Matt Currie

November 13, 2001

Anti-globalization activists planned on protesting in the streets of Washington, DC on September 29 and 30,[1] in response to the Annual Boards of Governors Meeting of the World Bank Group ("World Bank") and the International Monetary Fund ("IMF").[2]  In the same way similar protests brought tens of thousands of people from numerous backgrounds to the streets in a unified struggle,[3] the recent World Bank/IMF meetings mobilized people from social justice struggles word-wide. Due to the tragic events of September 11, 2001, however, the World Bank and the IMF will not hold their annual meetings[4] and the protests have been called off.[5]   Despite these events, the World Bank and IMF will not interrupt their normal business.[6]   The criticism of these international financial institutions remains strong, and the issues surrounding economic globalization will not change.

Established in 1946 during a meeting of 44 nations in Bretton Woods, New Hampshire, the World Bank and the IMF are international financial lending institutions created to provide development assistance and financial loans.[7]   The World Bank is comprised of five institutions: The International Development Association ("IDA"); the International Bank for Reconstruction and Development ("IBRD"); the International Finance Corporation ("IFC"); the Multilateral Investment Guarantee Agency ("MIGA"); and the International Centre for Settlement of Investment Disputes ("ICSID").[8]   The World Bank provides "development" assistance to over one hundred developing economies. [9]   Their loans focus on "economic management and private and financial sector development, fundamental drivers of economic growth and poverty reduction; human development, including multisectoral strategies to fight such killers as HIV/AIDS and malaria that disproportionately affect poor people; and environmental management, including lending operations that sought to address water supply and usage, protect forests, and promote disaster forecasting and preparedness, among other things."[10]

The IMF "promote[s] international monetary cooperation, exchange stability, and orderly exchange arrangements; Ö foster[s] economic growth and high levels of employment; and Ö provide[s] temporary financial assistance to countries to help ease balance of payments adjustment." [11]

Worldwide, environmentalists oppose World Bank and IMF policies. For over fifteen years, environmentalists have been concerned with the environmental impacts of World Bank loans.[12]   For the IMF to meet its purpose, it provides loans to countries "experiencing balance-of-payments problems."[13]   These loans came with strings attached, however. IMF loans "stipulate[] the conditions the country must meet in order to gain access to the loan," through the use of the a number of "facilities," or loan instruments, such as the Poverty Reduction and Growth Facility and the Extended Fund Facility.[14]

Generally, criticism is directed at the structural adjustment programs ("SAPs") of the World Bank and the IMF.[15]   SAPs encourage economic liberalization (often called neoliberalism), the deregulation of trade, investment and finances.[16]   In an effort to integrate countries into the global economy, SAPs lead to export oriented growth, decreased state spending, and the privatization of government enterprises.[17]   While these measures may help maintain debt payment schedules, reduce hyperinflation, and budget deficits, they often lead to increased poverty and unemployment.[18]   A country implementing SAPs may show an increase in gross domestic product ("GDP"), the World Bank and IMF measure of a strong economy, but this increase is largely due to the growth in exploitive sectors, such as the extraction of raw materials and cheap labor.[19]   The resulting activities, extraction of raw materials, lead to environmental degradation and generally fail to increase employment or income.[20]

World Bank loans tend to fund environmentally unsustainable and socially harmful projects.[21]   Since 1992, for example, the World Bank has approved more than $18.5 billion for oil, gas, and mining projects.[22]   A number of real life projects demonstrate the harmful impact of World Bank funded projects on the environment and local communities.

On June 6, 2000, the World Bank approved the $3.7 billion Chad Cameroon Oil and Pipeline Project.[23]   This project involves the drilling of 300 oil wells, the construction of a 1070 km pipeline, and an 11 km underwater pipeline.[24]   The project is a consortium between Exxon, Chevron, and Petronas (Malaysia's state oil company).[25]   A number of political risks are associated with the oil pipeline project, and the three oil companies stated their commitment to the project contingent on World Bank participation.[26]   In response, the World Bank acted and issued a loan the "provide comfort to these oil companies and the lenders."[27]

Fresh water is a limited and scarce resource that is facing increased pressure from both people in need of fresh water and corporation looking to privatize water sources.[28]   One of the many concerns with the pipeline project is diminishing fresh water supply. Operation of the oil pipeline will use a large amount of water.[29]   Indeed, Exxon plans to drill wells far deeper than wells currently used by local residents, increasing the risk of water scarcity.[30]   Considering more than one billion people worldwide already without access to fresh drinking water,[31]  oil pipeline opponents raised this concern to the World Bank and the international consortium supporting the project.[32]

