A Critical Analysis of the World Bank
To understand the World Bank it is prudent to look at the history, and from there it is viable to consider and critically analyze the World Bank and its many facets and branches. As well as how the World Bank is set up.
As World War 2 was raging across Europe and Asia, the need for a liberal, capitalistic, world economy was seen by the United Kingdom and the United States. The two governments realized that they needed a way to allow the free movement of their capital internationally through multilateral institutions. In the month of July 1944, they convened in the State of New Hampshire and donned their plans for two institutions that would do as they wished, and shape the world economy for the future (Danaher, 1994). However even at this early stage, it was evident who was controlling the concept of the bank, and the American dominance of the bank was created, to create a post-war world order.
With the headquarters being founded in Washington DC, the president being an American and the initial capital coming from the American reserves, and America controlling the largest share of the votes. In the post-war period, the American ideal ology and views on the distribution of wealth were penetrating the layers of the bank. With this anything that hinted of communism was reacted to in an oversensitive manner contributing to the initialisation political constructs of poverty with the bank and its partnership (Konkel, 2014).
As the rise of the left-wing agenda was on the increase the elite had to prevent this happening and get the business elite back into power by creating an international institution that would promote capitalist policies and strengthen the power of the corporate sector (Danaher, 1994). In its inception the World Bank had a mandate to undertake post-war reconstruction in Europe and to promote the growth and development of underdeveloped countries by making loans to governments in order to rebuild infrastructure, including but not limited to ports, roads, and railways, which would help the private companies get a footing in the countries. The underlying goal of the World Bank, and according to one critic this has been done with the vengeance is to “integrate countries into the capitalist world economy” (Danaher, 1994).
While this view is from a critic it is hard to find a viewpoint that counters this claim. Danaher in his book “50 Years is Enough. The Case Against the World Bank and the International Monetary Fund” also states that while the rhetoric of the World Bank is to end poverty, the central function is to bring the countries and governments tighter into a world economy ran by the richer members of the World Bank. In 1947, the Marshal Plan allowed the marginalization in reconstruction in Europe causing it to shift to development, with the first loan being made to France in the same year. In the same year with its change to development, it changed purpose to ‘increasing the level of production throughout the world’ and doing so as rapidly as possible. (IBRD, 1947).
Now that a brief History of how the bank came into existence, it is time to consider the makeup of the branch before we look deeper into aspects of the bank’s business. The World Bank consists of the International Bank for Reconstruction and Development and the International Development Association. The International Development Association loans money to lower and lower-middle-income countries, while the International Bank for Reconstruction and Development provides money through Grants and Loans to the low-income countries. This second group the International Bank for Reconstruction and Development raises its own finances on the capital markets, as the shareholders act as guarantees, thus keeping the AAA status. While the International Development Association is funded through donations, with every three years the donors decide on the policy mandates for the next three years.
The World Bank also has two main types of operation, Project Investments and Development Policy. Projects disband over a time period that is agreed in the stages, an example of projects could be building Schools, Hospitals or even Large Coal Plants, with the latter being one that is against other policies and will be discussed later in this report, these three examples are only examples and does not define the full scope of what can be constituted as a Project. Development Policy is a shorter time frame and is there to support a policy change on a local or national level of the country applying.
Human Right Violations
Danaher states that the World Bank has a rhetoric to end poverty, however in a report from 2012 conducted by Friends of the Earth International states that millions of United States Dollars had been put into a plantation of palm oil off the coast of Lake Victoria in Kalangala, Uganda, removing the homes and livelihood of its residents, through a project partly funded by the World Bank (FOEI, 2012). However while this land grab and violations of human rights was reported by a charity, the claim that the World Bank has no human rights policy is backed up in an article from 2015, by the United Nations Human Rights Office of the High Commissioner, where the United Nations Special Rapporteur on extreme poverty and human rights, Philip Alston states that, for all intense purpose the World Bank is a Human Rights free zone, treating humans like infectious diseases rather than universal values and obligations. (Aston, 2015).
