A New War? On Wolfowitz’s World Bank

11 April 2005 by Patrick Bond

The 1200 anti-war/profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. demonstrators who wound their way through central Johannesburg last Saturday heard fiery speeches, music and poetry. At the start and finish, protesters were inspired by 80-year old Dennis Brutus, the great anti-apartheid poet who has worked within the global justice movement since Seattle and indeed long before. He calls now for a “war” on the World Bank World Bank
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.

, in the wake of George Bush’s appointment of Paul Wolfowitz as its president last week.

The activists marched down from the city hall past banks and corporations to the Workers’ Library in a semi-liberated zone of the Newtown arts district.
They presented memoranda of protest along the way to the government’s Department of Home Affairs, attacking South Africa’s notorious xenophobia policies, and the US Trade Mission. The demonstrators were of all ages, colours and left ideologies (excellent pics are at southafrica.indymedia.org/). They combined the global call for an end to occupations of Iraq and Palestine with local demands for human rights.

Monday, March 21 was a South African holiday - Human Rights Day - commemorating the 1960 protest against pass books in Sharpeville township 60 km south of Johannesburg, where 69 people were killed by apartheid cops, most shot in the back as they ran. For Brutus, the timing is memorable. Because of Sharpeville, the African National Congress declared a guerrilla war on apartheid.

Times are different now,” says Brutus. “But the urgency is just as great. It is crucial for us to up the ante against the system we might term global apartheid. The World Bank is at the nerve center of that system, and will now become a ’War Bank’.

Brutus’ new book, Leafdrift, was published a few weeks ago by Whirlwind Press of Camden, New Jersey. After three decades in exile, he now spends most of his time in South Africa with the Jubilee debt cancellation and reparations movement.

Brutus has long warned against the divide-and-conquer tactics of outgoing World Bank president James Wolfensohn (“Wolfy 1”), who was perfectly willing to fund Bush’s illegitimate neocolonial rule in Afghanistan, Iraq and Haiti. But the man now labeled “Wolfy2” has none of his predecessor’s talents in softening up NGOs in meaningless “multistakeholder forums” on issues ranging from dams to mining/petroleum to structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/

George Bush phoned South African president Thabo Mbeki early last week to alert him to Wolfowitz’s promotion. According to Brutus, "It is revealing that there is this link between Bush and Mbeki on the nomination of Wolfy2.
We do not know at this stage what Mbeki’s response was. We know that the people of South Africa in our millions would yell No! to a warmonger running the most powerful financial institution in the world.
“The crowd in Johannesburg needed little reminder. Explains Brutus,”The neoliberal policies of the South African government are a direct consequence of the World Bank’s advice, ranging from macroeconomic structural adjustment to even privatisation of water and air. Our finance minister, Trevor Manuel, used to chair the board of the Bank and 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.

, and is in charge of the Development Committee, the institutions’ second most powerful policy committee. And there is another South African who is a managing director, Mamphela Ramphele. She was Steve Biko’s partner in the 1970s but her job today is ameliorating the Bank’s bad public image.

Ramphele’s vice president for public relations is Ian Goldin, another South African hated by trade unionists and communities here for promoting privatisation when he ran the Development Bank of Southern Africa - refusing to lend to the municipality of Nelspruit to supply water to poor people, and instead advancing a large loan to the British privatiser Biwater for the same purpose.

Brutus continues: “So when we march, we also protest the local manifestations of global apartheid, especially the failure of government to deliver services. We oppose privatisation and the ongoing disconnection of water and electricity to more than a million people a year. Jobs are still not being created. Our government is deceiving us when it claims it is delivering.

This is an especially poignant critique, given that 40% of South Africans still cannot read or write. Indeed, the depths of Pretoria’s strategy were unveiled last week when the Mail and Guardian newspaper reported that two University of KwaZulu-Natal education academics accused the state of “deliberate misinformation. Misleading claims about adult education provision have indeed become endemic.” As the newspaper editorialized on Friday, “No one with first-hand knowledge has believed for one moment the ridiculous figures the department has flourished to back its claim.

A year ago, the then education minister, Kader Asmal, claimed that “literacy projects have reached nearly two million learners”. Similar claims about millions receiving water were made five years earlier by Asmal when he was water minister, because he did not count vast numbers of taps and water systems delivered in rural areas that subsequently broke down.

Last week another state agency - Statistics South Africa - claimed that the government is now supplying more than 70% of residents with free water and electricity: “The best-performing municipalities on average were in the Free State [province], where 91.5% of households had free water and 90.3% had free electricity.

In reality, the Free State has seen ongoing violent protest by township residents over the past year, precisely because vast areas of the province have no water and power. Even the 19th century “bucket system” (where excrement is picked up by municipal workers from outhouses each morning) has broken down in many townships. Last September, 17-year old Teboho Mkhonza was killed when police opened fire on fleeing demonstrators, chillingly similar to 1960, but now Mkhonzo’s neighbours brandish not passbooks but empty wallets.

Stats SA has an awful reputation in business circles for a spate of serious errors, and so these new claims by its director, Pali Lehohla, were greeted with disbelief. Lehohla justified why he could not provide details to verify which riot-torn towns are actually delivering water: “Municipalities do need to be protected by the Act because they may want to apply to certain organisations for grants, and poor performance figures could harm them, or there may arise situations where they face punitive measures from the ruling party in their areas.

What is the link between these statistical horror stories about class apartheid, and the World Bank? At the macroeconomic level, the Bank designed the fiscal/financial model behind South Africa’s 1996 structural adjustment program. That program pushed state spending lower, and also pushed the proportion of the budget devoted to education down 2% over the subsequent six years.

