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 countries—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."
The
above statement of claim taken from the World Bank website contains
half truth. Yes it is true that in theory the World Bank would like to
reduce global poverty but in practice it is the opposite. The fact still
remains that both the Bank and the IMF have done very little to help
the world´s poor rather their condition has been worsened by the past
and present behaviour of the Banks. There is little evidence to back the
claim of both institutions that they are a vital source of financial
and technical assistance to developing countries. The World Bank may be a
vital source of financial assistance to the corrupt regimes in these
poor countries and not to the poor. There is no evidence to suggest that
the poor people from third world countries have benefited from loans
given to their governments. At best what the Bank and IMF have helped
the poor countries to do is to build up massive debts that they may
never be able to pay.
Third World countries including the whole of
Africa have incurred trillions of dollars in debts through loans
contracted from the Bank, IMF and Western governments which the people
who now wallow in utter poverty, never benefited. Most of these
conditional loans were either stolen or used to service debts already
owned by these poor countries. Part of the loans were also used to pay
foreign expatriates supplied to the poor countries by IMF, World Bank as
´technical experts´ but whose contribution is the result of poverty
seen in the third world. Again the loans were used to prop up corrupt
regimes who diverted the funds to their private bank accounts in
Switzerland, France, Britain, Liechtenstein and Luxembourg and Austria
among others.
In 2006 for example, developing countries owed
$3.7-trillion in odious debt, servicing more than $570-billion per
annum. An analysis by economist James Henry revealed that more than
$1-trillion worth of loans "disappeared into corruption-ridden projects
or was simply stolen outright". Out of this debt Africa owes $200
billion and uses $14 billion annually to service it, money that could be
used to provide education, healthcare other basic needs for the people.
The over $200 billion that African countries owe to foreign creditors
represents a crippling load that undermines economic and social
progress. The all Africa Churches Conference says this debt and its
servicing represent "a new form of slavery, as vicious as the slave
trade".
The servicing of such massive debts has brought untold and
worsening economic hardships to the poor as third world governments
have been forced to freeze investments in education, health, transport,
agriculture, housing, sanitation and other vital infrastructures.
Evidence of this hardship are chronic poverty, malnutrition, diseases,
starvation, hunger, decaying and inadequate infrastructures and economic
failures seen everywhere in the developing world. The sad aspect of
these debts servicing is that the current generation who are paying for
it never requested it nor benefited from it in anyway. The debts were
incurred at a time when these countries did not even need loans yet
World Bank, IMF and Western governments encouraged them to go for it.
Africa
Action a Not for Profit Organisation says, "The albatross of
illegitimate debt diverts money directly from spending on health care,
education and other important needs. While most people in Africa live on
less than $2 per day, African countries are forced to spend almost $14
billion each year servicing old, illegitimate debts to rich country
governments and their institutions, the World Bank and the International
Monetary Fund (IMF). Over the past two decades, African countries have
paid out more in debt service to foreign creditors than they have
received in development assistance or in new loans. Much of Africa's
foreign debt is illegitimate in nature, having been incurred by
unrepresentative and despotic regimes, mainly during the era of Cold War
patronage. Loans were made to corrupt leaders who used the money for
their own personal gain, often with the full knowledge and support of
lenders. These loans did not benefit Africa's people.
More
generally, many Africans question the notion of an African "debt" to the
U.S. and European countries after centuries of exploitation. They ask,
"Who really owes whom?"Yet, despite the social and economic costs of
this massive outflow of resources from the world's poorest region, the
wealthy creditors of Africa's debts continue to insist these debts be
repaid." Source http://www.africaaction.org /campaign_new /debt.php
Joseph
Hanlon of Jubilee Research UK gives details to what happened to monies
loaned to Mobutu of former Zaire now DR.Congo. He says: "Much of poor
country debt is related to the Cold War, when both sides pushed money at
their supporters. Zaire's ruler, Mobutu Sese Seko, was one of the
world's most corrupt leaders and it was for his government that the word
kleptocracy was first coined. Mobutu became one of the world's richest
men, with a personal fortune estimated at more than $10 billion owning
palaces in Europe and Zaire. But the West saw Mobutu as a loyal ally in
the Cold War (in part for his support of the US, in its backing for
UNITA in Angola). In 1978 the IMF appointed their own man, Edwin
Blumenthal, to a key post in Zaire´s central bank. He resigned two years
later, complaining of "sordid and pernicious corruption" that was so
serious that "there is no chance, I repeat no chance, that Zaire's
numerous creditors will ever recover their loans."
