The World Bank is not financially sound

USA Today (Society for the Advancement of Education), Sept, 1995 by Patricia Adams

Real reform is possible only in theory. For example, amending the World Bank's articles of agreement--its constitution--requires three-fifths of the members representing 85% of the total voting power. However, roughly four-fifths of the members are borrowers, so the articles give them an iron grip on the bank's affairs and leave the lending countries emasculated.

In the final analysis, the process by which development decisions are made matters most, and in that regard, the World Bank has failed spectacularly. Because the bank's decision-making process is constitutionally unaccountable to, and unamendable by, those it is supposed to serve, the bank continues to approve large projects that rearrange nations, resources for the benefit of elites and to set economic policy without accountability to the citizens of the nations affected.

The World Bank's single most destructive accomplishment perhaps has been to free Third World governments from the need to deal with their own people, thereby undermining the growth of democratic institutions and legitimate tax regimes throughout the Third World. As Chinese dissident Fang Lizhi said in 1989 while arguing for the withdrawal of World Bank loans and credits from China, "We must make our government realize that it is economically dependent on its citizens." Two months after making that statement, Fang was forced to seek asylum in the U.S. Embassy for his part in the democracy movement. Since then, China has become the World Bank's biggest annual borrower.

For five decades, World Bank investments have destroyed environments, distorted economies, broken lives, and built up $100,000,000,000 in contingent liabilities for the world's taxpayers. For almost as long, citizens have attempted and failed to reform the bank, confirming that it is constitutionally unaccountable and incapable, no matter how good its intentions, of contributing to the development of nations. Shareholders should take stock, assume responsibility, and end the World Bank's operations. There are many ways to do that:

Dissolution. In 1944, the founding fathers of the Bretton Woods institutions spelled out how the IBRD would be created and how it should be dissolved. According to the articles of agreement, a majority of the governors, exercising a majority of the total voting power, can shut down the IBRD's operations. It would be nearly impossible to convince a majority of the member countries to agree to do so, though, because borrowers, each with one vote, outnumber lenders six to one.

Borrowing countries will resist dismantling the IBRD as long as they can refinance and service old bank loans with new ones at the financial risk of the rich countries. Rich-country members, meanwhile, have an incentive to prop up the IBRD to avoid taxing their citizens an additional $100,000,000,000 to cover the liabilities incurred in their names.

Privatization. Before the World Bank could be privatized, its house would need to be put in order. Its assets--the portfolio of often worthless loans carried on its books at full value--would have to be written down to market value. Its payroll--which at an average of $123,300 per person is the world's most expensive--must be put on a commercial footing. (Employees also are pampered with perks, including tax-free income.)