Tag Archive | "Liberalization"

Global Banking: The World Bank

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By Patrick Wood, Editor

Intro­duc­tion

According to The World Bank, it is,

“a vital source of finan­cial and tech­nical assis­tance to devel­oping coun­tries around the world. We are not a bank in the common sense. We are made up of two unique devel­op­ment insti­tu­tions owned by 184 member coun­triesÂ — the Inter­na­tional Bank for Recon­struc­tion and Devel­op­ment (IBRD) and the Inter­na­tional Devel­op­ment Asso­ci­a­tion (IDA). Each insti­tu­tion plays a dif­ferent but sup­portive role in our mis­sion of global poverty reduc­tion and the improve­ment of living stan­dards. The IBRD focuses on middle income and cred­it­worthy poor coun­tries, while IDA focuses on the poorest coun­tries in the world. Together we pro­vide low-interest loans, interest-free credit and grants to devel­oping coun­tries for edu­ca­tion, health, infra­struc­ture, com­mu­ni­ca­tions and many other pur­poses.” 1

High-minded words like “our mis­sion of global poverty reduc­tion and the improve­ment of living stan­dards” would lead the reader to believe that the World Bank is some benev­o­lent and global wel­fare orga­ni­za­tion. Why is it then, that The World Bank joins the Inter­na­tional Mon­e­tary Fund and the World Trade Orga­ni­za­tion as orga­ni­za­tions that people around the world just love to hate?

In reality, the World Bank car­ries its weight, along with the Inter­na­tional Mon­e­tary Fund and the Bank for Inter­na­tional Set­tle­ments, to forcibly inte­grate minor coun­tries of the world into its own brand of cap­i­tal­istic democracy.

World Bank Beginnings

A sib­ling of the IMF, the World Bank was born out of the U.N. Mon­e­tary and Finan­cial Con­fer­ence at Bretton Woods, New Hamp­shire in July, 1944. The orig­inal name given to the World Bank was the Inter­na­tional Bank for Recon­struc­tion and Devel­op­ment (IBRD) and reflects its orig­inal mis­sion: to rebuild Europe after the dev­as­ta­tion of World War II. The name “World Bank” was not actu­ally adopted until 1975.

Both the IBRD and the IMF were cre­ated as inde­pen­dent spe­cial­ized agen­cies of the United Nations, of which they remain to this day.

The word “Devel­op­ment” in the IBRD name was rather insignif­i­cant at the time because most of the southern hemi­sphere was still under colo­nial rule, with each colo­nial master respon­sible for the busi­ness activ­i­ties in their respec­tive countries.

Note: It is argued by some that there was an orig­inal desire by banking elites to put an end to colo­nialism by restruc­turing invest­ment and trade pat­terns in col­o­nized coun­tries. This paper will not deal with this issue, but it should be noted that this has been exactly what has hap­pened, in many cases being aided by the oper­a­tions of the World Bank and the IMF.

As a “recon­struc­tion” bank, how­ever, the World Bank was impo­tent. It ulti­mately loaned only $497(US) mil­lion for recon­struc­tion projects. The Mar­shall Plan, by con­trast, became the true engine of the recon­struc­tion of Europe by loaning over $41(US) bil­lion by 1953.

The pri­mary archi­tects of the World Bank were Harry Dexter White and John May­nard Keynes, both of whom are sum­ma­rized Global Banking: The Inter­na­tional Mon­e­tary Fund (see article for com­plete details) as follows:

“Such is the moral fiber and intel­lec­tual cre­den­tials of the cre­ators of the IMF [and the World Bank]: One was an Eng­lish ide­o­logue econ­o­mist with a markedly global bent, and the other a cor­rupt and high-ranking U.S. gov­ern­ment offi­cial who was a top Soviet spy.“2

Struc­ture of the World Bank

Today, the World Bank con­sists of two pri­mary units: The already-mentioned IBRD and the Inter­na­tional Devel­op­ment Asso­ci­a­tion (IDA), which was cre­ated in 1960.

The IBRD lends only to gov­ern­ments who are credit-worthy; in other words, there is an expec­ta­tion that they will repay their loans. The IDA, by con­trast, only lends to gov­ern­ments who are not credit-worthy and are usu­ally the poorest nations. Together, they create a “one-two” punch in global lending to any gov­ern­ment that they are able to talk into bor­rowing. The U.S. cur­rently con­tributes about $1 bil­lion per year of tax­payer funds to the IDA.

