November 2001

A CIVIL SOCIETY REBUTTAL TO THE WORLD BANK’S "RESPONSE TO FOUR DEMANDS FROM THE MOBILIZATION FOR GLOBAL JUSTICE"

INTRODUCTION

For decades, individuals and broad-based movements in the Global South (Africa, Asia-Pacific, Latin America, and the Caribbean) have protested against World Bank and International Monetary Fund (IMF) policies.  They have denounced the expensive energy-generation projects, designed and built by the Bank together with multinational corporations, which have forced the re-location of thousands, devastated the environment, and mired countries in debt.  They have taken to the streets to demonstrate against the "structural adjustment programs" which indebted governments must agree to in order to get loans from the IMF and World Bank, and which preach a blind reliance on market forces and a progressively diminished role for government in regulating the economy and advancing social goals.  People in the Global South have also rallied against the debt treadmill, administered in significant part by the World Bank and IMF, which requires their countries to devote more and more resources to international debt repayments, even at the expense of provision of education, healthcare, and other basic services. Finally, many Southern citizens have identified the mission of the World Bank and the IMF as a neo-colonial one, in which the institutions act as agents of the G-7 countries (and in particular the United States), coercing support for the G-7’s political and economic aims and establishing rules that favor corporate interests in G-7 countries.

The  protests in the South have in recent years been matched by protests in Northern countries, including in the institutions’ host country, the U.S., in the Czech Republic, and now in Canada.  The sheer numbers of protesters and the reception the protests have met in the media have apparently caused the World Bank concern that its reputation, and perhaps even its funding, are endangered. 

The Mobilization for Global Justice cancelled its call for street protests in Washington in late September, in part out of respect for the victims of the September 11 tragedy and their families. But as the IMF and World Bank once again take up their business, the movement for global justice must too. The economic, social, and environmental realities of the Global South have not changed, after all; and the challenges that people in the North confront have only become more complex. The international movement for global justice will continue to work in every way to oppose the policies of the IMF and World Bank until their power to do harm has been eliminated. Whenever and wherever these institutions hold their closed-door meetings, our movement will continue to be there to expose them and demand justice.

MGJ Demand #1. Open all World Bank and IMF meetings to the media and the public.

The senior decision-making bodies of the IMF and the World Bank, their respective Boards of Executive Directors, continue to operate in almost total secrecy. The Boards of these two institutions make final decisions on all IMF and World Bank loans and institution-wide policies. Yet the meetings of the Executive Boards of the IMF and the World Bank are closed to citizens around the world who will be affected by these loans and policies, closed to their parliamentary representatives, and closed to the media. The written proceedings from these meetings are also secret. The World Bank publishes a highly edited and summarized report called the "Chairman's Concluding Remarks" which does not cover any loan discussions. The IMF publishes "Chairman's Statements" which are very brief and edited notes regarding debt policy, and loan decisions. Neither of these documents is adequate to provide civil society or the media with comprehensive information about decisions that will have tremendous impact on the lives and livelihoods of citizens in developing countries.

While continuing to use the rhetoric of empowerment, country ownership and participatory development, the World Bank has rejected citizen demands in three key areas:

1. The Bank has rejected calls for release of draft documents. Many important loan-related documents are only disclosed after Executive Board and government approval, after they have already become binding contracts. People in borrower countries need information before important decisions have been made, not afterwards.
   
   
2. The Bank has rejected calls for public release of structural adjustment conditions. In a small move toward greater disclosure, some adjustment documents may be disclosed after Executive Board and government approval. However, borrowing governments will identify "sensitive or confidential" information that will remain secret.
   
   
3. The Bank has rejected calls to open its Executive Board to public scrutiny. This means the public will continue to be denied access to the substance of Board deliberations pertaining to specific lending operations and institution-wide policies.

For further information:

• Further analysis of the World Bank's policy on information disclosure can be found at:  http://www.bicusa.org/mdbs/wbg/info.htm]

MGJ Demand #2. End all World Bank and IMF policies that hinder people's access to food, clean water, shelter, health care, education, and right to organize. (Such "structural adjustment" policies include user fees, privatization, and economic austerity programs.)

Policies formulated and supported by the World Bank and IMF have consistently reduced access to health care, education, clean water, and food, and have undermined workers’ right to organize (a human right highlighted in demands from around the world, but ignored by the World Bank). The economic and administrative systems established under these policies have devastated the productive capacity of national economies and proven hostile to the provision of basic services and protection of labor rights. The specific actions mandated by the World Bank, such as user fees, have directly caused undeniable suffering.

