WORLD vs. BANK: who is the World Bank really helping?

The World Bank self-proclaims to “promote shared prosperity” through low-interest loans to developing countries, and yet global wealth disparity is only rising. Who really benefits from the World Bank, and whose development is it truly supporting?

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The main focus of current development – one that is promoted through the conditions of the World Bank’s loans and its focus on infrastructure projects – is the growth of developing countries’ economies, in a world which is already far too developed. Trying to reproduce the economy of the Global North in developing countries as a solution to global poverty and inequality is a contradiction bordering on madness, as anyone with a basic understanding of global economics and the current disparity of wealth would agree.

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Showing how many times the world’s replenishable resources we are using per country, each year. The global average is 1.6 worlds, with developed countries such as Australia and the USA and European countries consuming the most.

Seeing as we are already consuming 50% more of our planetary resources than can be replenished each year, pushing for further growth is not only illogical but will ultimately be impossible; our resources are overstretched and our carbon emissions have recently reached what many environmentalists are terming “the point of no return”. Not only does development focused on economic growth promote a consumerist cycle which exacerbates the environmental disaster we are facing (the idea that more production = more money = less poverty) but this is being pursued regardless of statistics showing that it is simply not working.

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The richest 62 people own the same wealth as half the world’s population

While the global economy has grown by 380% since 1980, the number of people living on less than $5 a day has increased by 1.1 billion in that time; and yet we are still pursuing growth as a solution to poverty. The disparity of global wealth has been increasing rapidly, despite the $130 billion in aid sent from richer countries to poorer countries each year. This is seemingly a contradiction, until you discover that poorer countries are paying over 4.5 times that amount – about $600 billion – back to richer countries every year, in debt repayment of loans that have already been paid off many times over.

 

World Bank and the Third World Debt

While admittedly not all of these loans are from the World Bank, a lot of them are; and moreover, the style and conditions of lending promoted by the Bank, as well as the neo-liberal development it encourages, create a world in which this type of development – which is evidently leading us backwards – is the norm. While the richest 1% of the population now own 43% of the world’s wealth, there has been no readjustment in the Bank’s policy of aid; leading us to ask why, with the statistics so clearly showing that only the elite are benefiting, the Bank does not change its strategy.

Let’s talk for a moment about how the World Bank is structured. It’s based in the USA, with an American Bank President at the head of it; these have all typically been old, white Western men, pursuing old, white, Western agendas. Whereas the current American-South Korean President, Jim Yong Kim, brings an element of racial diversity to the team, he is somebody who publicly called for the World Bank to be shut down in the 1990s after experiencing first hand the devastation and disease in shanty towns surrounding Lima, Peru caused by the “structural readjustment” stage of the Bank’s development strategy; inflation controls and government cutbacks dictated by the lender, which frequently cause a period of economic instability and further poverty in the countries being “developed”. Yet these days he is portrayed in the media playing golf with Obama – a long, long way from Peru and any problems it may still be facing.

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It’s worth noting that the countries which invest the most money in the Bank get the highest amount of votes on how that money is spent; meaning that the USA has 20% of the voting power, with just one representative. Contrastingly, the 47 sub-Saharan African countries have only 7% of the voting power between them. With this system in place, poorer countries are effectively stripped of the power to decide how loans from the World Bank direct their own development. Arguably, the countries that do have the influence to decide how loans from the Bank are spent use this power to pursue their own neo-liberal foreign policies, regardless of the fact that it is evidently not helping the developing world.

Conclusively, in terms of the development and loans the Bank provides, it is not the poorest countries who are benefiting. For a more even distribution of global wealth and poverty reduction, the only conceivable solution could now be “de-development” and a more modest way of living in the Global North. However, in a world where the richest 300 people – a lot of them owners of large American corporations – have greater wealth than the poorest 3 billion, the question becomes why those in a position of influence over global economic policy would be aiming for this redistribution at all.

