Committee for the Abolition of Third World Debt

The World Bank must be held responsible

18 December 2012 by Eric Toussaint

This is the preface to the upcoming Japanese edition of Eric Toussaint’s book The World Bank: A Critical Primer (Pluto Press, London). The book was originally published in French in 2006. There are two English editions, one by Pluto Press in London and another by Vak in India. There are four Spanish editions: the first one published in Spain by Viejo Topo Banco Mundial : El golpe de estado permanente, the second in Ecuador by Abya-Yala, the third in Bolivia by Capitulo boliviano Derechos Humanos, and the fourth in Venezuela by Centro internacional Miranda (Banco Mundial : El Golpe de estado permanente). An Indonesian edition of the book is in preparation. A Pakistanis edition in Urdu and a Portuguese edition are also on way. The French edition is currently out of print, but is available for download free of charge in .pdf on the CADTM Web site. A new, updated edition will be published in 2014 to mark the seventieth year of the Word Bank’s existence.

Japan is the second-ranking power within the World Bank after the United States, with a little over 9% of the votes. Alone it has three times the number of votes allotted to China, and twice as many as Germany and France together. Japan’s citizens need to know about this international institution, which throughout its existence has nefariously undermined the fundamental human rights of the world’s peoples.

What is more, the projects it finances have a particularly damaging impact on the environment. Since the first edition of The World Bank: A Critical Primer in 2006, the policies conducted by the Bank have undergone no improvement. Its official discourse, which talks of protecting nature and the struggle against climate change, is no more than a mask for a policy which in fact increases emissions of greenhouse-effect gases.

The World Bank bears a large share of the responsibility for the food crisis that affected hundreds of millions of inhabitants of the countries of the global South in 2007-2008, and which is not over. During that time, the number of people suffering from hunger increased by 140 million, the result of a sharp 50% rise in food prices |1| in many developing countries. The Bank had recommended that the governments of the South stop maintaining the grain silos used to cover the domestic market in case of shortages or steep price increases. In coordination with the IMF, it encouraged the governments of the South to cut public credit for farmers, driving them into the clutches of private lenders (often large traders) or private banks exacting exorbitant rates. This caused much smallholder debt in India, Nicaragua, Mexico, Egypt and several countries in Sub-Saharan Africa. According to official studies, the high level of debt among Indian farmers has been the main cause of the suicides of 150,000 farmers in India over the past decade. India is one country where the World Bank has successfully persuaded the authorities to suppress public credit for farmers. That is not all: Over the past 40 years, the World Bank and the IMF have also coerced tropical countries into replacing staple-crop production with export crops (cocoa, coffee, tea, bananas, peanuts, flowers, etc.). Finally, to crown their efforts in favour of big agro-businesses and major grain exporting countries (the United States, Canada and Western Europe first among them), they also persuaded governments to open their internal markets to food imports which benefit from massive subsidies from governments in the North. This led to many producers in the South going bankrupt and to a severe reduction in local subsistence-crop production.
The World Bank also promotes a policy that encourages the grabbing of land traditionally farmed by smallholder farmers. Private multinational companies or foreign governments purchase hundreds of thousands of hectares of arable land outside their own borders, dispossessing smallholders and disorganising local production.

In 2009, at the height of a global crisis that sent the number of unemployed shooting skywards, the World Bank continued to advocate the elimination of social protection for workers. In Doing Business 2010 |2|, its widely circulated annual report published in September 2009, the Bank explains its strategy for fighting the informal economy by emphasising that “states with more flexible employment regulations saw a 25% larger decrease in informal firms”. Since its first report Doing Business 2003, the World Bank has issued an annual classification of those countries making the most reforms designed to improve the “business climate”. The objective is to constantly reinforce the rights of investors and private property to the detriment of social rights. In fact, to establish its ranking of the most “developed” economies, the World Bank uses an indicator relating to the hiring and firing of workers. The more a country’s legislation facilitates firing, the higher it is placed in the ranking. In spite of the many criticisms from social movements and the International Trade Union Confederation, the World Bank still persists in urging countries to lower severance pay and reduce or remove obligations regarding notice of termination.

By way of example, Rwanda in 2009 showed the greatest progress, and for good reason: Employers there are no longer obligated to engage in prior consultation with employees’ representatives or give notice to the labour inspectorate prior to “reorganisation”. On the other hand, Portugal has gone down in the ranking for extending the notice-of-termination period by two weeks. The list of countries downgraded for (slightly) improving workers’ conditions is a long one. This doesn’t stop the World Bank from affirming with extraordinary confidence that “the Doing Business Employing Workers indicators are fully consistent with the core labour standards but do not measure compliance with them”. However, Belarus, which has been stripped of EU trade preferences for having violated fundamental conventions of the International Labour Organisation (ILO), scored high in Doing Business 2010. A rise in the Doing Business classification is not good news for a country’s population, it is a sign of social regression.
Finally, it should be noted that the Bank is understandably satisfied with the record-breaking number of anti-social reforms implemented this year, and congratulates Eastern Europe, “particularly active this year”. |3| In fact, since 2008 some fifteen countries in that region have signed agreements with the IMF, and the World Bank, using the pretext of the global crisis, certainly intends to encourage a new offensive of Capital against Labour.

