The World Bank has a dismal environmental record that environmentalists have long condemned. Its lending policies have financed ecological destruction, human rights violations, and forced resettlement, and its projects have suffered from high failure rates, according to the bank’s own criteria.
Past reform efforts were denounced by environmental groups because those efforts failed to improve the bank’s performance. Since the mid-1990s, however, the bank has been appeasing its critics by including environmental nongovernmental organizations (NGOs) in World Bank operations. As advisers to the World Bank and conduits for its lending, NGOs have been participating increasingly in bank operations in recent years.
The bank appears to have created a new constituency of environmental NGOs. Although the bank has been unable to show that the quality of its environmental lending has fundamentally improved, environmental groups, by and large, are more cautious in their criticisms of the bank and no longer advocate a reduction or suspension of funding for the World Bank, as they did in the 1980s and early 1990s.
The bank has also begun to adopt aspects of the “sustainable development” agenda advocated by the environmental lobby. The bank has done so despite widespread concern that such an approach—based on the dubious presumption that vigorous economic growth will overwhelm the earth’s environmental capacity—is inimical to economic development and threatens to leave the developing world environmentally worse off.
A system in which NGOs administer and receive bank funds is also problematic because the 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.