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Bibliography of sources:

Balch, O, (2012) Should the development community beware corporates bearing gifts?, The Guardian, [Online]. Available at: https://www.theguardian.com/global-development/poverty-matters/2012/aug/07/development-community-beware-corporates-bearing-gifts

Bansal, S, (2011) Private sector has potential to aid development, but beware the pitfalls, The Guardian, [Online]. Available at: https://www.theguardian.com/global-development/poverty-matters/2011/jul/11/private-sector-aid-potential-and-pitfalls

Blankfield, K (2016), Forbes Billionaires: Full List of the 500 Richest People in the World 2016. Available at: http://www.forbes.com/sites/kerenblankfeld/2016/03/01/forbes-billionaires-full-list-of-the-500-richest-people-in-the-world-2016/#45d92e786c24

Danaher, K, (1994) 50 years is enough: the case against the World Bank and the International Monetary Fund. Boston, Mass, South End Press.

Edward, P, (2006), The Ethical Poverty Line: a moral quantification of absolute poverty, Third World Quarterly, Vol. 27, No. 2, pp 377 – 393

Gilpin, R and G. M., (2000), The Challenge of Global Capitalism: The Global Economy in the 21st Century, Princeton University Press. Available at: http://www.nytimes.com/books/first/g/gilpin-capitalism.html

Hickel, J, (2015),  Forget ‘developing’ poor countries, it’s time to ‘de-develop’ rich countries, The Guardian, [Online]. Available at: https://www.theguardian.com/global-development-professionals-network/2015/sep/23/developing-poor-countries-de-develop-rich-countries-sdgs

How does the World Bank operate?, (2005), Bretton Woods Project. Available at: http://www.brettonwoodsproject.org/2005/08/art-320865/

Kahn, B, (2016), The world passes 400ppm carbon dioxide threshold. Permanently., The Guardian [Online]. Available at: https://www.theguardian.com/environment/2016/sep/28/the-world-passes-400ppm-carbon-dioxide-threshold-permanently

Kernan, M (2016), The Global Development Narrative and “Strategic Ambiguity”. Available at: http://therules.org/global-development-narrative-strategic-ambiguity/

Luhby, T (2016), The 62 richest people have as much wealth as half the world, CNN. Available at: http://money.cnn.com/2016/01/17/news/economy/oxfam-wealth/

Oakland Institute, (2015), Peru, the Poster Child for the World Bank in Latin America. Available at: http://therules.org/peru-the-poster-child-for-the-world-bank-in-latin-america/

Peet, Richard (2003) Unholy Trinity: The IMF, World Bank and WTO, London: Zed Books

Rice, A, (2016), How the World Bank’s biggest critic became its president, The Guardian, [Online]. Available at: https://www.theguardian.com/news/2016/aug/11/world-bank-jim-yong-kim

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3 thoughts on “WORLD vs. BANK: who is the World Bank really helping?

  1. If global economic growth isn’t the solution to helping developing countries, then what do you recon is? Don’t you think global economic growth will benefit everyone in the long run (even those in LEDC). For example when China went through their period of rapid economic growth they soon became the highest contributor to FDI. Over $94billion was given out to Asia, Africa and South America in ODI from domestic Chinese firms in 1 year alone. And as history has shown ODI as well as FDI have helped some weaker economies flourish into some of the wealthiest nations we see today.

    Liked by 1 person

    1. Unfortunately I didn’t have enough words to go into it on this blog post, but I honestly believe that the only way we’re going to see a more even distribution of wealth globally is by slowing down the economic growth of the developed world (the concept of ‘de-development’ and less consumption, which isn’t very attractive to many people in the Global North, I know), and trying to achieve a “quality of life” more akin to countries like Costa Rica, who have a much lower income, far less consumption of resources but a similar life expectancy to more developed countries (e.g. the USA). However I also think this is unlikely to be achieved, because we’re so hardwired here into the capitalist way of thinking that more is always better, resulting in our culture of over-consumption. I honestly don’t think further growth through neoliberal development will benefit everyone in the long run, because the way it’s currently being pursued is only benefiting the elite few, hence the growth in global wealth disparity I keep going on about. I’d argue that while China’s development has been sustained so far and people have been lifted out of poverty, this is, generally speaking, the exception rather than the rule – and that it’s now facing huge difficulties in terms of challenges to environmental sustainability and rapid urbanization, which still suggests that in the long run its development cannot be sustainable, because it’s simply consuming too many resources to keep developing in this way. I honestly think we need a re-structuring of the entire economic system rather than simply relying on ODI – it’s a way of trying to treat the symptoms without tackling the cause of poverty and wealth inequality, and creates a system of hand outs and further debt which causes a reliance on more developed countries and further disempowerment of poorer countries.

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