Commentary

Don’t Let the World Bank Off the Hook

By James M. Sheehan
April 13, 2000
“Shut down the World Bank!” reads one of the many placards being carried through Washington D.C. As the international institution holds its annual spring meeting, thousands of activists are venting their anger about everything from world poverty to environmental degradation. While they are correct to point an accusatory finger at the World Bank for making those problems worse, their well-publicized efforts will do little good. The bank has become adept at co-opting key elements of its opposition in order to keep billions in U.S. government money flowing in its direction.

Since first being stung by environmentalist criticism in the early 1980s, the World Bank has repeatedly promised to reform itself. Despite those promises, the bank has neither fundamentally reformed its lending practices nor radically changed the kinds of projects that receive its funding. Bank projects around the world remain environmentally destructive and socially disruptive. By its own account, 2.6 million victims of World Bank lending in poor countries are having their property confiscated, their homes destroyed, and their livelihoods ruined.

When the bank hears public criticism of its destructive environmental record, it typically issues a press release announcing renewed commitment to old promises made in prior years’ press releases. After two decades of this behavior, there is little evidence of tangible improvement. In a recent review, the bank judged that 25 percent of its projects in 1997-98 had an unsatisfactory outcome, even by its own rather generous standards. It also concedes that only 54 percent of its projects completed could be judged “sustainable,” even though sustainable development is now supposed to be a main purpose of the bank.

Environmental groups also have a difficult time identifying reform successes. A 1999 environmentalist report labeled the World Bank’s reform program a “failure,” noting that it had not produced more environmentally sound projects or a greater level of bank accountability to the public. According to the report, endorsed by the Environmental Defense Fund, Friends of the Earth, Greenpeace and the Sierra Club, “an evaluation of the World Bank Group’s portfolio shows that it does not promote environmental protection in its operations and loans.”

The bank’s most noticeable improvement in recent years has been in its ability to weather criticism, exposure and political opposition. It has actively courted the support of environmental advocacy groups and has rhetorically embraced their “sustainable development” creed. The bank cooked its books to make it appear that environmental spending had gone up and provided generous grant funding to nongovernmental organizations (NGOs) in order to make them more dependent on its continued existence. It has invited green organizations to its lavish headquarters to solicit their advice and to enter into partnerships that improve the bank’s image. Despite its documentation of egregious abuses at the World Bank, the leadership of the anti-bank movement does not advocate — as it sometimes did — the only real solution to an institution that has demonstrated zero capacity for genuine reform: elimination.

Why has the bank’s opposition gone soft? The World Bank, recognizing that environmentalist opposition in the early 1990s threatened its very existence, made a concerted effort to meet this challenge. An internal World Bank report identifies the key to its survival continuing “to build a public constituency for the Bank’s policies and programs, and for development assistance in general.” Central to its strategy was a systematic effort to convert the environmental movement to an accommodationist stance toward the bank. The greens must advocate incremental changes to the institution, not its elimination.

Beginning in the early 1990s, the bank contacted its most influential environmental critics and invited them to “participate” in the bank’s work. According to the bank, this activity has caused “a reduction in NGO criticism” and a recognition on the part of NGOs that they and the bank share common interests. The bank claims that a chief benefit of appeasing the environmental movement is to “improve the overall climate of opinion around the Bank’s work.” Most important, environmental groups tempered their criticism of the bank during key moments when its budget was being debated in Congress.

The environmental groups are now committed to working with and improving the World Bank. Implicitly, they believe that World Bank planners, who once ignored environmental considerations with tragic consequences, can now be trusted to implement major development decisions in the Third World. They suggest that the bank can become an instrument of “sustainable development.”

The World Bank’s latest reform effort is eerily reminiscent of earlier efforts that environmental groups denounced as inadequate and diversionary. But this strategy has been effective enough to secure funding prospects on Capitol Hill. If the anti-bank protestors really want to “Break the Bank,” as their signs say, they will work harder to ensure that their own organizations do not compromise on this objective.

James M. Sheehan is an adjunct scholar of the Competitive Enterprise Institute and author of a new Cato Institute study, “The Greening of the World Bank: A Lesson in Bureaucratic Survival.”