The World Bank aggressively pushed countries to charge user fees for primary health and education services for much of the last 15 years, often including them as conditions of loans. The user fees were meant to compensate for budget shortfalls that were in part related to strict IMF budget austerity demands. After years of independent research showed the harmful effects the fees had on preventing the poorest citizens from accessing these key services, the World Bank began to backtrack on its long-standing support for user fees. In September 2001, the Bank released a new policy statement opposing user fees for primary education and, in a highly qualified manner, for primary healthcare. However, despite new claims by the Bank that it now discourages user fees, several recent policy documents endorsed or approved by the Bank, including ones for Ghana, Mauritania and Burkina Faso, contain user fees. It must also be recognized that the recourse to user fees is not always a Bank condition, but often one which grows indirectly but logically from the destructive rules established by Bank programs. And while the Bank claims that it mitigates the harmful effect of user fees with targeted subsidies, research by UNICEF, the Bank's own Operations Evaluation Department (OED), and its annual World Development Report (WDR) show that such exemption schemes have largely failed.

The Bank's claim that its structural adjustment lending does not promote user fees, austerity or privatization is thus simply inaccurate. As far as privatization is concerned, for example, the Bank's own Adjustment Lending Retrospective (February 20, 2001, page 47) states that privatization became an important feature in Bank adjustment lending in the mid-1980s and remains one today. Also contrary to Bank assertions, its adjustment programs have not been designed for the primary purpose of protecting key social sectors, much less to reduce poverty. These programs are no more development-oriented now than they were 20 years ago, as their core measures - economic deregulation and liberalization, privatization and austerity -- have remained unchanged. (According to the World Bank, between 1995 and 1999, 65 percent of all adjustment operations included trade policy and exchange rate reforms and more than 32 percent of adjustment lending supported privatization reforms. Almost 100 percent of IMF loans have budget deficit conditions.)

The World Bank frequently cites the large sums it loans countries and its programs which include funds for social programs as proof of its generosity and value. The value of those programs is mitigated by the conditions governments must agree to. And although the loans given are often at very low interest rates, they are loans, not grants, and add to the country’s debt burden. Indeed, a large portion of the debt that impoverished countries must deal with (see Demand #4) comes from low-interest Bank loans.

Adjustment programs vary little from country to country because governments "adopt" adjustment programs designed by the Bank and the IMF. They take this step because these institutions have the power to cut off all international financing to a country, and do so whenever a country hesitates to implement the economic policies it considers "sound." Leading economists and insiders like the Bank’s former Chief Economist, Joseph Stiglitz, and a former adviser to the Bangladeshi president, Rehman Sobham, have recently publicly belittled the Bank’s claims that governments feel "ownership" of adjustment policies. Rather than a sense of having led or had equitable participation in formulating the policies, government officials frequently feel trapped into accepted policies they have little confidence in.

Structural adjustment has failed on its own terms, with countries displaying lower growth rates while undergoing structural adjustment than when they were not; and with the economically successful Southern countries of recent decades ignoring and contradicting central tenets of the structural adjustment policy package. In restructuring national economies so that international corporations and financial institutions can maximize returns on investments, production and trade, structural adjustment policies have destroyed the productive core of domestic economies. The World Bank, with the IMF, has successfully demanded "labor flexibility" measures which have undermined workers' legal protections and wages and facilitated mass layoffs. The Bank and Fund also routinely press countries to rapidly remove trade barriers (such as tariffs on imports) and government subsidies for basic needs (e.g. bread) and to raise interest rates. In dramatically reducing consumer purchasing power, increasing the cost of borrowing and forcing competition with heavily subsidized and powerful foreign multinational corporations, these policies have devastated small and medium-sized enterprises and farms, which produce for the local market and employ the vast majority of workers in most countries. This widespread phenomenon and many other debilitating effects of imposed adjustment policies have been documented on four continents by the Structural Adjustment Participatory Review Initiative (SAPRI), an initiative in which the Bank itself was involved with civil society and governments.

