By: Callum McGoldrick, intern at the TaxPayers' Alliance
Founded in 1944, the World Bank’s original focus was post-war reconstruction and development. Early loans were targeted at European states recovering from war, but from 1947 the World Bank turned its gaze outward and in 1948 Chile became the first non-European country to receive a World Bank loan. The strict conditions on what the money could be spent on, along with terms on repayment of the loan, would often lead to loans being paid back in full, thus giving an incentive for the funders of the World Bank to invest. Loans continued to be given out with the intention of the money being spent on infrastructure projects with a realistic chance of return on investment. This was the case until the late 1970s.
Since then the World Bank has morphed into something very different. By the end of the 1980’s the World Bank was switching its focus to environmental issues. The body now lists two priorities in its mission statement: to end extreme poverty and promote shared prosperity in a sustainable way. When visiting the ‘Priorities’ section of their website, the number one spot is taken by ‘Climate’. Undoubtedly climate change is a problem that requires global solutions. But many of the solutions being proposed won’t help developing nations, it will hinder them.
Many of the ‘sustainable’ methods of energy production used in the West are simply not conducive to development nor useful to a severely underdeveloped nation. Methods such as wind farms and solar panels remain unreliable and can only be used as a supplement to other methods of energy production. Other methods, including nuclear plants, are incredibly expensive and require immense expertise to set-up and operate, two huge barriers for a poor nation. Additionally, it is not helpful for developing nations to receive huge loans to fund these projects as this only results in them being straddled with debts with no way to pay them off.
In its crusade against climate change, the World Bank has left the developing world in a state of limbo. While the West now has the resources to make these issues a priority, and is now tackling many of these issues head on, it is difficult to expect those nations that have not yet made the same technological advancements to share our concerns. Emissions are largely irrelevant to parents dealing with the much more immediate problem of how they will feed their children in the coming days.
And that’s only half the tale. The World Bank has been shown to be slapping the ‘Climate’ moniker on thousands of projects, many with spurious links to their stated goals. A Financial Times Investigation found that ‘hundreds’ of World Bank projects had ‘little to do’ with climate change out of the 2,000 listed climate projects. It would appear that the World Bank is using the cover of climate change to pursue social or cultural projects, such as sending aid to Gaza or funding higher education in Mexico.
Beyond this, the World Bank has acted as a de facto guarantor for private sector companies who loan money to developing countries since at least 1982 when Mexico announced that it would default on its debts. By funding bad debts, the World Bank (along with the International Monetary Fund) remove the need for projects to be viable to be worthwhile ventures for private sector financiers - if the lender cannot recover their investment back from the initial loanee then these global quangos, funded largely by taxpayers of developed nations, will foot the bill. As for the country that received the loan, they now just owe the World Bank in place of whatever organisation loaned them the money.
The problem of third world debt has become so large that even the UN, via the UN Conference on Trade and Development (UNCTAD), has admitted that the world ‘lacks an effective global system to deal with debt’. This is a somewhat startling admission given the amount of UN bodies, such as the World Bank, who claim to be committed to tackling the debt crisis. The president of the World Bank at the time, David Malpass, has called for a move towards ‘sustainable debt to restart investment’. But for as long as the World Bank, with its bottomless pit of money, acts as the guarantor, and promotes a strain of development which is incredibly expensive and unreliable, with little chance of a return on investment, the debt crisis will not be resolved.
Perhaps the World Bank would see more returns, and a reduction in global debt, if their spending prioritised growth and development methods with more proven track records over costly programmes centred around achieving abstract goals.