Committee for the Abolition of Illegitimate Debt

In 1995, William Clinton, the president of the United States, nominated James Wolfensohn, a New York banker, as 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 ninth president.
James Wolfensohn, born an Australian citizen, began his banking career in Sydney in 1959. From 1968 to 1977 he was one of the directors of the highly controversial London and New York banking group J. Henry Schroder [1]. According to 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.  [2], James Wolfensohn was the treasurer of the “American Friends of Biderberg” the anti-communist pressure group [3]. He left the Henry Schroder Bank to become an executive partner in Salomon Brothers, the investment bank. In 1980-1981, Robert McNamara was looking for a successor, and Wolfensohn, who was thought to be on the list, became a US citizen so as to better qualify for the post. [4] However, President Ronald Reagan nominated Alden W. Clausen as the president of the World Bank, and James Wolfensohn founded his own investment bank, James D. Wolfensohn Inc., which was a very active player in the flurry of mergers and acquisitions of the 1980s and through the first half of the 1990s, before being bought by Banker’s Trust.

James Wolfensohn became president of the Bank at a point in time when it had become urgent to restore its public image. 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/ Policies were getting very bad press and a series of financial crises were starting to hit the developing countries. It was necessary to quickly draw attention away by bringing back the terms “poverty reduction”, “good governance” and loans for projects which respect the environment. There was an onslaught of PR, and Wolfensohn became an expert in dealing with the press. His charm and eloquence made a very good impression.

Alluring ways

The HIPC Heavily Indebted Poor Countries
HIPC In 1996 the IMF and the World Bank launched an initiative aimed at reducing the debt burden for some 41 heavily indebted poor countries (HIPC), whose total debts amount to about 10% of the Third World Debt. The list includes 33 countries in Sub-Saharan Africa.

The idea at the back of the initiative is as follows: a country on the HIPC list can start an SAP programme of twice three years. At the end of the first stage (first three years) IMF experts assess the ’sustainability’ of the country’s debt (from medium term projections of the country’s balance of payments and of the net present value (NPV) of debt to exports ratio.
If the country’s debt is considered “unsustainable”, it is eligible for a second stage of reforms at the end of which its debt is made ’sustainable’ (that it it is given the financial means necessary to pay back the amounts due). Three years after the beginning of the initiative, only four countries had been deemed eligible for a very slight debt relief (Uganda, Bolivia, Burkina Faso, and Mozambique). Confronted with such poor results and with the Jubilee 2000 campaign (which brought in a petition with over 17 million signatures to the G7 meeting in Cologne in June 1999), the G7 (group of 7 most industrialised countries) and international financial institutions launched an enhanced initiative: “sustainability” criteria have been revised (for instance the value of the debt must only amount to 150% of export revenues instead of 200-250% as was the case before), the second stage in the reforms is not fixed any more: an assiduous pupil can anticipate and be granted debt relief earlier, and thirdly some interim relief can be granted after the first three years of reform.

Simultaneously the IMF and the World Bank change their vocabulary : their loans, which so far had been called, “enhanced structural adjustment facilities” (ESAF), are now called “Growth and Poverty Reduction Facilities” (GPRF) while “Structural Adjustment Policies” are now called “Poverty Reduction Strategy Paper”. This paper is drafted by the country requesting assistance with the help of the IMF and the World Bank and the participation of representatives from the civil society.
This enhanced initiative has been largely publicised: the international media announced a 90%, even a 100% cancellation after the Euro-African summit in Cairo (April 2000). Yet on closer examination the HIPC initiative turns out to be yet another delusive manoeuvre which suggests but in no way implements a cancellation of the debt.

List of the 42 Heavily Indebted Poor Countries: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoro Islands, Congo, Ivory Coast, Democratic Republic of Congo, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Laos, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Zambia. initiative. The Highly Indebted Poor Countries (HIPC) initiative was launched in 1996, its aim being to offset the increasing demands for cancellation of debts to developing countries. With great press coverage, the Bank announced “its” solution. There was immediately much criticism of the basic concept of the HIPC initiative and its ability to actually reach the goals or fulfil the aims it announced. At the end of Wolfensohn’s mandate, its failure is patently obvious. Instead of the 42 countries which were supposed to benefit from up to 80% cancellation of their debt as announced in 1996, or even 90% as was said in June 1999 at 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. in Cologne, in fact only 18 countries would see some reduction in their debt. While it was supposed to finally sort out the problem of the debt for these 42 countries, this initiative has turned into a fiasco: their debt went down from 218 to 205 billion US dollars, i.e. a reduction of only 6% between 1996 and 2003.