The World Bank faces a crisis of legitimacy due to the accumulated negative effects of its policies and the fact that it has been headed, since its inception, by a United States citizen designated by Washington. When The World Bank: A Critical Primer was published in French in 2006, Paul Wolfowitz, one of the strategists of the invasion of Iraq by the United States and its allies in 2003, had just begun his term of office as tenth president of the World Bank. He was forced to resign in June 2007, guilty of favouritism toward his companion, to whom he had given a large salary increase. Robert Zoellick, his replacement between 2007 and 2012, reinforced the neoliberal image of the World Bank; he had earlier been US Trade Representative under the Bush administration. He led the United States delegation in the WTO negotiations, in particular at the Doha meeting in 2001. The nomination of the current president, Jim Yong Kim, by Barack Obama in June 2012 raised a storm of protest. His name suggested that he was Korean, but in reality yet another United States citizen has been put in control of the World Bank.

For several decades, systematically, the Japanese authorities have been actively complicit in the activities of the World Bank. It is high time that Japan’s citizens demand accountability from their country’s representatives at the World Bank and support the populations of the countries of the global South who are gradually freeing themselves from its grasp. Ecuador is one example. The authorities in Quito, backed by the population, expelled the permanent representative of the World Bank in May 2007, began a debt-audit process, and finally decided in 2010 to withdraw from the International Centre for Settlement of Investment Disputes (ICSID ICSID In order to resolve any disputes that may arise between States and foreign investors, was established in 1965 under the World Bank, the International Centre for Settlement of Investment Disputes between foreign investor and State (ICSID) with the adoption of the Washington Convention of 1965, establishing an arbitration mechanism for resolving such disputes under the auspices o World Bank.

Contrary to some opinions defending the fact that ICSID mechanism has been accepted in the majority American hemisphere, many of States of the region continue to be distant from ICSID: Canada, Cuba, México and Dominican Republic are not party to the ICSID Convention. In the case of Mexico, this attitude is rated by specialists among “wise and rebellious” |1|. We have also to recall that following Caribbean States remain outside the ICSID jurisdiction: Antigua and Barbuda, Belize, Dominica (Commonwealth of) and Suriname. In South America, Brazil has not ratified (or even signed) the ICSID convention and no special interest seem to do so has been showed by the now 6th most powerful world economy. The case of Costa Rica access to ICSID system is extremely interesting: Costa Rica signed ICSID Convention on September 29, 1981 but only ratified it only 12 years after, on April 27, 1993. We read in a memorandum of GCAB (Global Committee of Argentina Bondholders) that Costa Rica`s decision resulted from direct United States pressure due to Santa Elena expropiation case, which was decided in the year 2000 |2|: "In the 1990s, following the expropriation of property owned alleged by an American investor, Costa Rica refused to submit to ICSID arbitration. The American investor invoked the Helms Amendment and delayed a $ 175 million loan from the Inter-American Development Bank to Costa Rica. Costa Rica consented to the ICSID Proceeding, and the American investor ultimately Recovered U.S. $ 16 million”.

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), the World Bank’s tribunal. Bolivia had made that same decision in 2007, and Venezuela followed in 2012. These three countries have decided to institute a Bank of the South (BancoSur) along with four other South American countries (Argentina, Brazil, Paraguay and Uruguay). This proves that there are alternatives to the World Bank, and alternatives are indispensable given the extremely questionable nature of the Bank’s actions since its creation, which The World Bank: A Critical Primer makes clear.

Eric Toussaint
Liège, December 2012

Translated by ‘Snake’ Arbusto and Mike Krolikowski


|1| See Eric Toussaint “Getting to the roots of the food crisis”

Doing Business 2010 is the seventh edition of a series of annual reports on regulations that facilitate or complicate the practice of doing business. The report presents quantitative indicators on the regulations of companies and the protection of property rights in a comparison of 183 countries. Regulations having repercussions on ten stages in the life cycle of a company are evaluated: starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. The data for Doing Business 2010 date from June 1, 2009. The indicators serve to analyse economic results and to determine which reforms were effective, and why. The 2010 report covers 183 countries.

|3| “Doing Business in 2010: A record in business regulation reform”

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