Paul Wolfowitz new President of the World Bank : What will change ?

22 April 2005 by Eric Toussaint


Beyond the question of who presides over the World Bank temporarily, what is the role of the World Bank ?

Contrary to popular wisdom, the World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

’s mission is not to reduce poverty in developing countries. Its mission, defined by the victors of WWII - notably the US and Britain - was to assist in the reconstruction of Europe and, additionally, to facilitate growth in developing nations, many of which were still European colonies. It is this second mission that is referred to as “development” and which has taken on greater
importance over the years.

During the first 20 years of its existence, more than 90% of the projects the World Bank funded were designed to improve communications infrastructure and facilitate the production of electricity. The money lent to developing nations went towards their purchase of goods and technologies from industrialized countries - what they needed, in short, to realize projects that allowed for an increase in exports from the South to the North. During this period, projects for education, health, access to
clean drinking water and purification of sewer water received less than 5% of loan moneys.

From its inception, the World Bank was a tool for American and Allied foreign policy. Countries that opposed their strategic interests were systematically refused loans from the World Bank and the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
: Guatemala under J. Arbenz in 1954, Egypt under Nasser in 1955 and 1956, Indonesia
under A. Sukharno from 1962-65, etc. Conversely, countries they considered allies received generous loans: the Congo under Mobutu, South Africa under Apartheid, Suharto’s Indonesia from 1965 to 1998, Pinochet’s Chile, the Philippines under Marcos, etc.

In addition, the World Bank gave loans to countries the US and its allies wanted to remove or distance from Soviet influence: Tito’s Yugoslavia, India, Ceaucesco’s Romania, for example.

The myth of fighting poverty became a central theme under Robert McNamara’s presidency (1968-1981) in order to combat left-wing radicalization in the Third World. McNamara made it clear to US allies in the South that in order to avoid being toppled by popular rebellions
they would have to implement some social programs.

What is the World Bank’s track record?

From the perspective of the most developed nations and multinational corporations, on balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. , the results have been positive. In collaboration with the IMF, the World Bank expanded its area of operations (growing from 44 to 184 member nations) and helped spread neo-liberal policies. Together, the IMF and World Bank managed the debt crisis by setting up a permanent transfer of wealth from the South to lenders from the North and by increasing the dependence of debtor nations.

From a different perspective, however, the track record is negative: far from reducing or eradicating poverty, the policies recommended by the World Bank and IMF increased it. As it is said in the social movement in Bangladesh, when the World Bank says “poverty reduction strategy,” it
really means “poverty reproduction strategy.”

Highlights from Wolfowitz’s biography

Wolfowitz taught at Yale University (1970-73); he was Dean at Johns Hopkins University in 1981 and holds a Ph.D. in political science from the University of Chicago. He is one of the main neo-conservative ideologues. He also has experience in international politics: as Director of the Asian section of the State Department under Reagan from
1982 to 1986, as U. S. Ambassador to Indonesia from 1986 to 1989, as Strategy Director for Defense Secretary Dick Cheney in papa Bush’s administration (first Gulf War). After Clinton’s two terms, as under-Secretary of Defense, he assisted Donald Rumsfeld in waging war against Afghanistan and Iraq.

Contrary to his claims, Wolfowitz did support the military dictatorships of Marcos in the Philippines, of Chun Doo Hwan in South Korea and of Suharto in Indonesia. In the early 1980s he attempted to help Marcos hedge his bets by convincing him to enact certain democratic reforms. At
that time in the Philippines, the combination of a strong revolutionary guerilla opposition and an anti-dictatorship bourgeois opposition threatened to lead to another defeat of the US like what had happened in Nicaragua in 1979 when the Sandinistas joined forces with the bourgeois
opposition. Marcos left the Philippines - not because of Wolfowitz, but because of a popular mobilization that chased him out of office in 1986. [1]

In the case of South Korea, Wolfowitz claims he succeeded in convincing dictator Chun Doo Hwan (responsible for the massacre of at least 200 people during the 1980 rebellion) to retire at the end of his term in 1986. In reality, it was the millions of students, workers and citizens who forced him to leave office through mass mobilizations.

In Indonesia where the anti-dictatorship mobilizations were much weaker (understandably, since Suharto had taken power in 1965 by massacring 500,000 civilians), the US supported the dictator until early in 1998. Wolfowitz was still declaring to Congress in May 1997 that “any balanced judgment of the situation in Indonesia today, including the very important and sensitive issue of human rights, needs to take account of the significant progress that Indonesia has already made and needs to acknowledge that much of this progress has to be credited to the strong and remarkable leadership of President Suharto. [2]

Wolfowitz’s recent past is well known: he is one of the architects of the “pre-emptive” war strategy used in Afghanistan and Iraq beginning in October 2001. If the American army wasn’t bogged down in the quagmire in
Iraq, it is possible that other countries would have already fallen victim to this strategy. Moreover, the way in which Rumsfeld and Wolfowitz use the occupation and “reconstruction” of Iraq to benefit American multinational corporations provides a glimpse of the “conditions” Wolfowitz might attach to aid distribution as head of the
World Bank. According to the Secretary of Defense, the war was supposed to cost $30 billion; it has already cost $200 billion. If one of the qualifications for leading the World Bank were good financial planning, Wolfowitz would not be in the running.

