COMMENTARY

The World Bank: From one ‘Wolf’ to another

by Sir Ronald Sanders, a former Caribbean diplomat, now corporate executive, who publishes widely on small states in the global community

Tuesday, April 12, 2005

Would it make much difference to CARICOM countries if the World Bank were to close tomorrow? On the basis that every little bit of assistance helps, it probably would matter to Guyana and Jamaica, but not to many others.

This question and its answer are posed because of the debate that has been raging internationally over the so-called ‘election’ of US Deputy Secretary for Defence, Paul Wolfowitz as the tenth President of the World Bank replacing Mr James Wolfensohn who served for two terms.

Mr Wolfowitz was hardly ‘elected’. When the IMF and World Bank were created in 1945 by the great powers at the time, it was agreed that the Europeans would always nominate the managing-director of the Fund, and the US would always nominate the President of the Bank. Thereafter, the Executive Directors of the Fund and the Bank would simply endorse the nominees.

This is precisely what happened on March 31st in respect of Mr Wolfowitz when the World Bank’s Executive Directors unanimously confirmed his nomination by US President George W Bush.

Critics of the US government, including many governments in Europe, received news of Mr Wolfowitz’s nomination with shock and awe.

He is a member of the neo-conservative group around President Bush who not only defined but executed the US government’s international policies during Mr Bush’s first term particularly the invasion of Iraq.

He is also one of the signatories, along with US Vice President Dick Cheney, Defence Secretary Donald Rumsfeld and Governor of Florida Jeb Bush, of “The Project for the New American Century”. The Project contained a proposal for direct and unilateral military intervention with the sole objective of making American supremacy irreversible throughout the world.

After 9/11, it is said that the Project proposals were included in the New Doctrine of National Security presented by President Bush in September 2002.

American watchers fear that the US nomination (and now the appointment) of Mr Wolfowitz as President of the World Bank reveals a determination to place the cadres of the neocons in key positions of power and influence and thereby to create the conditions for the continuation and expansion of their philosophy to make America the dominant and supreme force in the world.

In addition to all this, the critics of Mr Wolfowitz’s appointment say that he has no experience of management having run “nothing more substantial than a University sub-Faculty”.

There are many, including several non-governmental organisations, who feel that the Bank does not fulfil its purpose to eradicate poverty, and it ought to be closed down. They allege that it is nothing more than an instrument of US foreign policy, and they argue that Mr Wolfowitz’s appointment is further evidence of this claim.

Other are delighted at his appointment because they say it deprives the Bank of any credibility that it is a legitimate institution. Mr Wolfowitz they say is “a wolf in wolf’s clothing”.

This all sound like big-power politics – the kind of thing that Caribbean countries should stay out of. It reminds of the African proverb that when two elephants fight, the grass suffers.

But, Caribbean countries do have an interest in the World Bank, even though they have no voice. Caribbean governments have no seat on the Bank’s Executive Board where they are represented by Canada, and it has been the experience of several Caribbean countries that some staff members of the Bank have lectured Ministers of Finance and even Prime Ministers over the fiscal policies of their elected governments.

The Bank should be a source of financing for Caribbean countries in critical areas of their social and economic development. When the World Bank family was created, the International Bank for Reconstruction and Development (IBRD) was charged with the responsibility of assisting in the reconstruction and development of territories by facilitating the investment of capital, including the promotion of foreign investment and the provision of finance to the public sector. Alongside the International Finance Corporation (IFC) would provide direct financial support to the private sector.

Yet, the World Bank does comparatively very little in CARICOM countries except to insist on privatization of state-owned enterprises and participate with the IMF in assessing economies and joining in prescribing remedies. Some of these remedies are bitter medicine to swallow, and, where they have been applied, suffering has been created.

The Bahamas and Barbados have been ‘graduated’ from concessionary financing by the Bank because of “high per capita income” and other countries within the Organisation of Eastern Caribbean States (OECS) face similar restrictions. These countries rightly feel that they are being punished for their success in adhering to democratic principles such as trade union rights to bargain for better wages and salaries, and for managing their economies creatively. They are being forced unfairly into the global financial market to fund their development at high cost.

The World Bank likes big prestigious projects such as massive highways, huge ports and big dams. Projects such as education, health, and disaster preparedness elicit sympathy but no money from the Bank.

But, these are among the very critical areas in which Caribbean countries need concessionary financing if they are themselves to eradicate poverty in their societies. Ask any person in the street and their first priorities are: job security at a fair wage, education for their children so that they can enter the labour market with some prospect of survival, access to affordable health facilities in the event of accidents or disease, clean and potable water, and protection from natural disasters.

The Bank is yet to give favourable consideration to infrastructural development at concessionary rates to help the Caribbean develop the tourism sector on which it has become increasingly reliant. And, even though it is well known that the region is losing its preferential markets for its major exports, the Bank is yet to accept concepts of how it could help to fund the structural adjustment of economies including the retraining and redeployment of people.

In the mid and late 1990s, Mr James Wolfensohn, who remains President of the World Bank until June 1st when Mr Wolfowitz takes over, received many please from Caribbean Heads of Government to establish a pre and post natural disaster fund from which countries could draw to better prepare for disasters and to rebuild in their wake. While the Bank established a facility, its rules on access and its slow response in disbursing funds are unhelpful to countries which need urgent responses to rebuild.

This all comes back to the fact that Caribbean countries have no voice in the decision-making councils of the World Bank, and therefore no influence on its policies and programmes. The Bank, unfortunately, is the captive instrument of its largest shareholders.

It may have exchanged one ‘wolf’ for another – but Wolfensohn or Wolfowitz will make little difference to the Caribbean. The problem is not only the Bank’s management, it is fundamentally the Bank’s governance and its policies. The only way the Caribbean will change that is to get on its Board, and, sadly that can’t happen unless the Bank’s shareholding is expanded to permit effective Caribbean participation.

But, it should not stop Caribbean governments and non-governmental organisations from advocating reform of the Bank so that it could address Caribbean development realistically. .

(responses to: ronaldsanders29@hotmail.com) 

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