Statement in response to nomination of Paul Wolfowitz to head World Bank

21 March 2005 by Essential Action


Unless the Bush administration’s intention is to speed up efforts to
shut down and replace 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.

altogether, it is hard to imagine a
worse selection for World Bank chief than Paul Wolfowitz.

Wolfowitz brings no apparent development experience to the job, but does
offer a record of unabashed militarism and unilateralism that represents
exactly the wrong direction for the World Bank.

Militarism and wasteful spending on weaponry is a huge problem in the
developing world. The nomination of Paul Wolfowitz, who is emblematic of
misplaced priorities in the United States — sends exactly the wrong
message to poor developing countries that should spend far less money on
military operations and instead invest to advance genuine national
security interests, such as healthcare, education and providing for
basic survival.

For decades, the World Bank has veered out of control, pushing
mega-development projects that have displaced millions of people, failed
to improve national well-being and thrown countries into a downward debt
spiral. The Bank has simultaneously pushed market fundamentalist
policies — including blind support for privatization, deregulation, and
marketization and commodification of social services and public goods —
that have impoverished hundreds of millions.

Periodically, the Bank acknowledges its past failures and promises to
start anew — only to repeat the mistakes of the previous era, yet again.

If the Bank is going to continue to exist, it does need a new start, but
not the kind that Paul Wolfowitz’s nomination portends.

What the Bank does need to do is listen to the demands that have come
from social movements in developing countries and been echoed by allied
groups in the rich countries: cancel the debts owed by the poorest
nations, without harmful economic conditions; end support for the market
fundamentalist policies known as 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).

, which include
such policies as water privatization, removing labor protestions and
user fees for healthcare; end it support for environmentally harmful
projects, such as those in oil, mining, gas development and those
involving large dams; and open up its operations and become more

The only good news about this nomination is that it is likely to provoke
fierce opposition, and a genuine debate about whether there should be a
World Bank, and if so, what its function should be.

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Essential Action is a Washington, D.C.-based public 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. organization that works on international development-related issues.

For More Information: Robert Weissman 202-387-8030; 202-360-1844 (cell)



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