At the microeconomic level, the Bank authored South Africa’s 1995 Municipal Infrastructure Investment Framework which severely limited supply of services, and in 1995 a staffperson convinced Asmal that Pretoria should limit cross-subsidies from hedonistic to low-income consumers, and should establish “a credible threat of cutting service”; in 2003, approximately 1.5 million people were disconnected because of inability to pay.

Pretoria is left to fib about the record, ranging from adult education to water to AIDS to crime to job creation. So a deep resentment against the Bank’s neoliberal “Washington Consensus” has been brewing for a decade, shared even by pro-government trade unions.

Now add more explicit White House geopolitics to the Bank’s noxious recipe. As Cambridge political economist Noreena Hertz put it in the The Guardian on Saturday, “Of course, the US hijacking the World Bank to serve its foreign policy interests is not a new phenomenon.” But especially at a time of rhetorical flourishes for Africa - given that the G8 G8 Group composed of the most powerful countries of the planet: Canada, France, Germany, Italy, Japan, the UK and the USA, with Russia a full member since June 2002. Their heads of state meet annually, usually in June or July. will meet in Scotland in July to discuss Tony Blair’s new Africa Commission report - the danger posed by Wolfy2 is severe.

But so too is the danger that well-meaning Europeans will disguise the war zone, luring more people to their deaths. For example, the head of the EU parliament’s Development Committee, Luisa Morgantini, announced last week that there should be more Bushite candidates to choose from.

Her case was three-fold: “that the European Union in 2004 has presented two candidates for the post of the Managing Director of the IMF, with distinguished political profiles facilitating an informed choice regarding indications of future directions for the IMF; that the process of the selection of the final candidate has been done in a more transparent manner and in an appropriate timeframe, facilitating the input of the other shareholders; that the European candidate for the Managing Director of the IMF stood against a candidate nominated by another IMF member state, resulting in hearings of both candidates at the Board of the IMF and an indicative vote producing a majority for the European candidate.

Morgantini simply ignores that the worst candidate conceivable - Rodrigo Rato - was chosen as a result of this process. Recall Vicente Navarro’s critique of Rato at counterpunch.org (19 June 2004): he was “responsible for the dismantling of the Spanish welfare state. Mr. Rato is of the ultra-right. While in Aznar’s cabinet, he supported such policies as making religion a compulsory subject in secondary schools, requiring more hours of schooling in religion than in mathematics, undoing the progressivity in the internal revenue code, funding the Foundation dedicated to the promotion of francoism (i.e., Spanish fascism), never condemning the fascist dictatorship, and so on. In the economic arena, he dramatically reduced public social expenditures as a way of eliminating the public deficit of the Spanish government, and was the person responsible for developing the most austere social budget of all the governments of the European Community.

Morgantini also confirms her desire to see “other shareholders” play a more important role - i.e., confirming the domination of the Bank by a united front of Northern countries, rather than even concede the possibility that democratisation of multilateral agency voting power is worthy of mention.

And who, then, would be Bush’s second choice, if that’s what Morgantini desires? No doubt, someone with identical politics but less baggage than Wolfowitz. Is that what we in the global justice movement want? If not, why aren’t European NGOs condemning the inane yet dangerous line of argument associated with Morgantini’s opportunistic statement?

Actually, I’ve been surprised how many otherwise reasonable friends of mine signed an anti-Wolfy2 statement last week sponsored by Brussels-based Eurodad, with this clause: “We fear his appointment risks the Bank becoming seen as a tool of the current controversial US foreign policy, with aid flows becoming more dependent on strict adherence to US Administration priorities.” Well, I’m sorry, it’s the job of robust NGOs to speak truth to power, and to not “fear” describing the Bank - under Wolfy1 or Wolfy2 - as a tool of imperialism.

As a colleague of mine, Raj Patel, put it on his blog last week, it’s now “much easier to see how war and the Bank are linked if the man who’s good at one can move to the other without skipping a beat. This helps movement-building, and makes it harder for the media to ignore the links, though in this, I imagine ignorance will prevail. In short, the World Bank has a president that everyone knows and loathes, and this is going to make change easier. Welcome on board, Slick.

Brutus concluded: “This is a wider war, now. We must engage in much more education and activism to counter the Bank’s destructive role.” He chuckled when I told him a quote in The Guardian by Sebastian Mallaby (a genuinely hackish Washington Post columnist): “World Bank critics - who had been diverted to protesting [about] the Iraq war - can now do both at once. It’s like Christmas for them.

So if Wolfy2 is confirmed at the end of March, not only will the World Bank Bonds Boycott become an even more crucial grassroots protest tool against imperialism. Counterpunchers can also celebrate Christmas early, at an all-in mid-April March Against the Bank/IMF spring meetings in Washington, sponsored by excellent comrades including 50 Years is Enough, the Movement for Global Justice (DC) and Jubilee USA.

Patrick Bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. teaches at the University of KwaZulu-Natal in Durban and has authored two recent books: Against Global Apartheid: South Africa Meets the World Bank, IMF and International Finance, Zed Books, 2003 and Talk Left, Walk Right: South Africa’s Frustrated Global Reforms, University of KwaZulu-Natal Press, 2004).

Source: Counterpunch (www.counterpunch.org).

Patrick Bond

is professor at the University of Johannesburg Department of Sociology, and co-editor of BRICS and Resistance in Africa (published by Zed Books, 2019).



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