For further information:

• For more on SAPRI, see www.saprin.org. For additional assessments of structural adjustment, see www.developmentgap.org.
• For more on the World Bank’s interactions with civil society, see www.developmentgap.org and www.irn.org.
• For background on how the World Bank and IMF coerce governments into accepting structural adjustment conditions, see www.challengeglobalization.org.
• For an examination of the record of developing countries, comparing the last 20 years under structural adjustment with the previous two decades, see http://www.cepr.net/globalization/Scorecard.pdf

MGJ Demand #3. Stop all World Bank support for socially and environmentally destructive projects such as oil, gas, and mining activities, and all support for projects such as dams that include forced relocation of people.

Communities that have lived with oil, mining, gas, and large dam projects, and NGOs which have analyzed them, find that such projects consistently have negative social, environmental, and developmental impacts. World Bank lending for these projects runs directly counter to its stated mission of helping the poor. A recent internal paper commissioned by the Bank’s private-sector lending division noted that: "The notion that governments invest incremental rents/returns from extractive industries profitably and for the benefit of poor people is all too often more of an aspiration than a reality."  In addition, according to a recent Oxfam report, countries whose economies are dependent on oil and mineral exports also show: exceptionally low living standards, higher poverty rates, exceptionally high rates of child mortality, malnutrition, income inequality, low rates of literacy and life expectancy.

The Bank’s own staff have examined the relationship between extractive industries and corruption, authoritarian governments, governance, and conflict, and found strong evidence for a "repression effect," which holds that resource wealth retards democratization by enabling the government to better fund the apparatus of repression.

In addition, large dams and fossil fuels have well-documented negative local and global environmental impacts. According to recent research by the Institute for Policy Studies, the $20 billion in World Bank fossil fuel projects financed from 1992 to September 2001 will ultimately release 40.6 billion tons of carbon dioxide, an amount greater than all current annual global fossil fuel emissions.

The Bank states that "energy is critical in enabling developing countries to grow, to reduce poverty and to improve the quality of life for their citizens."  The question, then, is how best to meet the energy needs of the most impoverished.  The Bank currently devotes less than 5 percent of its energy lending and investment to meet the needs of the poorest 2 billion people, who, according the Bank’s own studies, would best be served with clean and renewable sources of energy. Despite this, the overwhelming majority of Bank energy lending continues to be for fossil fuel projects. As the Sustainable Energy & Economy Network has shown, the ratio of fossil fuel funding to funding for clean, renewable sources of energy is approximately 20 to 1.

The World Commission on Dams was established not just to "define standards" for dams (as the Bank maintains), but also to review the past record of large dams and assess alternatives for water resources and energy development. The World Bank has been silent on the WCD's findings on the destructive impacts of dams and its criticisms of the World Bank's role in promoting them over more appropriate alternatives. While it is a positive signal that the Bank says it will "promote the seven strategic priorities for future decision-making on dams," this is not a sufficient response to the report. The WCD guidelines cover not just decision-making on dams, but the whole process of energy and water planning. Given the Bank's poor record on compliance with its own safeguard policies, if the WCD guidelines are not given the force of policy, there will be no enforcement mechanisms, no accountability to the Bank’s Inspection Panel, and few incentives for compliance. The Bank's back-tracking on the WCD is one reason NGOs are currently viewing the Bank’s Extractive Industries Review with great skepticism.

For further information:

• Sustainable Energy & Economy Network -- www.seen.org
• Extractive Sectors and the Poor, Oxfam America, October 2001 — www.oxfamamerica.org
• Does Resource Wealth Cause Authoritarian Rule?, Michael L. Ross Visiting Scholar, Development Research Group, World Bank, April 2000
• Friends of the Earth International, www.foei.org
• International Rivers Network, www.irn.org

MGJ Demand #4. Cancel all impoverished country debt to the World Bank and IMF, using the institutions' own resources.

The international Jubilee 2000 movement succeeded in drawing attention to the "debt treadmill" which forced most developing countries to borrow year after year to pay off old loans, with no end in sight. Since private lenders are unwilling to make loans to governments that do not receive the World Bank/IMF stamp of approval, indebted countries had little choice but to submit to the structural adjustment policies that were a condition of loans from the World Bank and IMF. Unfortunately, structural adjustment policies invariably led to an increased debt burden, as exports failed to keep pace with surging imports.