Three other affil­i­ates com­bine with the World Bank, to be col­lec­tively called the World Bank Group:

  • The Inter­na­tional Finance Cor­po­ra­tion (IFC) — Founded in 1956, lends directly to the pri­vate sector in devel­oping counties.
  • The Mul­ti­lat­eral Invest­ment Guar­antee Agency (MIGA) –Founded in 1988, pro­vides guar­an­tees to investors in devel­oping coun­tries against losses caused by non­com­mer­cial risks.
  • The Inter­na­tional Center for Set­tle­ment of Invest­ment Dis­putes (ICSID) — Founded in 1966, pro­vides inter­na­tional facil­i­ties for con­cil­i­a­tion and arbi­tra­tion of invest­ment disputes.

Head­quar­ters for the World Bank is Wash­ington, DC. It employs approx­i­mately 7,000 in the Wash­ington com­plex, and another 3,000 in 109 offices scat­tered throughout member countries.

IBRD funds its lending oper­a­tions by selling AAA-rated bonds and other debt instru­ments to other banks, pen­sion funds, insur­ance com­pa­nies and cor­po­ra­tions around the world. By con­trast, the IDA is funded by (tax­payer) con­tri­bu­tions from member coun­tries. Annual levels of lending is roughly equal between IBRD and IDA. While the IFC gen­er­ates its own cap­ital in open mar­kets, MIGA and ICSID receive the majority of their funding from the World Bank, much of which is tax­payer funded.

Own­er­ship of the World Bank con­sists of voting shares held by member coun­tries, according to size and con­tri­bu­tions. Cur­rently, the U.S. is the largest share­holder with 16.4 per­cent of total votes. The next largest voting blocks are Japan (7.9 per­cent) and Ger­many (4.5 per­cent). Because major deci­sions require an 85 per­cent super-majority vote, the U.S. can effec­tively veto any change (100% –16.4% = 83.6%).

Amer­ican Hegemony

It should be noted that the United Nations is head­quar­tered in the United States, on land orig­i­nally donated to it by David Rock­e­feller. The Bretton Woods Con­fer­ence was held in New Hamp­shire. Every pres­i­dent of the World Bank has hailed from the United States. It is no wonder that the rest of the world views the World Bank as an Amer­ican operation.

There has been an unwritten but tra­di­tional rule that the World Bank pres­i­dent will always be an Amer­ican, while the pres­i­dent of the IMF is Euro­pean. (A recent excep­tion to this is the cur­rent IMF pres­i­dent, who is Canadian)

It is instruc­tive to review the past pres­i­dents of the World Bank, because it demon­strates which elite cabal is really in con­trol of World Bank oper­a­tions. In turn, this will point strongly to the real ben­e­fi­cia­ries of the World Bank hege­mony. The com­plete biogra­phies and accom­plish­ments of these men far exceed the avail­able space in this report, so only a few high­lights are noted.

1. Eugene Meyer. June to December, 1946. Chairman, Board of Gov­er­nors of the Fed­eral Reserve from 1930 – 1933; owner of the Wash­ington Post; Member, Council on For­eign Rela­tions; agent of Lazard Freres, Brown Brothers, Har­riman; appointed head of the War Finance Cor­po­ra­tion during WWI by Woodrow Wilson.

2. John J. McCloy. March 1947 to April 1949. Member and chair of the Council on For­eign Rela­tions; Chairman, Ford Foun­da­tion; Chairman, Chase Man­hattan Bank; lawyer whose firm was council to Chase Man­hattan Bank.

3. Eugene Black. July 1949 to December 1962. Chairman, Board of Direc­tors for the Fed­eral Reserve System (1933 – 34); senior vice pres­i­dent of Chase Man­hattan Bank; Member, Council on For­eign Rela­tions; member of Bilder­bergers; cre­ated the Inter­na­tional Finance Cor­po­ra­tion and the Inter­na­tional Devel­op­ment Asso­ci­a­tion at the World Bank.

4. George Woods. Jan­uary 1963 to March 1968. Vice pres­i­dent of Harris, Forbes & Co.; vice pres­i­dent of Chase Bank; vice pres­i­dent of and board member of First Boston Corp. (one of the largest U.S. invest­ment banking firms).

5. Robert Strange McNa­mara. April 1968 to June 1981. Pres­i­dent and director of Ford Motor Com­pany; Sec­re­tary of Defense in the Kennedy and Johnson admin­is­tra­tions; member of Tri­lat­eral Com­mis­sion, Council on For­eign Rela­tions and Bilder­bergers; hon­orary council trustee of Aspen Insti­tute. Per­son­ally nego­ti­ated China’s entrance into the World Bank.

6. A.W. Clausen. July 1981 to June 1986. Pres­i­dent, CEO and chairman of Bank of America; member, Tri­lat­eral Com­mis­sion; member, Bretton-Woods Committee.