The rapporteur also states that the main stumbling block is the banks Articles of Agreement, that were written and adopted in 1945, and prohibits the Bank from dealing with issues on Human Rights, Aston also claims that the anachronistic and inconsistent interpretation of the ‘political prohibition’ contained in the Bank’s Articles of Agreement are one of the stumbling blocks to progressing the banks future, however Aston admits that these articles were written more than 70 years ago, and in this time there was little to no international catalogue of human rights, and there was no specific treaty upon members, and no single international group involved in fighting for human rights. However, Aston does feel that the true reason behind the World Banks, avoiding of Human Rights is politically motivated. Later in the report the rapporteur states that there are countries in the Western civil society of the Branch that aims to slow down and stall the lending to countries that have little to no human rights, however, countries that borrow money or are critical of human rights do not want the World Bank to turn into the Human Rights Police (Aston, 2015).
Aston in his conclusion states that the World Banks attitude to human rights is incoherent, counterproductive and unsustainable. Due to the Article of Agreement that the World Bank would not be able to engage meaningfully with the international human rights framework, or to assist its member countries in complying with their own human rights obligations. So while the World Bank has a tagline “Working for a world free of Poverty” it is contradictory as it allows Human Rights violations, while it can be argued that the Human rights and Poverty are 2 different things, the United Nations Development Programme website states that the fight against poverty in all its dimensions is not an act of charity but a matter of civil, cultural, economic, political and social rights for all people (UNDP, 2016), so this is a relationship here between poverty and human rights.
However, in writing this critical analysis no papers were identified that argues that the World Bank is working against Human Right abuse. Nor was any evidence found of an article or press release countering Astons, report to the High Commissioner.
Even the human rights aspect is being effected from within the organization. A whistleblower from the World Bank publically outed worrying concerns within the internal organization of the World Bank. In an article by Forbes Magazine, it states the World Bank has over 9000 employees, with 188 countries being members, however, it is one of the most dysfunctional businesses in the world. Stating that the World Bank is a constant expanding virtual nation-state with supranational powers. In 2011 the World Bank had a $57 billion aid portfolio but little oversight by the countries involved in running the bank. According to multiple interviews over a period of weeks and hundreds of the five years from, 2007 to 2012, plus a lengthy review of internal documents, the problem has never improved but declined over the years to a worrying level (Behar, 2012) However in an independent report done on the World Bank in 2012 it states that the new President being named allows an excellent opportunity to remedy cracks in the institution, however, they do state that this is provided that they can be identified and the tendency to avoid tackling the big issues is overcome (Shivakumar, 2012). However, in 2015, 3 years after this independent report was released the World Bank publically came out admitting their issues and in a press release stated what they have identified as their main concerns.
The President of the World Bank Jim Yong Kim stated in a press report that they had identified 3 key areas that need improvement, the first one being that they, the World Bank, have not done an acceptable job in overseeing projects involving resettlements. Issue two was that the World Bank had not implemented planes well enough, and finally they had not implemented a strong enough tracking system to make sure the policies were being followed (Kim, 2015). However Brettonwood Project is critical of the President’s remarks, in an article from February 2016, they state that they are worried about the consultations that will be going on for each of the Phases.
Citing an article from August 2015 that states the 18 SCO’s state that the new drafts contradict the World Banks, Presidents “promise to ensure that the Bank’s new rules will not weaken or ‘dilute’ existing mandatory environmental and social protection measures and calls into question the extent to which the Bank has responded to public input.” (BiC, 2015). The Senior Advocate and Researcher on International Financial Institutions at the Human Rights Watch, states that the draft provided treats human rights as nothing more than aspirational, and does not help bid them to international law on human rights.
Finally stating that the World Bank’s refusal to respect human rights as a requirement, even though there has been a large local outcry from communities around the world to do so, sends a poor message to its own staff, showing that caring about the rights of humans is discretionally (Evans, 2013). This is of course furthers and ties into the concerns about Human Rights mentioned previously in this report.
One of the largest area’s for the World Bank’s investment is their Climate Change Initiative, with a further 29 billion United States Dollars being injected into it. With aim of making its target of 100 billion United States Dollars by 2020 (Collyns, 2015) The key paragraph on their website states that Climate Change and Poverty are interconnected, and without rapid and climate-smart development, then we could see more than 100 million people living in poverty by 2030, to help combat this the World Bank is incorporating policies to mitigate climate risks in its policies.
However, already we have in this report seen evidence that their internal politics is and actions are causing issues within its remit and ignoring Human Rights legislation. However there seems to be a long-standing controversy regarding projects being funded by the World Bank, one example could be the 2010 project to spend 3.75 billion United States Dollars to build one of the world’s largest coal-fired power plants, the plant would put out over 25m tonnes of carbon dioxide a year, thus making it harder for South Africa to meet its limits of carbon dioxide curbing.