Since the appearance of Jubilee 2000, the World Bank has tried to reverse the damage done to its public image by claiming that it "strongly supports debt relief." The Heavily Indebted Poor Countries (HIPC) Initiative, however, is more a tool for inducing governments into accepting new IMF/World Bank programs than a way of helping countries get out of debt. Governments wishing to benefit from HIPC must demonstrate prior compliance with IMF/World Bank structural adjustment conditions and commit to three, six, nine, or even twenty more years of structural adjustment to receive the maximum benefit (some portions of the promised debt relief are not wholly enacted for 20 years, thus giving the institutions prolonged leverage).

HIPC relieves too little debt for too few countries, at little or no cost to the World Bank and IMF. Under HIPC, the World Bank and IMF relieve less than 50% of the most impoverished countries' debts, leaving them to pay more than $700 million each year in debt service to these institutions. Zambia and Niger both face increased debt service payments after qualifying for HIPC. Five years after the introduction of HIPC, only three countries (Uganda, Bolivia, and Mozambique) have jumped through all its hoops and gotten all the relief promised. Under intense pressure from Jubilee campaigners, the Bank and IMF quickly approved 20 countries for entrance into the program by the end of 2000, but new hurdles are now being erected for them. Meanwhile, indebted and impoverished countries like Bangladesh, Haiti, and Nigeria do not even meet the Bank’s criteria for consideration under HIPC.

Many of the debts claimed by creditors, including the World Bank and the IMF, were accrued by dictators, corrupt officials, and non-democratic governments -- often with the complicity of the lenders, who were guided by political, rather than economic, motivations (hence the approval of billions for U.S. Cold War ally Zaïre, long after an IMF audit demonstrated that virtually all its loans went into President Mobutu’s own accounts, though now the people of the Democratic Republic of Congo are expected to repay it). Many of the debts claimed have in fact been paid back, even several times over; they persist only because of high interest charges.

The World Bank also glosses over the reality of how the debts of countries benefiting from HIPC are cancelled. When the World Bank and the IMF agree that a country should receive debt relief, this does not mean that they write off debts they claim. Instead, it means that they agree to accept full payment on those debts from a different source — namely, from funds made up of contributions of taxpayer money from wealthy countries (and some, including the initial $500 million, from the World Bank itself). The Bank and the IMF have policies against writing off loans (even in part). They use their unique status as "preferred creditors," meaning they take priority over all other creditors, and as "gatekeepers," meaning other creditors wait for them to certify (through lending) that a country is creditworthy, to get 100% repayment on all their loans, regardless of the country’s condition. Under the HIPC program, neither the IMF nor the World Bank sacrifices anything; indeed they gain more rapid and secure repayment of monies claimed of their most impoverished client governments, including debts long ignored by creditor and debtor alike.

The World Bank and IMF are deeply reluctant to take any responsibility for the failed loans and bad "advice" they have given over the years by themselves taking a loss in the cycle of debt. They routinely protest that to take money from them is to deny the benefits of their lending to other needy countries. In fact, the World Bank makes an annual profit of over $1.5 billion, and the IMF is sitting on gold reserves valued at over $30 billion. Independent research by accountants Chantrey Vellacott DFK demonstrates that even under well-established conservative accounting procedures, the World Bank and IMF could find more than $30 billion to compensate for debt cancellation, without jeopardizing the ability of the World Bank to carry out its overall functions, and without a negative impact on the Bank’s credit rating or its status as a lender.

For further information:

• Jubilee South: www.jubileesouth.net
• Jubilee USA Network: www.jubileeusa.org
• Jubilee Plus Network: www.j2000uk.org

THE WORLD BANK’S DEMANDS OF ITS OPPONENTS

1. We demand that groups renounce and denounce violence. This is a prerequisite for constructive discussion and debate.

The Mobilization for Global Justice is, and has been since its inception, a non-violent organization, as are all the organizations whose staff have contributed to this response.

The demonstrations at the April 2000 meetings of the IMF and World Bank, organized by the Mobilization for Global Justice, were free of "violence" and property destruction by protesters, despite many abuses by those protecting the meetings and the delegates. Despite over 1,200 arrests, there were no convictions for either felonies or misdemeanors. We believe that the Bank’s demand requiring specific rejection of violence is a tactic designed to distract readers from its economic agenda.  Its failure to recognize the systemic violence of policies that kill 19,000 children a day (according to the United Nations Development Program) reflects either a frightened or willful blindness to its impacts, or an inexplicably strong belief, after over 20 years of evidence to the contrary, that policies designed to promote corporate profit will ultimately end poverty. Our task in the movement for global justice is to make sure the public understands the violence perpetrated by these institutions’ power, and to see that they are held accountable.

