Book Notes

Battling the Bank and IMF

Mortgaging the Earth: The World Bank,
Environmental Impoverishment,and
the Crisis of Development

By Bruce Rich
Boston: Beacon Press, 1994
376 pp., $29.00

BRUCE RICH'S MASTERFUL MORTGAGING THE EARTH is a searing indictment of the World Bank and a profound challenge to the modern development theory it espouses and represents.

Drawing on knowledge accumulated from years of experience at the Environmental Defense Fund and on internal World Bank documents, Rich charts a string of development project disasters over which the Bank has presided, and he documents the social and environmental consequences of Bank lending for "structural adjustment" purposes.

The greatest strength of the book, however, is not its reporting but its historical, institutional and theoretical analysis.

The Bank, Rich shows, has been management dominated from its first years, when John McCloy accepted the post of Bank president on the condition that the Bank's executive board (made up of representatives from member countries) play no more than a passive role in the institutional oversight and supervision.

 The Bank has been driven to make ever-more loans, with ever-less care, by institutional dilemmas and a dangerous ideological predisposition, Rich argues. The end result is "an institutional culture of expansion."

The institutional problem the Bank has faced since its founding is what Rich calls "the specter of net negative transfers." A commercial bank makes a loan to a customer, and over time is paid back with interest. During the pay-back years, as the bank is taking in money from the borrower, it stays in business by making loans to other borrowers. The problem for the World Bank is that it is in the business of making loans to national governments, and therefore has a limited supply of customers. Over time, the developing country borrowers from the Bank must pay back more than the World Bank is lending - ultimately putting the Bank out of business. The only way to avoid this problem is to make more and more loans to the same governments, increasing the borrowing countries' debt. And even this solution is unsatisfactory, because it only postpones the eventual day of reckoning.

 The ideological impetus for expanding the Bank's loan portfolio is a belief expressed by former Bank President Barber Conable in 1987: "A ... basic truth is that development cannot be halted, only directed. And the Bank cannot influence progress from the sidelines. It must be part of the action." The Bank has come to view itself as a global manager, guiding economic development around the world.

 This global management perspective has had tragic consequences. To this world view, Rich ascribes the Bank's unflinching support for megaprojects, its preference for centralized control over projects and societies and its consistent refusal to consult, involve or learn from the communities which are the purported beneficiaries of its efforts.

 The World Bank, Rich claims, represents an inherently flawed way of "knowing and being in the world" which must be discarded if the planet is to survive. "It is a ceaseless quest for more intensive economic use of the earth's space and time, a world conceived as an abstract expanse, which through the correct method can be controlled and manipulated."

Against the World Bank universe stands that of the indigenous peoples and Third World communities that are all too often the victims of Bank projects. "They are not opposed to all economic development; they desire it, but on different terms. Their world is locally rooted, grounded in the history, culture and cry for survival of threatened people and places. Their survival depends on their parts of the earth being conserved as Earth, as a functioning, stable ecosystem."

 Rich does not argue for a return to Stone Age technologies. But he does argue that more emphasis should be placed on nurturing the growth and health of civil society, and less on economic growth; that attention should be paid to the scale of development projects, with a strong preference given to smaller, locally controlled efforts; and that reliance on high technology to solve social problems should be curtailed. Above all, he calls for "care - care as an attitude and a way of being in the world that saves the natural and human past, thereby securing a future of manifold possibilities. Such care ... bases social and economic practice on the dependence and interconnectedness of humans with ecosystems and social systems, and implies a less aggressive, more subtle and considered approach to human interventions in the biosphere."

 One sign of the success of Mortgaging the Earth is the near-hysterical response it engendered from the World Bank. A 30-page "Setting the Record Straight" paper seeks to position the Bank as the defender of the Third World from the book's "rich-country perspective." However, in substance and style, the paper serves to confirm rather than dispel many of Rich's accusations. One notable example is the Bank's attack by assertion on Rich's well-documented claim that an emphasis on energy efficiency rather than energy megaprojects would satisfy much of the energy demand of the Third World at a lower financial, as well as social and ecological, cost.


Dark Victory: The United States,
Structural Adjustment and Global Poverty
By Walden Bellow with Shea Cunningham
and Bill Rau
London, Oakland and Amsterdam:
Pluto Press with Food First and the
TransnationalInstitute, 1994
148 pp., $12.95

WHERE MORTGAGING THE EARTH emphasizes the institutional flaws of the World Bank, Dark Victory seeks to put the adjustment policies which the International Monetary Fund (IMF) and World Bank have inflicted on broad swathes of the Third World in a broader geopolitical and economic context.

