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How Wolfowitz Continues the Crisis

The World Bank before Singapore

The controversial former United States Deputy Secretary of Defence Paul Wolfowitz succeeded James Wolfensohn as the head of the World Bank in June 2005. It was a change that put a great sense of urgency into the question of what course the world’s most influential financial adviser and financing institution would take. However, Wolfowitz’s first year in office brought no great surprises. Instead of radical changes, the Bank’s agenda was governed by the goal of maintaining continuity, writes Daniela Setton.


Completely in line with the wishes of the large European shareholders, Wolfowitz stresses the role of the Bank in middle-income countries, focuses heavily on Africa, promotes the private sector and does not hold back when it comes to moral declarations on the World Bank’s mission to “fight poverty”. And in the tradition of his predecessor, he also places value in the strategic dialogue with civil society.

* Personal priorities, but what is the Wolfowitz agenda?
Wolfowitz has set some personal priorities. His publicity laden “anti-corruption offensive” is one of them, even if it does not have a coherent structure. The Bank is penalising single states by withholding loans on the basis of corruption accusations. At the same time, close US allies in the “war on terrorism” do not need to fear such sanctions despite their corruption. There are, it should be added, NGOs that praise Wolfowitz for giving more attention to this topic.

The German Federal Ministry for Economic Co-operation and Development (BMZ) sounds downright positive when talking about its co-operation with the current president of the World Bank. According to the BMZ there is complete agreement in the goals to be reached, the differences of opinion lie in the way in which the problems should be dealt with. When it comes to fighting corruption for example, the BMZ rejects what it calls the “crowbar methods” used by Wolfowitz and favours a long-term approach.

However, BMZ representatives have to admit that it is difficult to assess what Wolfowitz’s agenda at the Bank really is. It is obvious that he would like to get the Bank “under control”. Some say under their breath that the real goal is to weaken the Bank as an independent institution. In a number of controversial appointments, Wolfowitz has increased American influence in the Bank by filling important advisory and management positions with US-Republican friends, creating an inner circle that he consults with on important issues. Never has there been such an infuriation about a current World Bank president within the Bank itself.

* Continuity through change
Wolfowitz’s style of leadership is only one problem among many. The grand promises made in the decade of reforms under the leadership of James Wolfensohn are still a long way from being fulfilled, despite all the rhetoric about ownership, partnership and the fight against poverty. Due to their continued expansion, the duties to be fulfilled by the World Bank have become multitudinous and hard to oversee. And the question of whether the World Bank is better suited to fulfil these duties than other international organisations has not even been addressed. Nor is there a mechanism to hold the Bank in any way liable for the mistakes that it makes – such as the violation of human rights in World Bank projects.

Outcry against civil society clampdown for Singapore World Bank/IMF meetings

Civil society groups worldwide have reacted angrily to the Singaporean government’s ban on up to 20 delegates who plan to attend Bank/Fund annual meetings. They have also condemned the pressure apparently brought by Singapore’s government on the administration of neighboring Batam, Indonesia, where a major civil society conference will be held. Following the international outcry, official sources in Jakarta confirmed the meeting could go ahead.

Three years ago when the IMF & World Bank designated Singapore for their joint annual meetings civil society groups predicted these difficulties. Lidy Nacpil of Jubilee South commented, “Singapore’s thorough restrictions on freedom of expression and assembly are well known. The sounds of shock and disappointment from the IMF and World Bank cannot be taken seriously”. “The IMF and World Bank are trying to shed their image as economic disciplinarians and reposition themselves as civil society-friendly and as good governance champions, but these events show how little they have changed”, said Nacpil.

“Three years ago, we went through a similar ordeal when the World Bank chose to have its annual meetings in the Emirate of Dubai,” said Sameer Dossani of the 50 Years Is Enough Network. “It seems that the only countries where the IMF and World Bank feel secure are those with no respect for human rights and civil liberties.”

Antonio Tricarico of Campaign to Reform the World Bank, Italy – one of the organizations whose staff are banned from going to the Singapore meeting said “Italian government representatives in Singapore contacted me to say that I would not be allowed entry to Singapore because I am on some kind of ‘black list’”. Other organizations known to be on the banned include list INFID (Indonesia), Freedom from Debt Coalition (Philippines), FOCUS on the Global South, and World Development Movement (UK). These are all well-known groups committed to non-violent advocacy on economic justice issues.