And look what happened after this report.
Shortly
after Blumenthal's report to the IMF, it gave Zaire the largest ever
loan given to an African country. When Blumenthal wrote his report,
Zaire's debt was $5 billion; by the time Mobutu was overthrown and died
in 1998, the debt was over $13 billion. In the six years after
Blumenthal's report, the IMF lent Zaire $600 million and the World Bank
$650 million. In those six years Western governments lent Mobutu nearly
$3 billion.
About 50% of the $13-billion was stolen and deposited
in Western Banks notably Switzerland and France while the rest was
wasted on white elephant projects that never solved the poverty problem
in the country. Today majority of Congolese live on less than a dollar a
day while hundreds of millions of dollars are paid to the IMF and World
Bank every year as fees for loans taken and stolen by Mobutu.
In
another classic example, the World Bank lent Indonesia a total of US$30
billion in the course of General Suharto's three decades of rule. In
1998, World Bank resident staff in Indonesia estimated that: "at least
20-30 per cent of GOI [Government of Indonesia] development budget funds
are diverted through informal payments to GOI staff and politicians,
and there is no basis to claim a smaller 'leakage' for Bank projects as
our controls have little practical effect on the methods generally
used". That means by the Bank's own account that up to US$9 billion of
World Bank loans to Indonesia were wasted through corruption and that
World Bank staff knew it. And they did absolutely nothing to stop the
corruption. Today the poor people of Indonesia are still paying for the
billions of dollars wasted before the eyes of IMF.
In Philippines
during the regime of the dictator Ferdinand Marcos, the Bank and IMF
were absolutely aware of the fact that most loans to Philippines were
transferred into the bank accounts of Ferdinand Marcos and his generals;
nevertheless they considered it as a necessary bribe for paying the
political staff in power in order to ensure the acceleration of the
neoliberal counter reform. As a result World Bank lent Marcos $400m in
1980; $251m in 1982 and $600m in 1983 and Marcos deposited the money in
his accounts in Switzerland. So far the Philipinos are still paying for
the policies of the Bank and IMF.
Dr. Susan Hawley author of
Exporting Corruption has written extensively about how loans taken and
diverted into private banks by Ferdinand Marcos have gruesomely affected
Philippines´ development and her quest to reduce poverty. She says:
"The US company, Westinghouse won a contract in the early 1970s to build
the Bataan nuclear plant in the Philippines. It was alleged that
Westinghouse gave President Ferdinand Marcos US$80 million in kickbacks.
The plant cost $2.3 billion three times the price of a comparable plant
built by the same company in Korea. Filipino taxpayers have spent $1.2
billion servicing the plant's debts even though the plant has never
produced a single watt of electricity because it was built at the foot
of a volcano near several earthquake faultlines. The Philippine
government is still paying $170,000 a day in interest on the loans taken
out to finance the nuclear plant and will continue to do so up to the
year 2018. A Philippino Treasurer Leonor Briones recently commented on
the loans: "It is a terrible burden which never fails to elicit feelings
of rage, anger and frustration in me. We're talking of money that
should have gone to basic services like schools and hospitals". Source:
Dr. Susan Hawley.
Patricia Adams, executive director of Probe
International, in her book Odious Debts estimates the Philippino
dictator, Ferdinand Marcos, and his wife Imelda, pocketed literally
one-third of the Philippines' entire borrowing – much of it in the form
of kickbacks and commissions on aid and loan-funded projects. His
personal wealth when he was overthrown was $10 billion. Source:
Jubileeresearch.org.
The behaviour of the two Banks and other
lending institutions to prop up corrupt regimes explains why after 50
years of loans there has not been any appreciable reduction in poverty
levels world wide and especially in Africa. As I said the best the two
Bretton Woods institutions have done is to help the poor countries to
build massive debts and increase poverty. Today majority of the 945
million Africans (70%) live on less than two dollars a day meanwhile
hundreds of billions of dollars have been loaned to their corrupt
leaders and there is nothing to show for it.
