clausen is more devoted to the interests of multinational capital than Robert McNamara. "

The World Bank is an institution designed to support international business and finance. Different World Bank presidents, subject to different pressures from the United States (the chief donor to the World Bank), and in different economic periods, will choose different means to fulfill the institution's functions.

The World Bank under McNamara - with the support of the Nixon, Ford and Carter administrations-pursued a strategy geared to medium-term market stability: increase aid, even on concessional terms, to help businesses penetrate markets and resources, facilitate the repayment of Western commercial debts by developing countries, and pacify local political opposition.

This approach responded well to multinationals 'needs upon entering third world economies, and to the worries of commercial hankers who, particularly- after the OPEC price shocks in 1974, were chiefly worried about recovering loans and feared that the heavily-strained financial system might collapse.

The World Bank with Clausen as president - under heavy pressure from the Reagan administration - simply will not be able to continue along the same path.

The U.S. and other major Western contributors are refusing to grant more funds for concessional lending to the poorest countries. And McNamaras idea of an energy affiliate-designed in part to insure that these countries don't collapse-has been squashed by the Reagan administrations staunch opposition.

In addition the World Bank is more actively pursuing such overt supports 16r multinationals as an international insurance scheme and an international investment code to curb nationalistic policies of developing countries.

The current U.S. administration is inclined toward more short-term gains for US interests, with less concern .16r long-term global stability. These policy trends are exacerbated by the current recessionary period of the world economy. Powerful multinationals such as the oil companies, engaged in resource extraction, are now more inclined to see World Bank lending to prop up faltering developing Country economies as being either unnecessary or inimical to their interests: the poorer the country, the greater bargaining power for the companies.

Banks appear less worried about third world defaults,- the banks are happily making huge profits through currency manipulations in developing countries hard-hit h I- recession.

And the Reagan administration does not share the concerns of its predecessors that third world turmoil will threaten western interests unless economic aid is provided; rather, Reagan, Haig, Weinherger, Regan, et al, see U.S. military aid, at least .16r countries they deem important, as the key o protecting multinational corporate interests.

- The editors

Costa Rican policies defended

Dear Monitor:

I have a few critical comments about volume 2, number 5 on Central America. Where I had independent information, I was disappointed at factual completeness, and felt that your ideology was more apparent than the brevity of your articles could afford.


The Costa Rica article, page 21, ends by criticizing the International Monetary Fund's demand for austerity measures "that will redistribute income and wealth away from the nation's poor majority." The implication this statement leaves me with is that austerity always favors the wealthy. In fact, a number of economists are urging on Costa Rica a program of austerity which would flatly prohibit luxury imports, while strengthening the nation's excellent social security program. That, of course, is the path which Great Britain followed after World War II; it was painful, but successful. I grant that "austerity" by heavily taxing, but continuing to permit, luxury imports, favors the rich (but certainly does not redistribute wealth toward them; quite the contrary). It is not certain which path Costa Rica will follow, but both are open to the new government which will be elected in February.

Mexico: The half-page bit, page 5, on junk foods implies heavily that Mexicans favor junk foods because Coca Cola spends more money on advertising than the Mexican government does. Better to have omitted the item than to spread such oversimplification. Mesoamericans have always dieted on junk foods. It happens, by accident, that the preindustrial junk foods were not junk, but highly nutritious. Mexicans for perhaps 1,500 years have eaten a great many of their meals from the stands of street or plaza vendors-tortillas topped with or rolled around beans, cheese, vegetables, or whatnot. In terms of eating habits, a Twinkie is interchangeable. Coca Cola and other bottled soft drinks have one distinct alimentary advantage over most alternatives-the consumer can be reasonably sure that the contents are safe to drink. Further, many non-Europeans, for genetic reasons, cannot tolerate milk after adolescence. If you want to criticize, criticize the Mexican government for not either advertising alternatives very heavily, or restricting Coca Cola's advertising. It is silly to take a manufacturer to task for advertising his product. The infatuation with sweet drinks, by the way, is pan-Latin, pan-class, and may go back to the delight which pre-Colombian aristocrats took in chocolate; Coca Cola is more democratic.

United Brands: a very small point indeed. Samuel Zemmuray (back page), not Zemurry. His story merits, and has received, extended treatment elsewhere.

- Paul Kitsche
San Jose
Costa Rica

Costa Rica does not have to adopt an "austerity program that takes wealth and income away from the nation's poor,' but if the government accepts - as it is likely to do - the International Monetary Funds program, then such an outcome is inevitable.

IMF "austerity programs reduce mass purchasing power in four ways: by lifting price supports on basic consumer goods, such as food, clothing and fuel: by freezing wages: by reducing social services: and by devaluing the currency.

As to your comment on the article, "Mexico lambasts junk food ads." A good part of your objection involves a simple semantic confusion. You identify "junk food" as any food purchased "from the stands of street or plaza vendors," regardless of nutritional value; we were operating with a standard meaning of "junk food" as any mass-produced edible product of little nutritional value.

Mexicans drink Coca-Cola less because of some "pan-Latin" "infatuation with sweet drinks," than because of sophisticated marketing by the company. For generations, Mexicans have produced and consumed their own sweet drinks, more nutritious than Coke. Not until the company began marketing in Mexico with heavy advertising did Mexicans change their habits dramatically. It was precisely these facts that led the Mexican National Consumer Institute to conclude that advertising contributes to the poor eating habits of Mexicans. The article noted that the Mexican government is, in fact, campaigning to restrict junk food advertising. - The editors

Table of Contents