7. Barber B. Conable. July 1986 to August 1991. Member of U.S. House of Rep­re­sen­ta­tives from 1965 to 1985; member Tri­lat­eral Com­mis­sion and Council on For­eign Rela­tions; senior fellow, Amer­ican Enter­prise Insti­tute; board member, New York Stock Exchange; member, Com­mis­sion on Global Governance.

8. Lewis T. Pre­ston. Sep­tember 1991 to May 1995. Pres­i­dent, CEO and chairman of J.P. Morgan & Co., and chairman of the exec­u­tive com­mittee; vice pres­i­dent of Morgan Guar­anty Trust Co.; member and trea­surer of Council on For­eign Rela­tions; director of Gen­eral Electric.

9. James D. Wolfen­sohn. June 1995 to 2005 Exec­u­tive partner and head of the invest­ment banking depart­ment, Salomon Brothers (New York); exec­u­tive deputy chairman and man­aging director, Schroders Ltd. (London); director, Rock­e­feller Foun­da­tion; board member, Rock­e­feller Uni­ver­sity; hon­orary trustee, Brook­ings Insti­tu­tion; Director, Pop­u­la­tion Council (founded by John D. Rock­e­feller); member, Council on For­eign Relations.

10. Paul Wol­fowitz. 2005 — present. Deputy Sec­re­tary of Defense (2001 – 2005); member, Tri­lat­eral Com­mis­sion; member, Council on For­eign Rela­tions; member, Bilder­bergers; director of the neocon flag­ship, Project for the New Amer­ican Cen­tury (PNAC); member of the elite “Vul­cans” group that advised George W. Bush on for­eign policy during the 2000 pres­i­den­tial elec­tions (other neocon mem­bers included Con­doleezza Rice, Colin Powell and Richard Perle); member of and fre­quent speaker at Social Democ­rats USA (suc­cessor to the Socialist Party of America).

An impor­tant pat­tern emerges here. These men frame a 50-year time period stretching from 1946 to 2006. The early players have long since passed away. There was no social con­nec­tion between the early and latter pres­i­dents. Yet, seven out of ten are mem­bers of the Council on For­eign Rela­tions; four are mem­bers of the Tri­lat­eral Com­mis­sion, seven have major global bank affil­i­a­tions (Chase Man­hattan, J.P. Morgan, Bank of America, First Boston, Brown Brothers, Har­riman, Salomon Brothers, Fed­eral Reserve), and four men were directly con­nected to Rock­e­feller interests.

A detailed analysis is not required to see the pat­tern emerge: Global bankers (the same old crowd) and their related global proxies, have com­pletely dom­i­nated the World Bank for its entire his­tory. Col­lec­tively and indi­vid­u­ally, they have always oper­ated pur­pose­fully and con­sis­tently for their own self-interested, finan­cial gain. Why would anyone expect even one of them to act out of char­acter (e.g., be con­cerned for world poverty) while directing the helm of the World Bank?

Pur­poses of convenience

What­ever the true pur­poses of the World Bank and IMF might have been, the pub­licly dis­played pur­poses have changed when it was con­ve­nient and necessary.

In 1944, recon­struc­tion of war torn coun­tries after WW II was the impor­tant issue.

When the Bank demon­strated its impo­tence by loaning only a pit­tance of less than $500 mil­lion, it changed its pubic image by posi­tioning itself as a check and bal­ance to the expan­sion of com­mu­nism. Without the World Bank to engage all of the lesser coun­tries of the world who were sus­cep­tible to com­mu­nist influ­ence, com­mu­nism might spread and ulti­mately threaten to end the cold war with an ugly nuclear Holocaust.

Public and leg­isla­tive sen­ti­ment ulti­mately fiz­zled and the Bank was again under heavy crit­i­cism when Robert Strange McNa­mara was appointed president.

Poverty Reduc­tion: Trojan Horse

As noted above, McNa­mara was pres­i­dent of the World Bank from 1968 through 1981. He was also among the orig­inal mem­ber­ship of the Tri­lat­eral Com­mis­sion, founded in 1973 by Rock­e­feller and Brzezinski, and was widely con­sid­ered to be a cen­tral figure in the global elite of his day.

It was McNa­mara who caused the focus of the World Bank to fall on poverty and poverty reduc­tion. This has essen­tially remained the siren call right into the present. This was a bril­liant maneuver because who would ever say they are anti-poor or pro-poverty? Any attack on the Bank would thus be viewed as an attack on poverty relief itself. From 1968 onward, the battle cry of the Bank has been “elim­i­nate poverty.”