James Wolfensohn,
Ex-World Bank President seems to disagree and says: "As a public
institution we are accountable for helping our borrowers to see that the
money allocated under Bank-financed operations is being spent on what
it should be spent on and that our borrowers are getting good value for
what is being spent". But how does Wolfensohn reconcile his statement
with reports regarding loans to dictators in Africa, Asia and South
America that produced nothing but poverty? The question is has the
billions of loans and aid to third world countries change anything for
the poor people in those countries? Can Wolfensohn say with empirical
evidence that countries that have borrowed money from the Bank got value
for the money? I do not think so. There is no evidence to suggest that
IMF and World Bank even made the effort to ensure the people benefited
from the loans and there is no evidence to prove that both institutions
made effort to recover the money from Mobutu, Suharto, Marcos, or the
Banks in Switzerland after it became obvious the dictators had stashed
the money in foreign Banks. The two mega banks did not make any effort
because they knew future generations cannot afford to refuse to pay as
that will be a stain on their credit worthiness. But how fair is it to
ask people to pay for things they or their country never benefited?
Instead
of being agents of growth, development and helping to fight poverty,
what the two institutions and their western political masters have done
so far is to entrench poverty, diseases, hunger, starvation and
malnutrition in these poor voiceless countries. The pressure on the poor
countries to meet their debt obligations has forced many of them to use
scarce resources to service these debts to the detriment of their
economies and their peoples. If indeed the Bank and the IMF are
committed to reducing poverty why would they loan money to corrupt
regimes or refuse to take responsibility for the failures of their own
policies and actions? Why would they help poor countries to build
massive debts only to wash their hands off the debt? And why should poor
Africans, Asians and Latinos be made to pay the odious and illegitimate
loans that they never benefited? Why should poor African and third
world countries be made to take responsibility for the failures of IMF
and the Bank´s ill conceived policies that have brought misery and
untold hardships to the poor? Who should take responsibility for these
odious and illegitimate debts is it the Bank who loaned out of
negligence and without due diligence or the people who never benefited?
To
ask these poor countries to continue to pay these debts is not only
unfair but morally not justified. Poor countries should stop paying
these odious and illegitimate debs unless the IMF and the World Bank can
prove that the people benefited from it. World Bank and IMF were wilful
accomplices to the loot, corruption and mismanagement that took place
during Mobutu, Suharto, Marcos, Lansana Conte regimes and which are
being repeated by the corrupt regimes of Obiang Nguema, Denis Sassou
Nguesso, Gaddafi, Hosni Mubarak, Omar Bongo, Obiang Nguema and Blaise
Campore. If lending institutions fail to demand proper accountability
from these corrupt rulers then it would be unlawful and improper to ask
future generations to pay for the sins of their rulers.
When
consultants Morgan Grenfell urged against the sale of the Uganda
Commercial Bank, the World Bank and IMF insisted the sale go ahead. Sold
to a Malaysian engineering consortium linked to the brother of the
Ugandan president, the bank had to be re-nationalised in 1998 "after
running into trouble giving out millions of dollars worth of dubious
loans". According to the head of Uganda's privatisation unit, "When [the
sale of Uganda Commercial Bank] went bad", the World Bank "disappeared
off the radar screen" and refused to take any responsibility for it.
Source: greenleft.org.au
Apart from their support for corrupt
regimes, the Bank and IMF prescriptive policies have also played a huge
role in entrenching poverty in the third world. Worth mentioning are the
structural adjustment programme and trade liberalisation which were
sold to the poor countries by these financial institutions and supported
by the western economic saboteurs. The fact is that the SAP and trade
liberalisation among others were ill formulated, implemented and
monitored with the results that countries that embraced them have all
lived to regret.
The SAP forced onto poor third world countries by
the Bank and the IMF forced their governments to abandon their support
for the public sector with serious devastating consequences to the
health, education and agric sectors. The withdrawal of farm subsidies in
particular made it difficult for farmers to produce to support local
consumption or compete with their rich Western counterparts who receive
billions of dollars of government subsidies every year. The unrests and
disturbances over food shortages and high food prices that occurred in
Egypt, Haiti, Ivory Coast, Liberia, Mauritania, Indonesia, Afghanistan,
Eritrea, Somalia and Sierra Leone in 2008 were the direct result of the
Bank and IMF bitter pills prescribed to these poor countries.
Trade
liberalisation required the poor countries to privatise or close down
certain companies, opening up the economy to foreign goods, reforming
economic policy, liberalising labour market, eliminating subsidies, and
environmental regulations, eliminating set prices for producers and
consumers, increasing exports, cutting government expenditures and
giving foreign multinationals free hands to do as they wish often to the
detriment of the countries concerned. The cost of trade liberalisation
to third world countries is estimated to be $300-billion.