Why did G. W. Bush choose Paul Wolfowitz as head of the World Bank?

By doing so, G. W. Bush is showing both the international community and his partisans that he has the will and the ability to increase the US’s direct leadership over multilateral institutions. This is true for the World Bank as well as the UN, where it will be more difficult. Bush
could have reappointed Wolfensohn to head the World Bank for a third term. After all, Wolfensohn stated to the press: “I’ve had the impression from the administration that they are perfectly pleased with what has happened here in recent years. [3] It was not Wolfensohn’s appointment by a Democratic administration that stopped Bush from doing so. Bush wants an American foreign policy strategy that is purely a product of the state apparatus while maintaining an excellent relationship with the neo-conservative intelligentsia and business milieus.

In some ways, Wolfowitz’s nomination ressembles that of McNamara in 1968. McNamara, Secretary of Defense, had relinquished his post as leader of the war in Vietnam when events took a turn for the worse for US forces; Wolfowitz stepped down from his post in the midst of the failure of the war in Iraq. Like McNamara, Wolfowitz has experience
running a large administration: the Pentagon. Like McNamara, Wolfowitz was foreign policy advisor to the president of the United States. In all probability, Wolfowitz, like McNamara and without breaking with
Wolfensohn’s policies, will continue the myth of the war against poverty. He may even go so far as to cancel some multilateral debts for
pet clients of the World Bank, especially in sub-Saharan Africa. Such a
policy would be in the interests of the US and multinational
corporations, given sub-Saharan Africa’s role in providing oil to the
US. Like McNamara, Wolfowitz will lead with a carrot and a stick.

The appointment of Wolfowitz should be seen in relation to the Bush
administration’s nomination of John Bolton as American ambassador to the
United Nations. John Bolton, well known for his attacks on the UN, was
president of the American Enterprise Institute from 1997 to 2001. He
attempted to get Mohamed El Baradei fired as head of the UN institution
charged with overseeing the disarmament of Iraq immediately before the
war in 2003. It was Bolton who oversaw the US’s refusal to ratify the
International Criminal Court and who withdrew from the UN conference on
racism in Durban in August 2001. John Bolton has told the US Congress:
Now more than ever the United Nations needs American leadership. [4]

If Bush had appointed Wolfensohn for a third term, would that have changed things fundamentally?

No. Wolfensohn, like Wolfowitz, supported Suharto until the very end.
His policies were fundamentally in line with US interests. Immediately
after the invasion of Iraq, he hesitated to involve the World Bank in
Iraq and, under his presidency, although the World Bank did give loans
to Iran, it did not diverge significantly from US policy.

The only difference could be whether or not to pursue the policy of
dialog with NGOs and civil society practiced by Wolfensohn. Abandoning
this dialog would not change much given that the World Bank does not
take these opinions into account. Wolfowitz will certainly delegate this
public relations role to World Bank personnel. The Bank has everything
to gain in seeing its actions legitimized by civil society.

So nothing will change?

Things will be worse. Wolfowitz will make sure that the actions of the
World Bank remain even more tightly tied to US interests. He will
increase World Bank pressure on the governments of debtor nations so
that they privatize strategic sectors that have not yet been privatized.
I am thinking, for example, of public oil companies like Pemex in
Mexico, Petrobas in Basil and PDVSA in Venezuela.

By Eric Toussaint, President of CADTM (Committee for the Abolition of Third World Debt), and author of Your Money or your Life. The Tyranny of Global Finance, Haymarket, Chicago, 2005; and co-author, with Damien
Millet of The Debt Scam, VAK Publication, Mumbai, 2003 and of Who Owes
Who? 50 Questions about World Debt
, Zed Books, London, 2004.



Footnotes

[1See Walden Bello, US Sponsored Low Intensity Conflict in the Philippines, San Francisco, Institute for Food Policy and Development,
1987.

[2Tim Shorrock, Paul Wolfowitz, Reagan’s Man in Indonesia, Is Back at the Pentagon, in Foreign Policy in Focus, February 2001, p. 3

[3James Wolfensohn, Press conference, April 12, 2005, Washington

[4Financial Times, April 12, 2005

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography: https://en.wikipedia.org/wiki/%C3%89ric_Toussaint
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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