This is clearly seen on the About Us page of the World Bank web site, where these words are promi­nently displayed:

“Each insti­tu­tion (IBRD and IDA) plays a dif­ferent but sup­portive role in our mis­sion of global poverty reduc­tion and the improve­ment of living stan­dards. [emphasis added]

How­ever, Article I of The Arti­cles of Agree­ment of the IBRD, as amended on Feb­ruary 16, 1989, state its offi­cial Pur­poses as follows:

(i) To assist in the recon­struc­tion and devel­op­ment of ter­ri­to­ries of mem­bers by facil­i­tating the invest­ment of cap­ital for pro­duc­tive pur­poses, including the restora­tion of economies destroyed or dis­rupted by war, the recon­ver­sion of pro­duc­tive facil­i­ties to peace­time needs and the encour­age­ment of the devel­op­ment of pro­duc­tive facil­i­ties and resources in less devel­oped countries.

(ii) To pro­mote pri­vate for­eign invest­ment by means of guar­an­tees or par­tic­i­pa­tions in loans and other invest­ments made by pri­vate investors; and when pri­vate cap­ital is not avail­able on rea­son­able terms, to sup­ple­ment pri­vate invest­ment by pro­viding, on suit­able con­di­tions, finance for pro­duc­tive pur­poses out of its own cap­ital, funds raised by it and its other resources.

(iii) To pro­mote the long-range bal­anced growth of inter­na­tional trade and the main­te­nance of equi­lib­rium in bal­ances of pay­ments by encour­aging inter­na­tional invest­ment for the devel­op­ment of the pro­duc­tive resources of mem­bers, thereby assisting in raising pro­duc­tivity, the stan­dard of living and con­di­tions of labor in their territories.

(iv) To arrange the loans made or guar­an­teed by it in rela­tion to inter­na­tional loans through other chan­nels so that the more useful and urgent projects, large and small alike, will be dealt with first.

(v) To con­duct its oper­a­tions with due regard to the effect of inter­na­tional invest­ment on busi­ness con­di­tions in the ter­ri­to­ries of mem­bers and, in the imme­diate postwar years, to assist in bringing about a smooth tran­si­tion from a wartime to a peace­time economy.

The Bank shall be guided in all its deci­sions by the pur­poses set forth above.3

Note that the word “poverty” does not appear even once. The reason is clear: What­ever “busi­ness as usual” might be with the Bank, it has nothing to do with poverty or poverty reduc­tion. Rather, the Bank is in busi­ness to loan money by stim­u­lating bor­rowing demand in devel­oping coun­tries, with a view to increasing inter­na­tional trade. The pri­mary ben­e­fi­cia­ries of inter­na­tional trade are the global cor­po­ra­tions, and the poor are actu­ally poorer as a result.

This hypocrisy was noted even by Nobel lau­reate and former World Bank chief econ­o­mist, Joseph Stiglitz, as late as 2002:

As far as these ‘client coun­tries’ were con­cerned, it was a cha­rade in which the politi­cians pre­tended to do some­thing to redress the prob­lems [of poverty] while finan­cial inter­ests worked to pre­serve as much of the status quo as they could.4

Lib­er­al­iza­tion and Struc­tural Adjustments

When Alden Clausen (also an orig­inal member of the Tri­lat­eral Com­mis­sion) took over the reins from Robert McNa­mara in 1981, a mas­sive shakeup in the bank occurred. As Stiglitz noted,

“In the early 1980’s a purge occurred inside the World Bank, in its research depart­ment, which guided the Bank’s thinking and direc­tion.“5

Clausen, a true core member of the global elite, brought in a new chief econ­o­mist with rad­ical new ideas:

“…Ann Krueger, an inter­na­tional trade spe­cialist, best known for her work on ‘rent seeking’ — how spe­cial inter­ests use tar­iffs and other pro­tec­tionist mea­sures to increase their incomes at the expense of others…Krueger saw gov­ern­ment as the problem. Free mar­kets were the solu­tion to the prob­lems of devel­oping coun­tries.6 [emphasis added]

This was pre­cisely the time when so-called lib­er­al­iza­tion poli­cies and Struc­tural Adjust­ments were force­fully imple­mented as a means of forcing coun­tries to pri­va­tize indus­tries. If gov­ern­ments were the problem, then they should turn over areas of crit­ical infra­struc­ture to pri­vate multi­na­tional cor­po­ra­tions which, according to Krueger, could per­form better and more effi­ciently than bureau­cratic gov­ern­ment bodies.

Not sur­pris­ingly, most of the career staff econ­o­mists left the Bank in the early 1980’s in protest over Clausen and Krueger’s policies.

How the Money Laundry Works

The mech­a­nism and oper­a­tion of Struc­tural Adjust­ments, along with the tight coop­er­a­tion between the IMF and the World Bank, was ade­quately cov­ered in The August Review’s Global Banking: The Inter­na­tional Mon­e­tary Fund. The fol­lowing well-documented example will be the “pic­ture worth a thou­sand words” in the Review’s effort to pro­file self-serving Bank and global cor­po­rate poli­cies. It also demon­strates the “tag-team” approach used by the Bank and IMF in the prying open of closed mar­kets in unco­op­er­a­tive coun­tries. It’s a rather tan­gled story, but careful reading will pro­duce under­standing of how the “system” works.