From SAPs to PRSPs .Wolfensohn introduced the Poverty Reduction Strategy Programmes (PRSPs) to replace the much-discredited Structural Adjustment Programmes (SAPs) that had been the Bank’s 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.

http://imf.org ’s main approach to development since the 1980s. In fact, only the name changed - the macro-economic framework of privatisation and liberalisation remained the same. The World Bank and the IMF actually imposed more stringent conditions on their loans, because now they were working hand in hand with the WTO WTO
World Trade Organisation The WTO, founded on 1^st January 1995, replaced the General Agreement on Trade and Tariffs (GATT). The main innovation is that the WTO enjoys the status of an international organization. Its role is to ensure that no member States adopt any kind of protectionism whatsoever, in order to accelerate the liberalization global trading and to facilitate the strategies of the multinationals. It has an international court (the Dispute Settlement Body) which judges any alleged violations of its founding text drawn up in Marrakesh.

, which came into existence in 1995 [5]. At the same time, the much vaunted “participation” of civil society - which was presented by the World Bank as a profound policy change - is very difficult to find or observe in reality.

The SAPRI initiative. The very first “constructive engagement” exercise James Wolfensohn committed the Bank to was a three way assessment of Structural Adjustment Programmes between the Bank, civil society and the governments called the SAPRI (Structural Adjustment Participatory Review) which was launched in 1997.
SAPRI was designed as a tripartite field-based exercise, with a Bank team appointed by James Wolfensohn to develop a transparent and participatory global methodology for gathering and documenting evidence of the impacts of World Bank-IMF SAPs at local and national levels in seven countries. Walden Bello and Shalmali Guttal are devastating in their criticism:

“Despite agreement on the common rules of the exercise and the review methodology, the World Bank team played an obstructionist role throughout the SAPRI process. For example, at public fora, instead of trying to listen to and learn from the evidence presented by civil society representatives about the impacts of SAPs, Bank staff almost always argued points and in the end, claimed that the fora presentations (which were part of the agreed-upon qualitative input) constituted ‘anecdotal evidence’.

“Reluctant to go public with these findings, the Bank team backed off from an earlier (written) agreement to present all SAPRI findings in a large public forum in Washington DC, with Wolfensohn present. Instead, the Bank team insisted on a closed technical meeting and a small session in Washington DC scheduled when Wolfensohn was not in town. Most important, the Bank now insisted that it and civil society each write separate reports. The Bank report used the Bank’s own commissioned research as the basis for its conclusions and barely referred to the five-year SAPRI process. In August 2001, the Bank pulled out of SAPRI and buried the entire exercise, and except to say that it had learned a lot from SAPRI, the Bank did not commit itself to reshaping its lending policies based on the SAPRI findings.

“On 15 April 2002, the full SAPRI report (under the name SAPRIN, to include findings from the two countries where civil society conducted investigations without Bank involvement) was released to the public and received immense media coverage.

“Wolfensohn expressed regrets that he and his staff had not been in touch with SAPRI and promised to read the report and discuss it seriously in the near future. To date, however, neither the Bank, nor Wolfensohn have shown any commitment to review and make changes to their adjustment lending. On the contrary, structural adjustment policies continue to be the mainstay of Bank-Fund lending through PRSPs and the Poverty Reduction and Growth Facility (PRGF).” [6]
Corruption. The World Bank’s stated aim of promoting “good governance” was very much contradicted by the revelations which came to the fore due to the Asian crisis. The Bank’s relationship with the corrupt Suharto dictatorship in Indonesia continued well into the Wolfensohn era. According to Jeffrey Winters, a specialist on Indonesia, the Bank accepted erroneous statistics and tolerated the fact that 30% of every dollar in aid it dispensed to the regime was siphoned off by corrupt individuals.

