April 12, 2000

World Bank embraces environmental groups to pacify criticisms
New priorities not shown to improve quality of environmental lending

The World Bank has attempted to deflect criticism of its lending policies by enlisting environmental advocacy groups in its projects, concludes a Cato Institute study released today.

In "The Greening of the World Bank: A Lesson in Bureaucratic Survival," James M. Sheehan documents how the bank has appeased its critics by "paint[ing] itself ‘green'" and incorporating "sustainable development" into its operations.

During the 1980s and early 1990s, environmental nongovernmental organizations (NGOs) protested and denounced bank lending policies on the grounds that it was financing projects that led to ecological destruction, human rights violations and forced resettlements. The prevailing belief among environmental NGOs was that "the bank has done more damage than good," according to Sheehan.

In the new relationship between the bank and environmental NGOs, "the bank has been unable to show that the quality of its environmental lending has fundamentally improved, [but] environmental groups, by and large, are more cautious in their criticism of the bank" now that they have been incorporated into the lending process, states Sheehan. For example, starting in the mid-1990s bank leaders began meeting with environmental NGO leaders, promising reforms and requesting NGOs not to lobby against bank funding. NGOs have since reversed their criticism of the bank's Global Environmental Facility and stopped advocating cuts in U.S. funding of the aid agency.

Both sides appear to have benefited from the arrangement: The World Bank has pacified some of its harshest critics, and environmental NGOs have received dramatic increases in financial support from the bank. For instance, in 1997 NGOs participated in nearly 50 percent of all bank projects, including 81 percent of the bank's agricultural projects, 60 percent of its health and population programs and 69 percent of other social-sector projects. NGOs now "have a vested interest in the World Bank; without it, their own budgets would shrink significantly," writes Sheehan.

These developments are problematic, Sheehan argues, because "the [new] incentive structure ensures that there will be little accountability in the lending process. In addition, the bank's financing of NGOs can undermine the basic governance process in developing countries through its selective support of NGOs that endorse official initiatives or that have clear political agendas." .

"The Greening of the World Bank: A Lesson in Bureaucratic Survival"