Water Wars

In 1998, the IMF approved a loan of $138 mil­lion for Bolivia it described as designed to help the country con­trol infla­tion and sta­bi­lize its domestic economy. The loan was con­tin­gent upon Bolivia’s adop­tion of a series of “struc­tural reforms,” including pri­va­ti­za­tion of “all remaining public enter­prises,” including water ser­vices. Once these loans were approved, Bolivia was under intense pres­sure from the World Bank to ensure that no public sub­si­dies for water existed and that all water projects would be run on a “cost recovery” basis, meaning that cit­i­zens must pay the full con­struc­tion, financing, oper­a­tion and main­te­nance costs of a water project. Because water is an essen­tial human need and is cru­cial for agri­cul­ture, cost recovery pricing is unusual, even in the devel­oped world.

In this con­text, Cochabamba, the third largest city in Bolivia, put its water works up for sale in late 1999.Cochabamba Water War Only one entity, a con­sor­tium led by Bechtel sub­sidiary Aguas del Tunari, offered a bid, and it was awarded a 40-year con­ces­sion to pro­vide water. The exact details of the nego­ti­a­tion were kept secret, and Bechtel claimed that the num­bers within the con­tract are “intel­lec­tual prop­erty.” But, it later came to light that the price included the financing by Cochabamba’s cit­i­zens of a part of a huge dam con­struc­tion project being under­taken by Bechtel, even though water from the Mis­i­cuni Dam Project would be 600% more expen­sive than alter­na­tive water sources. Cochabam­bans were also required to pay Bechtel a con­trac­tu­ally guar­an­teed 15% profit, meaning that the people of Cochabamba were asked to pay for invest­ments while the pri­vate sector got the profits.

Imme­di­ately upon receiving the con­ces­sion, the com­pany raised water rates by as much as 400% in some instances. These increases came in an area where the min­imum wage is less than $100 a month. After the price hike, self-employed men and women were esti­mated to pay one quarter of their monthly earn­ings for water.

The city’s res­i­dents were out­raged. In Jan­uary of 2000, a broad coali­tion called the Coor­di­na­tion for the Defense of Water and Life, or simply La Coor­di­nadora, led by a local worker, Oscar Olivera, called for peaceful demon­stra­tions. Cochabamba was shut down for four days by a gen­eral strike and trans­porta­tion stop­page, but the demon­stra­tions stopped once the gov­ern­ment promised to inter­vene to lower water rates. How­ever, when there were no results in Feb­ruary, the demon­stra­tions started again. This time, how­ever, demon­stra­tors were met with tear gas and police oppo­si­tion, leaving 175 injured and two youths blinded.

The threat that pri­va­ti­za­tion of public ser­vices under GATS (Gen­eral Agree­ment on Trade in Ser­vices) poses to democ­racy were demon­strated in March 2000. La Coor­di­nadora held an unof­fi­cial ref­er­endum, counted nearly 50,000 votes, and announced that 96% of the respon­dents favored the can­cel­la­tion of the con­tract with Aguas del Tunari. They were told by the water com­pany that there was nothing to negotiate.

On April 4, the res­i­dents of the city returned to the streets, shut­ting down the city. Again, they were met with police resis­tance, and on April 8, the gov­ern­ment declared mar­tial law. The Boli­vian mil­i­tary shot a 17-year-old pro­tester in the face, killing him. How­ever, the protests con­tinued, and, on April 10, the gov­ern­ment relented, signing an accord that agreed to the demand of the pro­testers to reverse the water con­ces­sion. The people of Cochabamba took back their water.

Unfor­tu­nately, this inspiring story didn’t simply end with the vic­tory for the people of Cochabamba. On Feb­ruary 25, 2002, Bechtel filed a griev­ance using investor pro­tec­tions granted in a Bolivia-Netherlands Bilat­eral Invest­ment Agree­ment at the World Bank, demanding a $25 mil­lion dollar pay­ment as com­pen­sa­tion for lost profits.7

Note: Bechtel Engi­neering is the largest civil engi­neering com­pany in the world. It is pri­vately owned by the Bechtel family. For many years, gen­eral counsel (and vice-president) for Bechtel was none other than orig­inal Tri­lat­eral Com­mis­sion member Caspar Weinberger.