Major donors to the World Bank approved the oil pipeline, despite concerns, after the World Bank and the consortium made a number of commitments, assuring all parties that the project would benefit the poor and would not harm the environment.[33]   The World Bank promised to establish a national government capacity for environmental management and monitoring of the pipeline project.[34]   They also ensured the capacity building projects would be in place prior to construction of the oil pipeline.[35]   Today, the capacity is not in place, and the government seems to lack the will and the skill to fulfill their duty to ensure environmental management and monitoring; still the oil pipeline construction continues.[36]   The success of this project overall is questionable since last two World Bank efforts to establish institutional capacities have failed.[37]

A second example is Kyrgyzstan, a small country in Eastern Europe, and home to the Cameco/Kumtor gold mine, one of the largest deposits of gold in the world.[38]   The IFC[39]  provided $40 million in financial banking, and the MIGA[40]  issued $45 million in political risk insurance to the project sponsor, Cameco.[41]   Three chemical spills occurred at the Kumtor mine between 1998 and 2000, each creating environmental and health problems for the surrounding community.[42]   For instance, a 1.7 ton sodium cyanide spill in 1998, led to health problems for at least 2,600 people.[43]   Additionally, highly toxic sodium cyanide flowed from the Barskaun River into Kyrgustan's largest lake.[44]

Despite more than twenty years of criticism and resistance for civil society, the World Bank and the IMF continue to operate as if support for their policies is absolute. Since 1976, the World Bank and IMF have been protested more than one hundred times.[45]   While countries from Argentina to Zambia have been the sites of mass protests, the World Bank and IMF have continued harmful lending programs, paying little attention to the criticism.[46]   Today, with a growing global justice movement linking citizen groups in the north with citizen groups in the south, important issues are now being raised, debated, and pressure is mounting on these international financial institutions to respond.[47]

In response to criticism from environmental advocates and the U.S. Congress, the World Bank adopted procedures in the 1980s and 1990s, such as mandatory environmental assessments and public disclosure of the assessments, to mitigate potential harm from environmental projects.[48]   Despite these much needed environmental policies and procedures, application of the policy reform is barely visible.[49]   The World Bank's environmental assessment procedures are not adequately developed or implemented at the ecosystem, sectoral, or economy-wide levels.[50]   Furthermore, the project-by-project approach used by the World Bank to address environmental issues fails to consider alternative means to meet development goals.[51]

Occasionally, the World Bank and IMF admit mistakes in their projects.[52]   However, these institutions continue to stress neoliberal policies to promote economic growth. Despite this assurance, evidence suggests that World Bank and IMF involvement fails to live up to its advertisement. A lack of economic growth in regions under heavy World Bank and IMF control in the last two decades demonstrate that current policies are ineffective. For example, stagnant growth in Latin America and a drop in African income show failures in lending policies.[53]   The GDP in Latin America grew by 75% from 1960 to 1980, but rose a mere 6% from 1980 to 1998.[54]   Sub-Saharan Africa experienced a 36% growth in GDP from 1960 to 1980, which has since fallen 15%.[55]   The 1980 to 1998 period saw the World Bank and IMF lending policies in place.[56]   Instead of addressing criticism and failure of their policies, the World Bank and IMF continue to push their approach essential to promote economic growth.[57]

The World Bank and the IMF are fundamentally flawed. Each institution promotes a development model with an emphasis on export growth and fossil fuel projects that fail to address the concerns of local people. Export oriented growth, usually of natural resources, and environmentally unsustainable projects continue to dominate the loans and the lending requirements. Attempts to "green" these international financial institutions have failed to produce changes in their approach. The environmental procedures do not offer a serious look at alternative projects that will meet the "development" goals. And the loans often provide financial insurance to the project sponsors instead of support to local communities. Until the World Bank and the IMF drastically rethink basic development policy, countries will be better off without their "assistance."

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[1] See The Mobilization for Global Justice Call to Action, available at http://lists.essential.org/pipermail/stop-imf/2001q3/000476.html (last visited September 18, 2001).

[2] International Monetary Fund, 2001 Annual Meetings, at http://www.imf.org/external/am/2001/index.htm (last visited September 18, 2001).

[3] Since the 1999 World Trade Organization Ministerial Summit in Seattle, meetings of international financial institutions and governmental organizations have been greeted with large protests.

[4] Press Release, World Bank, World Bank Group and IMF Will Not Hold Annual Meetings (Sept. 17, 2001) available at http://wbln0018.worldbank.org/news/pressrelease.nsf/673fa6c5a2d50a67852565e200692a79/eeeeb70b7a4de09585256aca004ebc36?OpenDocument (last visited September 18, 2001).