The central thesis of the provocative and accessible Dark Victory is that free market- oriented structural adjustment policies were only one part of a three-pronged Reaganite strategy to reestablish U.S. global economic hegemony.

The IMF- and World Bank-imposed structural adjustment policies served the goal of resubordinating the Third World to the dictates of the United States and other industrialized countries. The two-fold thrust of adjustment was to dismantle emerging Third World government apparatuses and to open Third World economies to foreign investors. Dismantling the state sector would silence the calls for a New International Economic Order which had been sounded in the 1970s, and undermine Third World nations' ability to develop autonomous economies that might pose a competitive threat to U.S. industry. Opening up Third World economies served multinational corporate interests in obvious ways.

The second goal was to undercut the growing economic power of the Newly Industrializing Countries (NICs) of Asia, especially South Korea and Taiwan. To achieve this end, Bello and his co-authors argue, the United States aggressively employed a range of unilateral trade tools available under U.S. trade law, and sought to forge the General Agreement on Tariffs and Trade (GATT) into a weapon designed to strengthen U.S. corporations and weaken NIC companies.

The third prong of the Reaganite agenda was to tear up the domestic New Deal "social contract" in order to cut the costs of doing business in the United States. This included breaking the power of labor unions on the one hand, and slashing government-run social programs on the other.

 On its own terms, Bello and his co-authors conclude, the Reaganite offensive was successful in each of its main areas of concern.

 In human terms, however, the offensive was a disaster of almost unprecedented scale. In a brief survey, Dark Victory documents the resulting suffering and impoverishment in both the Third World and the United States.

In surveying the contemporary scene and the available policy options, Bello and co-authors reference Rosa Luxemburg's famous comment on the need to choose between socialism or barbarism. While noting as a preliminary matter the impossibility and undesirability of Third World countries reverting to the state-led capitalism of the post-World War II period or of industrialized countries copying the bureaucratic socialism of the Soviet Union, the authors insist Luxemburg's question remains relevant.

Describing a more equitable, democratic and ecologically sustainable future, they write, "one cannot avoid describing a system of social relations that checks or restrains the devastating logic of capitalism - at least capitalism in its Anglo-American, free-market version - to sacrifice individual well-being, community, the environment, and even the long-term viability of the economy itself on the altar of short-term profitability." They conclude, "Whether one calls the alternative socialism, social democracy, democratic capitalism, or people-centered development is less important than its essence: the subordination of the market, of the institutions of production and distribution, to community."


50 Years is Enough: The Case Against the World Bank
and the International Monetary Fund
Edited by Kevin Danaher
Boston: South End Press, 1994
210 pp., $14.00

FIFTY YEARS IS ENOUGH IS A COLLECTION of short essays and interviews offering critical perspectives on the IMF and World Bank.

An excellent introduction for newcomers to IMF and World Bank issues, as well as a useful resource for those more familiar with the global financial institutions, Fifty Years is Enough manages to avoid the pitfall of repetition that traps many compilation books. Instead, the book succeeds in offering a diversity of perspectives.

 An especially interesting essay by Muhammad Yunus, founder of the Grameen Bank, which makes micro loans to the poor in Bangladesh , serves as a preface to the book. Yunus suggests the 180- degree shift that the World Bank would need to make to truly become a bank of the poor. Yunus speaks with great credibility, for the Grameen Bank loans more than $30 million a month - in loans averaging less than $100 each - and maintains a repayment rate of more than 98 percent.

Perhaps the major difference between the World Bank and the Grameen Bank, Yumus writes, is their different conceptions of the poor. "Current conceptualizations of poverty provide no help in the alleviation of poverty," he warns. "These conceptualizations are based on the assertion that the poor are responsible for their poverty. ... Working with this conceptualization produces programs and projects intended to make the poor give up their æbad habits' and acquire ænecessary skills and attitudes.'"

 By contrast, at the Grameen Bank, he writes, "We think of the poor differently. We think they are as capable and as enterprising as anybody else in the world. Circumstances just pushed them to the bottom of the heap. They work harder than anybody else. They have more skills than they get a chance to use. With a supportive environment, they can pull themselves out of the heap in no time."