Since then, the World Bank has granted addi­tional “poverty reduc­tion” loans to Bolivia. Care­fully read the Bank’s cur­rent (2006) assess­ment on Bolivia found on its web site:

“Bolivia is expe­ri­encing a time of dif­fi­culty and uncer­tainty. In recent months, var­ious polit­ical and social dis­tur­bances have esca­lated with serious con­se­quences, cul­mi­nating in the res­ig­na­tion of Pres­i­dent Gon­zalo Sánchez de Lozada in October 2003, and the appoint­ment of Vice-President Carlos Mesa as Pres­i­dent. The cur­rent admin­is­tra­tion inherits a dif­fi­cult eco­nomic, polit­ical and social cli­mate, which is com­pounded by long-term issues, such as pro­found inequality, an economy that has been adversely affected by the regionÂ’s recent eco­nomic slump, and wide­spread public dis­en­chant­ment with cor­rup­tion.“8

Polit­ical and social dis­tur­bances? Dif­fi­cult eco­nomic, polit­ical and social cli­mate? Pro­found inequality? Wide­spread dis­en­chant­ment with cor­rup­tion? It leaves one speechless.

So, in the case of Bolivia, we see the fol­lowing in operation:

  • An IMF loan is made to Bolivia, with conditionalities
  • The World Bank steps in to enforce the con­di­tion­al­i­ties and impose struc­tural adjustments
  • The World Bank loans “devel­op­ment” funds to Bolivia, and simul­ta­ne­ously brings in pri­vate bank con­sor­tiums to fund the var­ious projects that Bechtel had in mind.
  • Bechtel makes a sole-source bid, and it is accepted.
  • The water project ends in total failure and Bechtel gets kicked out after extreme polit­ical pres­sure from consumers.
  • Bechtel files a “lost profit” claim according to a pre-negotiated “insur­ance guar­antee” with the World Bank Group (MIGA, see above.)
  • If Bechtel wins its claim, it will be paid off with tax­payer money con­tributed by member countries.
  • Undoubt­edly, any loans from private-sector banks that later turn sour, will be bailed-out with tax­payer funds as well.

This kind of oper­a­tion is brazen stealing (albeit per­haps legally) of funds from everyone in sight: Bolivia, the city of Cochabamba, the people of Cochabamba, U.S. tax­payers. The only ben­e­fi­cia­ries are Bechtel, the com­mer­cial banks and a few cor­rupt politi­cians who got their cus­tomary bribes and kickbacks.

A pen­e­trating ques­tion remains to be answered: When did Bechtel first set their sights on the Bolivia deal? Did Bechtel have a role in sug­gesting or cre­ating the con­di­tion­al­i­ties and Struc­tural Adjust­ments spec­i­fied by the World Bank in the first place? If so, there would be grounds for crim­inal investigation.

It is not likely that the World Bank will tell us, because of its very secre­tive inner work­ings. Even Stiglitz has noted,

The IMF and World Bank still have dis­clo­sure stan­dards far weaker than those of gov­ern­ments in democ­ra­cies like the United States, or Sweden or Canada. They attempt to hide crit­ical reports; it is only their inability to pre­vent leaks that often forces the even­tual dis­clo­sure.“9

Cor­rup­tion

The World Bank has received accu­sa­tions of cor­rup­tion for many years. Since the Bank is an inde­pen­dent spe­cial­ized agency of the United Nations and con­sid­ering the old adage, “The fruit doesn’t fall far from the tree”, this might not come as a sur­prise to most. The United Nations has a major and doc­u­mented track record on cor­rup­tion of every con­ceiv­able sort. It would be too sim­plistic to just leave it at that.

In May, 2004, Sen. Richard Lugar (R-Indiana), as Chairman of the For­eign Rela­tions Com­mittee, kicked off the most recent inquiry into cor­rup­tion related to the activ­i­ties of the mul­ti­lat­eral devel­op­ment banks, of which the World Bank is foremost.

The heads of the var­ious devel­op­ment banks were invited to tes­tify (vol­un­tarily) before the Com­mittee. According to Sen. Lugar, James Wolfen­sohn “declined the invi­ta­tion, citing the estab­lished prac­tice of Bank offi­cials not to tes­tify before the leg­is­la­tures of their numerous member countries.”

Wit­nesses before the Com­mittee tes­ti­fied that as much as $100 bil­lion may have been lost to cor­rup­tion in World Bank lending projects.

In Sen. Lugar’s opening remarks, he points out that the entire his­tory of the World Bank is sus­pect, with between 5 per­cent and 25 per­cent of all lending being lost to corruption.