The civil society outcry this week has reversed the announced ban on the International People’s Forum in Batam, Indonesia, an island just 45 minutes from Singapore by ferry. Indonesian lead organizers INFID confirm that the conference will go ahead from September 15-17 – just before the official meetings in Singapore. “Local and international organizers have been planning this conference for months,” said Dian Kartikasari of INFID, an organizer of the event. “We are expecting over 1000 participants from more than 40 countries around the world. The conference will be a space to discuss opposition to neoliberal economic policies promoted by the IMF and World Bank and alternative models of people-centered development.”

Civil society groups chose the location in Indonesia because of the notorious restrictions in Singapore and because of Indonesia’s vibrant network of civil society groups and its own sour experience enduring IMF mistreatment during the East Asian financial crisis of the late 1990s.

As ineffective as the World Bank is when it comes to fighting poverty, it is quite “successful” in another area: in close co-operation with the WTO and the IMF it has further developed its model for development politics, effectively integrating the lessons gained from past failures into its neo-liberal programme. Above all, this includes an agenda to improve the investment climate in developing countries, an agenda that has made “good governance” and institutional support central concerns of World Bank politics. The creation and the furtherance of favourable business conditions for the private sector in developing countries and emerging markets is the red thread that winds through the entire operations of the Bank, from the research to the political analysis, the consulting, the capacity building, the technical help all the way to the allocation of loans.

This is highly evident with respect to the World Bank investments in infrastructure, which is to be doubled and will reach a total of US$ 10 billion by the year 2010. The energy, transportation and water sectors are not guided by ecological and social priorities but rather dominated by the principles of commercialisation, market regulation and the valuation of areas which are not yet an integral part of the global market such as land and water. Instead of small, decentralised solutions to deal with the problems of the poor, the Bank is supporting large, expensive projects. These projects reflect the interests of the Bank’s large shareholders in gaining contracts for their companies and securing access to natural resources as well as reflecting the interests of the emerging economies in meeting their needs for growth.

* Ideological thaw?
In the light of these facts, the ideological thaw evident in a few important World Bank publications does not really fill the reader with a feeling of optimism. A prime example is the World Development Report 2006 that explicitly states that growth alone is not enough to fight poverty and that – for the World Bank an almost revolutionary statement – emphasises the importance of questions regarding the distribution of wealth. The World Bank Report, Economic Growth in the 1990s: Learning from a Decade of Reform (2005), sets the score straight on the negative experiences with the neo-liberal market liberalisation policies of the last decade and comes to the conclusion that our knowledge of growth is still largely incomplete. The Bank has also recently been changing its tune with respect to privatisation and openly admits that its activities in the area of private sector support in the 1990s were more “ideological in nature”. Still, the Bank is sticking to its privatisation and liberalisation paradigms when it comes to granting loans.

* A crisis of meaning
The World Bank is not so much driven by its misguided development paradigms as it is worried about its loss of importance in large emerging economies such as China, Brazil and India. The Bank is worried about a veritable financial crisis and sacrifices even minimal social and ecological standards in these countries in order to drive its infrastructure agenda forward. The Bank’s proponents are once again faced with a dilemma of how to justify their position. The BMZ sees the future role of the Bank in the emerging economies as a supporter of “global public goods”. In the face of how harmful the Bank’s new international framework for investments in “clean energy and development” is for the climate, one has reason to be sceptical.

Experts on the World Bank with such varied backgrounds as Bruce Rich from the Environmental Defence Fund (EDF) and Peter Nunnenkamp from the Kiel Institute of World Economy take the standpoint that due to the lack of a real focus on poverty, the Bank should withdraw from the large emerging economies. However, considering the influence of the Bank’s main shareholders, who want to “keep a foot in the door” in countries such as China, that is not likely to happen. The fact that recently the large emerging economies have themselves started to win influence within the Bank, does not really change the situation either.

Daniela Setton is a regular contributor to World Economy & Development In Brief and works with WEED in Berlin.

Recommended citation: Setton, Daniela (2006) ‘How Wolfowitz Continues The Crisis. The World Bank before Singapore‘, World Economy & Development In Brief, 3/Aug-Sep (www.wdev.eu)

Posted: 11 September 2006

More on the subject:
>>> The World Bank and Pakistan's Water Sector
>>> World Bank: Leap Backwards for Sustainable Energy

The Never-ending Story of ECOSOC Reform / Between Geneva, Singapore and Heiligendamm


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