[5] Press Release, Mobilization for Global Justice, Mobilization for Global Justice Cancels its Call for Street Demonstrations Against World Bank/IMF at End of September (September 16, 2001) available at http://www.globalizethis.org/s30/feature.cfm?ID=208 (last visited September 18, 2001).

[6] World Bank Press Release, supra note 4.

[7] World Bank Group, World Bank Group at a Glance, at http://www.worldbank.org/html/extdr/about/glance.htm (last visited September 18, 2001), and International Monetary Fund, What is the International Monetary Fund, at http://www.imf.org/external/pubs/ft/exrp/what.htm (last visited September 18, 2001).

[8] World Bank Group, World Bank Group at a Glance, at http://www.worldbank.org/html/extdr/about/glance.htm (last visited September 18, 2001).

[9] Id.

[10] Id.

[11] International Monetary Fund, About the International Monetary Fund, at http://www.imf.org/external/about.htm (last visited September 18, 2001).

[12] Frances Seymour and Navroz K. Dubash, World Bank's Environmental Reform Agenda, FOREIGN POLICY IN FOCUS, Vo. 4, No. 10, March 1999, at 1.

[13] See International Monetary Fund, How does the IMF Lend?, at http://www.imf.org/external/np/exr/facts/howlend.htm (last visited September 18, 2001).

[14] Id.

[15] See Carol Welch, Structural Adjustment Programs & Poverty Reduction Strategy, FOREIGN POLICY IN FOCUS, Vol. 5, No. 14, April 2000.

[16] Id.

[17] Id.

[18] Id.

[19] Id.

[20] Id.

[21] See Andrea Durbin and Carol Welch, Greening the Bretton Woods Institutions, FOREIGN POLICY IN FOCUS, Vol. 5, No. 33, September 2000.

[22] Robert Weissman, Why We Protest, The IMF and World Bank hurt poor countries and undermine democracy, WASH. POST, Sept. 10, 2001, at A21.

[23] Samuel Nguiffo and Susanne Breitkopf, Broken Promises: The Chad Cameroon Oil and Pipeline Project; Profit at Any Cost?, FRIENDS OF THE EARTH INTERNATIONAL, June 2001, at 4.

[24] Id. at 6.

[25] Id.

[26] Id.

[27] Id, quoting IBRD/IFC, Chad-Cameroon: Petroleum Development and Pipeline Project, Project Appraisal Document, April 20, 2000, at 22.

[28] See Maude Barlow, Blue Gold: The Global Water Crisis and the Commodification or the World's Water Supply, INTERNATIONAL FORUM ON GLOBALIZATION, June 1999.

[29] Id. at 7.

[30] Id.

[31] Id.

[32] Nguiffo and Breitkopf, supra note 23, at 11.

[33] Id.

[34] Id. at 12.

[35] Id.

[36] Id. at 12-3.

[37] Id.

[38] Friends of the Earth, Plundering the Planet, World Bank Support of Oil, Gas and Mining, available at http://www.foe.org/international/omg/casestudies.html (last visited September 11 2001) [hereinafter Plundering the Planet].

[39] The World Bank institution that "promotes private sector investment, both foreign and domestic, in developing member countries." World Bank Group, World Bank Group at a Glance, at http://www.worldbank.org/html/extdr/about/glance.htm (last visited September 18, 2001).

[40] The World Bank institution that "promote foreign direct investment by offering political risk insurance (guarantees) to investors." Id.

[41] Plundering the Planet, supra note 38.

[42] Id.

[43] Id.

[44] Id.

[45] Rick Rowden, List of 20 Years of IMF Protests in the Global South, RESULTS, available at http://lists.essential.org/pipermail/stop-imf/2001q3/000488.html (last visited September 18, 2001).

[46] See Weissman, supra note 22.

[47] See id.

[48] See Seymour and Dubash, supra note 12.

[49] Id.

[50] Id.

[51] Id.

[52] See Weissman, supra note 22.

[53] See id.

[54] Mark Weisbrot, Dean Baker, Robert Naiman, and Gila Neta, Growth May Be Good for the Poor-- But are IMF and World Bank Policies Good for Growth?, CENTER FOR ECONOMIC AND POLICY RESEARCH, available at http://www.cepr.net/response_to_dollar_kraay.htm (last visited September 18, 2001).

[55] Id.

[56] See id.

[57] Weissman, supra note 22.