But cor­rup­tion remains a serious problem. Dr. Jef­frey Win­ters of North­western Uni­ver­sity, who will tes­tify before us today, esti­mates that the World Bank ‘has par­tic­i­pated mostly pas­sively in the cor­rup­tion of roughly $100 bil­lion of its loan funds intended for devel­op­ment.’ Other experts esti­mate that between 5 per­cent and 25 per­cent of the $525 bil­lion that the World Bank has lent since 1946 has been mis­used. This is equiv­a­lent to between $26 bil­lion and $130 bil­lion. Even if cor­rup­tion is at the low end of esti­mates, mil­lions of people living in poverty may have lost oppor­tu­ni­ties to improve their health, edu­ca­tion, and eco­nomic con­di­tion.10

One must wonder why World Bank offi­cials have been so sloppy and care­less with tax­payer dol­lars. Even fur­ther, one must wonder if the cor­rup­tion was a neces­sity to achieve the under­lying pur­poses of the Bank, that is, to create bogus and unwanted projects in order to “stim­u­late” trade.

Sen. Lugar con­tinued his opening remarks,

Cor­rup­tion thwarts devel­op­ment efforts in many ways. Bribes can influ­ence impor­tant bank deci­sions on projects and on con­trac­tors. Misuse of funds can inflate project costs, deny needed assis­tance to the poor, and cause projects to fail. Stolen money may prop up dic­ta­tor­ships and finance human rights abuses. More­over, when devel­oping coun­tries lose devel­op­ment bank funds through cor­rup­tion, the tax­payers in those poor coun­tries are still oblig­ated to repay the devel­op­ment banks. So, not only are the impov­er­ished cheated out of devel­op­ment ben­e­fits, they are left to repay the resulting debts to the banks.11

It has not been deter­mined which Bank employees might have taken bribes in exchange for influ­ence, but one can be sure that any deal starting with cor­rup­tion only has one direc­tion to go — down. In the end, it is help­less indi­vid­uals who are left holding the bag. The incurred debts and failed projects just add to the impov­er­ish­ment of already poor people.

This is not to say that charges of cor­rup­tion at the World Bank are modern rev­e­la­tions only. In 1994, marking the 50th anniver­sary of its cre­ation at Bretton Woods, South End Press released “50 Years is Enough: The Case Against the World Bank and the Inter­na­tional Mon­e­tary Fund,.” edited by Kevin Danaher. The book details offi­cial Bank and IMF reports that reveal the same kind of cor­rup­tion back then. In addi­tion, it revealed dif­ferent types of cor­rup­tion, for instance,

“Beyond the wasted money and the envi­ron­mental dev­as­ta­tion, there was an even more sin­ister side to the Bank during the McNa­mara years: the World Bank’s predilec­tion for increasing sup­port to mil­i­tary regimes that tor­tured and mur­dered their sub­jects, some­times imme­di­ately after the vio­lent over­throw of more demo­c­ratic gov­ern­ments. In 1979, Sen­ator James Abourezk (D-South Dakota) denounced the bank on the Senate floor, noting that the Bank was increasing ‘loans to four newly repres­sive gov­ern­ments [Chile, Uruguay, Argentina and the Philip­pines] twice as fast as all others.’ He noted that 15 of the world’s most repres­sive gov­ern­ments would receive a third of all World Bank loan com­mit­ments in 1979, and that Con­gress and the Carter admin­is­tra­tion had cut off bilat­eral aid to four of the 15 — Argentina, Chile, Uruguay and Ethiopia — for fla­grant human rights vio­la­tions. He blasted the Bank’s ‘exces­sive secre­tive­ness’ and reminded his col­leagues that ‘we vote the money, yet we do not know where it goes.’” 12

The text speaks for itself and needs no com­ment. Readers of this report will likely have a better under­standing of where the money went!

Con­clu­sions

This report does not pre­tend to be an exhaus­tive analysis of the World Bank. There are many facets, exam­ples and case studies that could be explored. In fact, many crit­ical and ana­lyt­ical books have been written about the World Bank. The object of this report was to show how the World Bank fits into glob­al­iza­tion as a cen­tral member in the triad of global mon­e­tary powers: The IMF, the BIS and the World Bank.

The World Bank is likely to con­tinue to operate despite any amount of polit­ical flack or public protest. Such is the pat­tern of elitist-dominated insti­tu­tions. Such is the his­tory of the Inter­na­tional Mon­e­tary Fund and the Bank for Inter­na­tional Settlements.