In Sub-Saharan Africa, “The Bank took more hits as news of corruption and malpractice came to light in Bank supported infrastructure projects. Prominent among these were the Lesotho Highlands Water Project (LHWP) and the Bujagali Falls dam in Uganda. In 2001, the Lesotho High Court started investigating charges of bribery against several major international dam-building companies and public officials in connection with the LHWP. Instead of supporting a nationally accountable legal process, the Bank quietly conducted its own internal investigation of three of the companies charged with paying bribes and concluded that there was insufficient evidence to punish them for corruption. In 2002, the Lesotho High Court eventually succeeded in convicting four companies for paying bribes, among them Acres International, a long term ally and pet contractor of the World Bank and who the Bank had cleared in its internal investigation. It took the Bank well over a year to eventually announce that it would disbar Acres International from World Bank contracts for a period of three years” [7].

The World Commission on Dams (WCD). Established in 1997, the World Commission on Dams was to conduct a comprehensive and independent global review of the effectiveness for development of large dams and to propose internationally acceptable standards for such projects. Over a period of two and half years, the WCD commissioned a massive volume of research and received nearly 1000 submissions from around the world on the environmental, social, economic, technical and institutional aspects and on the performance of large dams.
Although the WCD worked independently from the World Bank, the Bank played a more active role in the development of the WCD Report than any other institution and was consulted at every stage of the WCD’s work programme. James Wolfensohn applauded the WCD process as a model for future multi-stakeholder dialogues. However, the inadmissible happened: the Bank rejected the Report’s findings because they went too far. The final report “Dams and Development: A New Framework for Decision-Making”, was presented by Nelson Mandela in London in November 2000. James Wolfensohn justified his refusal to follow the report’s guidelines by saying that the Bank had to consult its shareholders and the dam-building government agencies in the major dam-building countries. In a statement published on the 27^th March 2001, the Bank said:

“Consistent with the clarification provided by the WCD [World Commission on Dams] Chair, the World Bank will not ’comprehensively adopt the 26 WCD guidelines’, but will use them as a reference point when considering investments in dams”.

And even added, “This was an unprecedented and highly productive dialogue between all parties. The World Bank believes that such dialogues are very important for the many controversial development issues, and will continue to engage in them in the future”. [8]

The Bank’s tactics are clear. Faced with criticism and opposition, the Bank itself announces the setting up of a participatory mechanism, commissions and actively participates in studies and reports, declaring its intention to take into account the results, and then, when the reports are published, uses evasive rhetoric about the future, while assuring the public that it will continue to engage in such “highly productive dialogue” in the future.

The Extractive Industries Commission.
The experience of the World Commission on Dams (WCD) was replayed in the Extractive Industries Review (EIR). Challenged in a public meeting by Friends of the Earth, Wolfensohn responded - to the surprise of his staff - that the Bank would undertake a global review to examine whether Bank involvement in extractive industries was consistent with its stated aim of poverty reduction.
Having learnt its lesson from the WCD process, the World Bank kept a much tighter rein on the EIR which was less independent and less participative than the WCD. However, the EIR Report, published in Lisbon on 11 December 2003, turned out to be a surprisingly strong document in spite of the Bank’s interference. It firmly recommended that the Bank and its private sector arm, the International Finance Corporation (IFC), phase out their involvement in oil, mining and natural gas. The Report demanded that the Bank shift their financing to renewable energy. The Report caused an outcry among private financiers (such as Citibank, ABN Amro, WestLB and Barclays) for whom Bank involvement in the oil, mining and gas industries is essential for as long as they are not able to totally finance such projects themselves.

In the 17 June 2004 edition of The Financial Times, Emil Salim, who presided the EIR, published an opinion article in which he stated, “Having overseen the review, I came to the conclusion that the World Bank must radically alter its approach to supporting extractive projects - and even stop supporting some altogether. The reason for this conclusion was clear. The Bank is a publicly supported institution whose mandate is poverty reduction. Not only have the oil, gas and mining industries not helped the poorest people in developing countries, they have often made them worse off.
As with the WCD Report, the World Bank decided once again, in August 2004, to ignore most of the EIR Report’s important recommendations. For example, it actually continued to defend the construction of the Chad-Cameroun pipeline [9]. The Bank continued to justify its direct involvement in extractive industries on the principle that this puts it in a position to ensure the industries’ compliance with social and environmental standards!

James Wolfensohn struggles with civil society
When James Wolfensohn arrived at the World Bank in 1995, the “50 Years is Enough” [10] campaign was in full steam in the US and was gathering momentum throughout the world. Then came the Jubilee 2000 Coalition, which was especially strong in countries which are mainly Christian, in both the North and the South. The Jubilee 2000 campaign, which started in 1997 and ended in 2000, collected more than 20 million signatures on a petition asking the Bank to go further than the HIPC initiative and to “cancel the backlog of unpayable debts of the most impoverished nations.” It also organised several large demonstrations: the human chain of 80 000 people in Birmingham UK during the G8 summit in May 1998, and the 35 000 demonstrators during the G8 in Cologne in June 1999.

