Issues & Convenors

World Bank conditionalities and policy requirements in India have the following economic impacts:

• Poverty and distribution — poverty is underestimated presently
• Decline in per capita food consumption
• Employment elasticities fall; small scale sector reservation effectively reduced; rise in unemployment
• Inflation held in check by weakening labour
• Agriculture, food security and cropping pattern shifts
• Fiscal situation — cut in direct taxes and customs duties; tightening of fiscal deficit targets; reduced role of government and public sector; privatization
• Problems of finances of state governments and local bodies
• Impact on social sectors; deterioration in living conditions of the poor
• Industrialization and small scale industries, artisans and small businesses
• Shifting pattern of production
• International division of labour
• Loosening of environmental protection; deterioration of environment; ill effects on the poor
• Growing inequity in society — across nations, within nations and regions
• Proliferation of financial markets and their domination; instrument for control over resources
• Control over resources passes to capitalists
• Loosening of controls; greater black economy and poorer governance

Since its founding at the Bretton Woods Conference in 1944, the World Bank has grown into one of the most powerful international institutions situating itself at the centre of the dominant economic and financial system which seeks to control a majority of the world's resources and markets. It also dominates the international discourse on development through its own research and publications and through its funding and consultancies that span a wide cross-section of the world's social scientists and research institutions.

Originally set up as the International Bank for Reconstruction and Development (IBRD), along with the International Monetary Fund (IMF), the primary roles of these institutions were to be involved in the efforts to reconstruct a war-devastated Europe, to regulate the international monetary and financial order and to restructure international finance and currency relationships after the conclusion of World War II. As one of America's leading historians noted, much of this was to lay the foundation for the advancement of US geopolitical goals particularly the containment of the growing power of the Soviet Union.

Presentations:

• The World Bank: A Politico-Economic History — Smitu Kothari
• The Midwives of Corporate Totalitarianism — Aseem Shrivastava

Joseph Stiglitz, the Nobel laureate and former Chief Economist of the World Bank in his frank critique of the World Bank and IMF, "Globalisation and its discontents", notes that "The institutions are dominated not just by the wealthiest industrial countries but also by commercial and financial interests in those countries, and the policies of the institutions naturally reflect this". This, he says, happens because the World Bank and other Multi-lateral financial institutions are controlled by the wealthy countries. For the WB/IMF, these countries are represented by their Finance Ministers and Central Bank Governors.

He goes on to say, "The Finance Ministers and Central Bank governors typically have close ties with the financial community; they come from financial firms, and after their period in government service, that is where they return. These individuals naturally see the world through the eyes of the financial community. The decisions of any institution naturally reflect the perspectives and interests of those who make the decisions; not surprisingly, the policies of the international financial institutions are all too often closely aligned with the commercial and financial interests of those in the advanced industrial countries."

Though an insider with impeccable credentials and credibility like Stiglitz has laid bare this fact which was known by most people much earlier, yet it is obvious that the government of India's policies regarding the revolving door between the government and the World Bank/IMF are totally oblivious to this.

How else would one explain the fact that for much of the last 20 years, and particularly since 1991, many if not most of the top economic policy makers including members of the planning commission, secretaries of the Finance Ministry and Governors of the Reserve Bank have been staffers of the World Bank/IMF. They have moved smoothly and seamlessly between the World Bank/IMF and the government of India, as if the government of India were just a division of the World Bank/IMF.

In 1996, James Wolfensohn, then President of the World Bank, called for the World Bank to become a Knowledge Bank. The World Bank has always been engaged in producing knowledge. This knowledge has been produced and used to design, justify, plan and support policies, programs and projects all over the world. Wolfensohn formally recognised this 'other' side of the Bank to be as important as its financial side.

In India, the latest country assistance strategy (CAS) that defines the Bank's approach to lending for the three years 2005-08, says: "Three Strategic Principles will underpin the Bank Group's work: (i) focusing on outcomes… (ii) applying selectivity…and (iii) expanding the Bank Group role as a politically realistic knowledge provider and generator."

Creation of Intellectual Support for Privatisation and Globalisation

Why is the Bank giving so much importance to the creation and provision of knowledge? Ostensibly, it is to better tackle the challenges of global poverty eradication and improving people's lives. However, there appear to be other reasons.

It is an open secret that the World Bank directly intervenes in the policy making processes of the countries to which it lends money. In the last 15 years or so, the Bank has been consistently pressurising Governments along the path of Liberalisation, Privatisation and Globalisation (LPG), forcing open more and more sectors of the economy to global private capital. Simultaneously, it has been pushing for the 'commercialisation' of these sectors, that is, the operation of these sectors along commercial lines, as a market, so as to create an enabling environment for privatisation.