The sad
aspect of this exercise is that almost all the companies that were sold
went to foreigners and cronies of corrupt government officials and the
proceeds stolen or used to service debts already owned by these poor
nations. This policy also led to closure of a number of factories, and
decline in agriculture output that were sources of livelihoods to
hundreds of millions of families. The mention of this retrenchment
exercise always brings painful memories to millions who lost their jobs
and had to live a life of squalor without any help or whatsoever from
their governments.
Also the Bank and the IMF tax and trade
policies towards these poor countries always put them at a disadvantage
positions when dealing with multinational corporations. Many poor
countries are forced to grant tax concessions to multinational
corporations as a favour for investing in the third world economies.
These concessions include instituting secrete memorandums of agreement,
subsidies to foreign corporations and massive tax concessions (such as
income tax, usage fees, property tax) which are the primary source of
revenue for export-oriented developing countries.
How do you fight
poverty when rich companies are made to pay close to nothing for raping
countries of their natural resources? Why wouldn´t poverty increase and
people die of starvation, hunger and diseases when money meant for
development are used to service debts for which the people never
benefited?
In an article by Khadija Sharife entitled Capital
Flight: Gingerbread Havens, Cannibalised Economies she wrote: "The IMF
and World Bank tax policies towards the developing world is very lethal
especially where the poor are now caught in tax brackets, courtesy of
the IMF and World Bank´s structural adjustment programmes (SAP),
instituting policies ranging from tax holidays to the privatisation of
state services, carving out huge slices of natural capital at corporate
auctions. Africa has collectively lost more than $600-billion in capital
flight, excluding other mechanisms of flight such as ecological debt
(globally estimated at a potential $1.8-trillion per annum). Thus with
the support and collusion of IMF and the Bank, poor countries are
loosing billions of dollars in revenue to rich multinational
corporations.
The unflinching support that the Bank and the IMF
give to multinational corporations against the wishes of third world
governments is another reason why poverty is still rampant in Africa and
elsewhere. For example, in 1998 the Pakistani anti-corruption agency
investigated over 20 Western companies for paying kickbacks to Benazir
Bhutto's government for public contracts to provide electricity. Six of
the companies later confessed to offering bribes. Instead of receiving
support from Britain, France, the US, IMF, World Bank and other Western
governments they were told to quash the investigation on the grounds
that investors would shy away from Pakistan. The IMF even made a package
of loans conditional on the government dropping the charges against the
companies involved.
Source:http://www.thecornerhouse.org.uk/item.shtml?x=51975. In the end
Pakistan had no choice but to stop the investigations.
It is on
record that about 45% of all World Bank project contracts go to
multinationals in the US, Germany and Britain why? Why not companies in
these poor countries where the projects take place and who finally end
up paying for the projects?
But it is not surprising that these
multinational financial institutions behave the way they did. Both
institutions only acknowledged in 1996 the role corruption plays in
entrenching poverty after more than 50 years in existence. Why did they
continue to loan to the dictators after mounting evidence that they were
looting the loans? Why did it take World Bank 50 years to recognise the
devastating impact corruption was having on the world´s poor? Could it
be that both institutions are corrupt themselves?
Dr. Jeffrey
Winters of Northwestern University says, "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 have lost opportunities
to improve their health, education, and economic condition".
And
Sen. Richard G. Lugar speaking about corruption in the World Bank and
its impact in fighting poverty said, "Corruption thwarts development
efforts in many ways. Bribes can influence important World 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."
In fact, allegations of
corruption at the Bretton Woods institutions are as old as the
institutions themselves. 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 and embezzlement 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." There is no doubt the money
was stolen by the corrupt government officials and dictators who
received the money. But the sad thing is that the Bank and IMF have
failed to take responsibility for their actions pushing the blame on the
poor countries and their poor people who never benefited from it.
Fifty
years of loans to the world´s poor and fifty years of extreme poverty
and odious debt among the world´s poor. It is as if the World Bank has
guided these countries into poverty rather than fight poverty. Can we
say these mega financial institutions are truly there to help the
world´s poor fight poverty or they serve a higher authority whose aim is
to keep the world´s poor in debt and in poverty as Jenkins pointed out
is his book 'The Confessions of Economic Hit Man'? That is in reality do
the Bank and IMF promote poverty or development?.
By Lord Aikins Adusei
The Author is a political activist and anti-corruption campaigner.
Africason is a die-hard believer in Africa.
Twitter: @african_school
Web: www.africason.com
Email: info(AT)africason.com
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