2. We also challenge those groups who claim to be concerned about poor people in developing countries, yet have focused primarily on organizing protests, to shift their energies away from conflict and toward constructive dialogue and partnerships with the Bank and its member governments.

The range of constituencies affected by IMF and World Bank policies is tremendous.  In its response, the Bank suggests – indeed, demands – that those who wish to criticize the institution refrain from demonstrating, but instead engage in "constructive dialogue and partnerships with the Bank and its member governments."  This attitude reflects a regrettable impulse to restrict the legitimate avenues for dissent.  We believe that the problems with World Bank/IMF policies are not simply economic, but also very much political problems.  We feel that the urgency of fundamental change in the global economy is great enough to warrant hard work on many different levels by many different kinds of civil society organizations.  There are compelling reasons for some organizations to meet with the IMF and World Bank, but there are equally compelling reasons to build opposition to the institutions’ policies by lobbying their governments, engaging in grassroots public education, and organizing vivid demonstrations of the passion and numbers of people who oppose IMF and Bank policies. It is important to note that there are no rigid divisions among IMF/World Bank opponents; indeed those who compile studies frequently participate in mass marches. Working to improve the economic and political position of the Global South means seeking immediate policy changes and building public support for a fundamental shift in global power relations.

Many groups that have tested the Bank's expressed desire for dialogue in recent years have found the Bank’s response disingenuous. They have met with the Bank to address issues such as large-dam development (World Commission on Dams), structural adjustment (SAPRI), fossil fuels and other extractive industries, forestry, and poverty (PRSPs), as well as a number of safeguard policies and the Bank's information-disclosure policy. These groups have found the Bank fundamentally unresponsive to citizen input -- even when the Bank has requested it -- and to the initiatives' findings and recommendations. Civil-society participants in those initiatives have been frustrated, finding that the Bank seeks to manipulate its joint endeavors with civil society, use its consultations to validate and advance its own positions, and turn the initiatives into public-relations exercises. When it has been unable to control initiatives, the Bank has sought to distance itself from them and from the outcomes they produce and to avoid implementation of recommendations.

In this context, critics of the Bank have found that a mobilized citizenry is essential for holding the Bank accountable. Protests shed light on the actions of the Bank and put pressure on governments, in the South and North, to be responsive, and to make the Bank responsive, to local and global concerns. Especially in light of its aggressive defense of policies that have inflicted so much hardship around the world, the World Bank should expect more protests in the future.

Finally, we are deeply conscious of the fact that the Mobilization for Global Justice and the other organizations in the North that have participated in creating this document are just one part of the global movement for economic justice. Our role is to use our position nearer the seats of power to amplify the experiences and demands of people in the Global South, the people who actually live under the policies of the World Bank and IMF. (The extensive history of resistance in the South is documented, in part, in a report by the World Development Movement: http://www.wdm.org.uk/ cambriefs/Debt/unrest.pdf) We believe that no effort to address poverty, inequality, and environmental destruction can be satisfied by discussions among people in Washington, but must instead be led by the people closest to the problems, and the possibilities, on the ground.

The following organizations participated in the composition of this rebuttal:

• Mobilization for Global Justice — Washington, DC USA
  
• Halifax Initiative — Ottawa, ON Canada
  
• 50 Years Is Enough Network - Washington, DC USA
  
• The Development GAP - Washington, DC USA
  
• Social Justice Committee — Montreal, QC Canada
  
• Jubilee USA Network - Washington, DC USA
• Sustainable Energy & Economy Network/Inst. for Policy Studies - Washington, DC USA
• Essential Action - Washington, DC USA
• International Rivers Network — Berkeley, CA USA
• INSAAF International — Bhatinda, Punjab, India
• RESULTS Education Fund - Washington, DC USA
• Africa Action — New York, NY & Washington, DC USA
• Religious Working Group on the World Bank & IMF - Washington, DC USA
• Center for Economic Justice — Albuquerque, NM & Washington, DC USA
• Global Exchange — San Francisco, CA USA
• Civil Society Initiative for the Environment — Panamá City, Panamá
• Sisters of the Holy Cross — Notre Dame, IN USA
• Campaign for Labor Rights — Washington, DC USA