All over the world, there has been massive resistance to these policies, and tremendous accumulating evidence that the policies are harming the poor and destroying the environment. The Bank is therefore increasingly being called upon to present justification for these policies. One of the most important ways in which this is done is through the use of knowledge. In effect, this is the creation of the 'intellectual' support to build up the rationale and justification of privatisation and globalisation.

For more than sixty years, the International Monetary Fund and the World Bank together with their partner regional development banks, various ODA's and export credit agencies, have used international finance capital to exercise control and restructure a country like India and the societies of the South to serve the interests of global private corporations and the economic and geopolitical agenda of the few powerful nations that control these institutions.

These 'terrible twins' typically play the Good Cop, Bad Cop comedy on poor nations and their people in a pincer like move, whereby the Bad Cop (IMF) first imposes conditionalities on its loans that chokes social sector and other welfare activities, and the Good Cop (World Bank) steps in through Social Safety Nets, poverty alleviation and other prescriptive loans to throttle nations in spirals of debt, with accompanying loss of sovereignty.

Attempts by global financial institutions to synchronize their policies on developing nations threaten to further entrench a one-sided approach to development, fuel instability and widen the gap between the world's rich and poor.

The resulting effects on people's lives, on communities, on the environment, and on the economic as well as political structures in the South have been profound and over the years have generated numerous resistance struggles against these institutions.

The debt problem must be understood not simply in terms of volume and debt service capacity, but through a critical lens examining historical, political, and economic context. While India's external debt ($123 billion) appears small compared to other countries, the 2006-07 budget allocated 421,219 crore rupees to debt service versus only 9,321 crore to social services.

Debt as an Instrument of Power

Debt is wielded as a powerful instrument to influence and intervene in borrowing countries' economies and promote neoliberal policies. India's continuous access to World Bank loans enables IFIs to impose conditionalities, policy prescriptions, and finance projects that create enabling environments for privatization and serve global corporate interests. Since 2000, the Transportation sector has claimed 41-58% of World Bank lending in India.

The Illegitimacy of Debt

Specific debts can be illegitimate based on: processes involving fraud or coercion; private debts that became public through guarantees; usurious interest rates and onerous provisions; and harmful projects financed by loans. Furthermore, the accumulation of debt itself results from colonial and neo-colonial exploitation—most debtor countries are former colonies, and their biggest bilateral creditors are often their former colonial powers.

The perspective on illegitimacy asserts that these debts cannot be legitimately claimed from the people of the South. In fact, the North owes the South enormous historical, social, and ecological debts. This empowering perspective is based on principles of human rights, justice, sovereignty, and democracy.

The World Bank has acquired a new concern and a new modus operandi. Its new focus is ensuring that the whole range of scarce natural resources—or resources made scarce through private appropriation—be opened up for private ownership. This means creating private property rights over natural resources, effectively opening the entire domain to ownership by private corporations and multinationals.

This fits with the pattern of contemporary globalization, where accumulation takes the form not just of building new factories or expanding productive capacity, but of grabbing—seizing public property, common resources, natural resources, peasant lands, and spaces occupied by small producers. Marx called this "primitive accumulation of capital," but it might better be termed accumulation through encroachment.

Accumulation through encroachment has become a dominant feature of globalization, and the World Bank underwrites and promotes it through numerous conditionalities that create conditions for such encroachment to thrive. This requires privatization of public sector assets and the appropriation of common property resources by multinationals—sometimes requiring government complicity at multiple levels.

The World Bank has heavily infiltrated the Central government and financial ministries. It has also penetrated state governments through training programmes. More recently, the Bank is seeking to enter the sphere of decentralization and local self-governing institutions. One of its main purposes in entering local self-government is to facilitate precisely this business of making resources previously unavailable for private appropriation newly accessible to corporate interests.

Governance became an integral part of the World Bank’s agenda in the 1990s. Analysts have noted (Singh, 2003) that this shift functioned as a strategic response to growing criticism of the Bank’s failure to reduce poverty and inequality despite decades of growth-oriented lending.

Rather than reassessing its flawed neo-liberal policy framework, the Bank attributed the lack of progress toward its stated goal of a poverty-free world to poor policy implementation and weak governance within borrowing countries. The Bank’s convenient diagnosis was that sound policies cannot be sustained in environments marked by weak institutions. According to this view, deficient governance leads to misguided resource allocation, excessive government intervention, arbitrariness, and corruption—conditions said to deter private sector investment and slow both economic growth and poverty reduction.

The World Bank defines governance as “the manner in which power is exercised in the management of a country’s economic and social resources for development.” Notably, this definition makes no reference to democracy and therefore does not engage with questions of political legitimacy. The Bank further asserts that, consistent with its Articles of Agreement as a non-political institution, it concerns itself only with the technocratic aspects of governance.