Also damaging the concept of a Greener Future that the World Bank is promoting on their own website. However since this project the World Bank has been a strong supporter of a Carbon Price movement and one of their top advisors even publically stated that Australia’s move against the proposal would have no real impact (King, 2014) as over half the world supports the World Banks plan on a Carbon Price, including over 1000 large companies (Darby, 2014). However, while the Bank fights for a Carbon Price over 1/3 of the Banks finance for energy went to continuing to use Fossil Fuels. It was also revealed that 40% of the equity holdings for the Worlds Bank’s pension fund around about 18.8 billion United States Dollars is invested in an equity index funds, this includes that the World Bank claims it is critical off, as well as industries that damage the health of the people they want to help.
Other contradictions in regards to the banks Climate Change can include a 600 MW coal power plant in Kosovo, supporting the development of Ghana’s oil and gas reserves, bringing the support level to 57.8 million United States Dollars. Spending 700 million United States Dollars on a Ghana offshore gas project and a 50 million United States Dollars investment in Africa Oil for oil and gas exploration in Kenya, even though Africa Oil was on 2 separate market indexes and valued at over 800 million United States Dollars.
To make matters worse for the World Bank in 2014, roughly 75 percent of World Bank projects had no assessments related to climate change risks into their design, also a further 88 per cent of the projects did not assess emissions from greenhouse gasses. The Bank has been criticized for removing the threshold for greenhouse gas accounting as a mandatory task in their draft of the proposed social and environmental framework (BrettonWoods, 2015). In an article from 2007, the author states that the then President of the United States was so against the term Climate Change being used that he thwarted efforts by the World Bank to use the term “global warming”, the then President of the World Bank, Paul Wolfowitz, even removed the mention of Climate Change from title of a report, and had the report edited in a way to downplay the effect of global warming (Gumbel, 2007). In 2006 a board of 8 of the leading nations, endorsed a report titled “Climate Change, Energy, and Sustainable Development: Towards an Investment Framework.” But afterward the then Bank President, P Wolfowitz, asked the team to refocus the paper from a climate viewpoint to a clean energy, with a note of uncertainty being added.
They were asked to elaborate on the challenge of mitigating climate change by reducing the impact and vulnerability. Mr. Wolfowitz also had the title altered within months to become “Clean Energy and Development: Towards and Investment Framework”, the then policy director stated that the move was “a hodgepodge of an idea”. With the bank’s strategy and operations director for sustainable development, Kristalina Georgieva stating that the bank needs a more direct action plan and it was very difficult to be super effective to shift the problem (Pasternak, 2007). However, shortly after the resignation of Mr. Wolfowitz, for unrelated problems, the World Bank finally admitted that they needed to look more into Climate Change with a senior climate-change specialist at the World Bank saying that Climate Change is here and now, we must adapt (Spotts, 2007).
However, the World Bank states that since 2000 they have committed 12.1 billion United States Dollars, to renewable and efficient energy (figure 1). The World Bank states that it has approved over 364 renewable energy projects between 2005 and 2009, in 85 countries around the world. With 99 unique projects in 46 countries in 2009 (figure 2). Making it one of the busiest years for such ventures for the World Bank, as it expands its portfolio in renewable energy and efficient energy. However, as this report has shown, the World Bank has spent large amounts in fossil fuel projects, to re-emphasise what has been mentioned in this report, in the financial year 2013-2014 the World Bank increased its funding to non-renewable fuels by 23% on the previous finance year. On in monetary terms roughly 3.4 billion United States Dollars (Mathiesen, 2015) Showing that while the World Bank claims to wish to push renewables and efficient energy they are doing the opposite in practice.
This report has looked at varying aspects of the World Bank, from Internal Issues, Climate Change Policy, and how the Bank views Human Rights, while many of these issues are interconnected, the report attempts to separate into more appropriate placements. The report also briefly looks into why the World Bank was formed and what the main aspects are. Throughout the report a lot of critical viewpoints were raised each backed up from their source, however, it was hard to find any reports that supported the practices of the World Bank, except their own website and reports, so there are no independent articles or reports listed fighting the other corner so to speak. At the end of the day, it is up to the individual to make their mind up and this critique analyses some the critical and controversial topics within the World Bank.
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