It is suf­fi­cient to con­clude that…

  • of the two archi­tects of the World Bank, one was a top Soviet com­mu­nist agent (Harry Dexter White) and the other was a British ide­alogue (John May­nard Keynes) totally ded­i­cated to glob­alism (See Global Banking: The Inter­na­tional Mon­e­tary Fund for more details on White and Keynes)
  • From the begin­ning, the Bank has been dom­i­nated by inter­na­tional banking inter­ests and mem­bers of the Council on For­eign Rela­tions and later by the Tri­lat­eral Commission
  • the cry of “poverty reduc­tion” is a sham to con­ceal the recy­cling of bil­lions of tax­payer dol­lars, if not tril­lions, into pri­vate hands
  • the cry of “poverty reduc­tion” defuses critics of the Bank as being anti-poor and pro-poverty
  • cor­rup­tion at the World Bank goes back decades, if not all the way to the very beginning

Foot­notes

  1. World Bank web site, About Page
  2. The August Review, Global Banking: The Inter­na­tional Mon­e­tary Fund
  3. World Bank web site, IBRD Arti­cles of Agree­ment: Article I
  4. Stiglitz, Glob­al­iza­tion and its Dis­con­tents (Norton, 2002), p. 234
  5. ibid, p. 13
  6. ibid
  7. Wal­lach, Whose Trade Orga­ni­za­tion? (The New Press, 2004), p.125] See also, Bechtel Vs. Bolivia: The Boli­vian Water Revolt
    See also, The New Yorker, letter on Leasing the Rain
    See also, PBS, Leasing the Rain
  8. World Bank web site, Bolivia Country Brief
  9. Stiglitz, op. cit., p. 234
  10. Lugar, U.S. Senate Web­site, $100 bil­lion may have been lost to World Bank Cor­rup­tion, May 13, 2004
  11. ibid.
  12. Hanaher, 50 Years is Enough: The Case Against the World Bank and the Inter­na­tional Mon­e­tary Fund, (South End Press, 1994), p. 10

NOTE: Carl Teichrib, Senior Fellow at World Research Library, con­tributed to this report

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People want to know…

faq

What is Globalization?

It is the col­lective effect of pur­poseful and amoral manip­u­la­tion that seeks to cen­tralize eco­nomic, polit­ical, tech­no­log­ical and soci­etal forces in order to accrue max­imum profit and polit­ical power to global banks, global cor­po­ra­tions and the elit­ists who run them. It is rapidly moving toward an full and final imple­men­ta­tion of Technocracy.

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What is the Tri­lat­eral Commission?

Founded in 1973 by David Rock­e­feller and Zbig­niew Brzezinski, the Com­mis­sion set out to create a “New Inter­na­tional Eco­nomic Order”, namely, Tech­noc­racy. The orig­inal mem­ber­ship con­sisted of elit­ists (bankers, politi­cians, aca­d­e­mics, indus­tri­al­ists) from Japan, North America and Europe. Col­lec­tively, they have dom­i­nated and con­trolled trade and eco­nomic policy in their respec­tive coun­tries since at least 1974.

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What is Technocracy?

Tech­noc­racy is a move­ment started in the 1930’s by engi­neers, sci­en­tists and tech­ni­cians that pro­posed the replace­ment of cap­i­talism with an energy-based economy. Orig­i­nally envi­sioned for North America only, it is now being applied on a global basis. Authors Aldous Huxley and George Orwell believed that Tech­noc­racy would result in a Sci­en­tific Dic­ta­tor­ship, as reflected in their books, “Brave New World” and “1984″.

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What is Smart Grid?

Smart Grid is the national and global imple­men­ta­tion of dig­ital and Wi-fi enabled power meters that enable com­mu­ni­ca­tion between the appli­ances in your home or busi­ness, with the power provider. This pro­vides con­trol over your appli­ances and your usage of elec­tricity, gas and water.

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Who is M. King Hubbert?

Hub­bert was a geo-physicist who co-founded Tech­noc­racy, Inc. in 1932 and authored its Tech­noc­racy Study Course. In 1954, he became the cre­ator of the “Peak Oil Theory”, or “Hubbert’s Peak” which the­o­rized that the world was rapidly run­ning out of carbon-based fuels. Hub­bert is widely con­sid­ered as a “founding father” of the global warming and green movements.

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Who is R. Buck­min­ster Fuller?

A pio­neer in global eco­log­ical theory, Fuller (1895 – 1984) was the first to sug­gest the devel­op­ment of a Global Energy Grid that is today known as the Global Smart Grid. Fuller is widely con­sid­ered to be a “founding father” of the global green move­ment, including global warming, Sus­tain­able Devel­op­ment, Agenda 21, etc.

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Is the Venus Project like Technocracy?

The Venus Project, founded by Jacque Fresco, is a utopian, modern-day iter­a­tion of Tech­noc­racy. Like Tech­noc­racy, it scraps cap­i­talism and pro­poses that “a resource-based economy all of the world’s resources are held as the common her­itage of all of Earth’s people, thus even­tu­ally out­growing the need for the arti­fi­cial bound­aries that sep­a­rate people.” The appli­ca­tion of tech­nology is the answer to all of the world’s prob­lems, including war, famine and poverty.

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