The World Bank suddenly discovers 400 more million poverty-ridden people

12 September 2008 by Eric Toussaint , Damien Millet

The World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

recently acknowledged significant mistakes in its figures concerning poverty in the world. Indeed, while “the WB’s estimates of poverty are improved thanks to more reliable data on the cost of living”, the outcome is a head-on questioning of statistics produced by this institution, which has been facing a serious legitimacy crisis for several years: all at once the WB has just found out that 400 million more people live in poverty than earlier thought. In other words more than half of the subsaharan population!

This reflects the lack of reliability of statistics published by the WB and shows that their main objective is to back up the neoliberal policies imposed by its own experts the world over. As can be read in its press release, [1] 1.4 billion people in the developing world (one in four) were living on less than US$ 1.25 a day in 2005, while previous estimates were around 1 billion. Yet the WB still finds grounds for rejoicing, since what matters in its eyes is not the number but the proportion of poor people. Why is this? Because with a rampant world demography, the latter figure can more easily suggest improvement: if for instance the number of poor people does not increase, the proportion will automatically fall with the passing years. [2]

This is why the Millennium Development goal is to reduce by half the proportion of people living on less than a dollar a day between 1990 and 2015. But given the WB’s huge mistakes in its accounts, the set of current international policies against poverty collapses. Structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

policies (reducing social budgets, cutting costs in the field of health and education, an agriculture geared to export with consequent reduction of staple food crop cultivation, relinquishing food sovereignty, etc.) that have been enforced by the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
and the WB since the early 1980s have seriously worsened living conditions for hundreds of millions of people throughout the world.

There has been a lot of criticism of the WB in this respect since Thomas Pogge, professor at Columbia University, wrote recently: The World Bank’s accounting policies are most questionable. We have good reason to think that with a more credible method we would observe a more negative trend and more widespread poverty. […] As long as the WB’s current method and the data it produces are used by international organisations and university research on poverty, the problem cannot really be considered seriously. [3]

The WB has exposed its weakness both statistically and politically. More than ever our objective must be threefold: turning away from the logic of structural adjustment, doing away with the WB, and developing a new international institutional architecture.

Damien Millet, spokesman for CADTM France (Committee for the Cancellation of Third World Debt,, author of L’Afrique sans dette, CADTM/Syllepse, 2005.
Eric Toussaint, President of CADTM Belgium, author of Banque du Sud et nouvelle crise internationale, CADTM/Syllepse, 2008.

Translated by Christine Pagnoulle in collaboration with Judith Harris

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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Damien Millet

professeur de mathématiques en classes préparatoires scientifiques à Orléans, porte-parole du CADTM France (Comité pour l’Annulation de la Dette du Tiers Monde), auteur de L’Afrique sans dette (CADTM-Syllepse, 2005), co-auteur avec Frédéric Chauvreau des bandes dessinées Dette odieuse (CADTM-Syllepse, 2006) et Le système Dette (CADTM-Syllepse, 2009), co-auteur avec Eric Toussaint du livre Les tsunamis de la dette (CADTM-Syllepse, 2005), co-auteur avec François Mauger de La Jamaïque dans l’étau du FMI (L’esprit frappeur, 2004).

Other articles in English by Damien Millet (46)

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