The growing opposition between civil society and Wolfensohn came to the boil during the tumultuous World Bank-IMF annual meeting held in Prague in September 2000, which had to be cut short owing to massive demonstrations. Confronted with a list of thoroughly documented charges at the famous Prague Castle debate, Wolfensohn lost his cool, exclaiming, “I and my colleagues feel good about going to work every day.” It was an answer that was matched only by IMF Managing Director Horst Koehler’s equally famous line at the same debate: “I also have a heart, but I have to use my head in making decisions.”
The World Bank has instigated a very pro-active approach towards NGOs and some local authorities, setting up a strategy of integration/recuperation which it calls “soft loans”. These soft loans are destined to provide micro-credits (especially for NGOs concerned with women), to be used for local education and health initiatives and to best manage financial input from migrants. The Bank has created a specific structure for loans and donations to help NGOs. This strategy of the Bank to woo civil society and regain some legitimacy in the eyes of the public is producing results.

James Wolfensohn played the open-to-dialogue card in order to defuse criticism of the Bank and to win over some of the contestation movements. The three initiatives in three different domains - SAPRI, the World Commission on Dams and the Extractive Industries Commission - were all aimed at bringing the Bank’s critics around the table, and implied that the Bank was willing to change its way of working and to take into account their demands. In fact, this proved not to be the case. The Bank did not play by the rules since it rejected the results of these commissions. It was above all a lesson for those who were still hanging on to their illusions that negotiation could lead to a change the Bank’s policies and workings.

Internal crises and the crisis of legitimacy
During James Wolfensohn’s mandate, in 1999-2000, the Bank’s leadership went through an internal crisis resulting in the departure of two key members of staff, namely Joseph Stigliz, the chief economist and vice-president of the Bank who resigned at the end of 1999, under pressure from the secretary of the US Treasury, Lawrence Summers, and in June 2000 Ravi Kanbur, the director of the World Bank’s annual World Development Report. Joseph Stiglitz and Ravi Kanbur were inside reformers whose departure was a clear message that there is no place for reform from within the Bank itself.
The World Bank is also strongly contested in the US Congress, as can be seen from the report of the Meltzer Commission, which was published in February 2000.

The end of James Wolfensohn’s second mandate
The arrival of the conservative administration at the White House in 2001 complicated Wolfensohn’s mandate. He spent his last four years as president acquiescing to the increasingly aggressive programme of G.W.Bush’s administration. From time to time he dug his heels in, but invariably ended up doing what Bush and his team required him to do. He himself said in an interview shortly before the end of his mandate, “I’ve had the impression from the administration that they are perfectly pleased with what has happened here in recent years” [11].
In Afghanistan, as well as pledging $570 million and fronting the US effort to raise billions of dollars for reconstruction, James Wolfensohn expressed interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. in the Bank’s participation in financing a fuel pipeline to channel massive gas reserves through Afghanistan from landlocked Turkmenistan to India or Pakistan, a project greatly desired by US energy corporations backed by US vice-president Richard Cheney.
In Iraq, Wolfensohn, under incentive from Washington, committed $3-5 billion for reconstruction and agreed to manage the Iraq Trust Fund to channel money to development projects undertaken by the occupying regime, especially those aimed at “capacity building” in the private sector, a priority aim of the Bush administration.

Despite all his efforts, James Wolfensohn could not stop the erosion of his authority and prestige. No longer appreciated at the White House because of his sympathies with William Clinton and John Kerry - the Democrat candidate in 2004 - James Wolfensohn was also increasingly mistrusted by those who had believed in his reformist rhetoric. It was perfectly obvious very early on that were George W. Bush to be elected for a second term, there was no chance of Wolfensohn’s mandate being renewed in 2005. Indeed, in March 2005 George W. Bush appointed one of his close collaborators as the president of the World Bank, namely Paul Wolfowitz, the Deputy Defence Secretary.

As for James Wolfensohn, in 2005-2006 he was charged with a mission in relation with the Bank in the Gaza Strip, but as a full time job, he joined the Board of the largest international bank group, Citibank.