World Bank Doesn't Merit Taxpayer Funds

Article excerpt

Federal budget-cutters in Congress are preparing to trim U.S. subsidies to the World Bank. Defending itself, the World Bank has bought advertisements in major newspapers -- for the first time in its history -- that claim credit for great economic progress in the world's poorest countries. But the bank's abysmal record cannot be whitewashed quite so easily.

Since 1982, World Bank watchdog groups have tirelessly documented the chronic deterioration of the institution in the form of social and environmental devastation, project failure and rising Third World indebtedness. In 1992, mounting public criticism forced the creation of the Morse Commission to review the World Bank-financed Sardar Sarovar dam project in India. The highly embarrassing case study revealed what the report called "gross delinquency" on the part of the bank's project managers. The project displaced tens of thousands of people from their homes and subjected villagers to abject poverty and malaria. A second report by Willi Wapenhans, the bank's vice president, revealed chronic mismanagement of the Bank's $140 billion portfolio. More than one-third of bank-financed projects were failing and deep-rooted problems were threatening the viability of the remainder.

Treasury Undersecretary Larry Summers, a former chief economist at the World Bank, acknowledged these long-standing problems when he testified before a House subcommittee that "the bank is undertaking a whole series of internal reforms to improve the quality of its lending operations." These reforms were initiated in response to pressure from Congress. This latest round of reforms, which include a new information disclosure policy and the creation of an Independent Inspection Panel, or IIP, has been totally ineffectual.

The new disclosure policy is intended to give the public open access to information in order to properly assess the economic and environmental effects of bank projects. Unfortunately, the new policy permits virtually no bank documents to be released to the public without the prior approval of borrower governments. Vital documents like engineering studies of dams, site plans for irrigation systems and cost-benefit analyses of forestry projects can be kept secret. The bank provides only short summaries in which the most relevant technical information has been deleted.

Even this controlled information is often not released in a timely fashion, as typified by the World Bank's $368 million loan project in Mexico. Intended to support the environmental commitments in the North American Free Trade Agreement, the Northern Border Environmental Project finances hazardous waste transportation and wastewater-treatment services. …

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