World bankruptcy - World Bank and environment

Sierra, July-August, 1992 by Paul Rauber

"Just between you and me," World Bank chief economist Lawrence Summers wrote to his colleagues late last year, "shouldn't the World Bank be encouraging more migration of the dirty industries to the LDCs [less-developed countries]?"

Unaware that his comments would soon be faxed throughout the global environmental community, Summers blithely rationalized poisoning the developing nations.

First, he reasoned, if one measures the cost of pollution by total wages lost to "increased morbidity and mortality," it makes sense to pollute in the country with the lowest wages: "I think the economic logic behind dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that."

Secondly, because pollution-control costs are higher in already polluted countries, dirty industries ought to be located in those that are still clean: "I've always thought that the underpopulated countries of Africa are vastly under-polluted," he wrote. Clean African skies, Summers argued, are "vastly inefficient . . . compared to Los Angeles or Mexico City."

Finally, people in poor countries shouldn't be concerned about carcinogenic toxics, because fewer of them will live long enough to die of cancer anyway. "Pretty air," Summers concluded, is something only affluent nations can afford.

"Your reasoning is perfectly logical but totally insane," responded Jose Lutzenberger, Brazil's minister of the environment. "If the World Bank keeps you as vice-president it will lose all credibility. Your thoughts are a concrete example of the unbelievable alienation, reductionist thinking, social ruthlessness, and arrogant ignorance of many conventional |economists' concerning the nature of the world we live in."

The nature of that world being what it is, however, Summers was not fired (he claimed that his comments were meant to be "highly ironic"); Lutzenberger was replaced (he made the mistake of speaking out about corruption in his ministry); and fiscal control of all major multilateral environmental projects in the developing world was seized by the World Bank. The future, it seems, belongs to the ruthless economists.

Those economists were midwives, two years age, to a dinky (by Bank standards) $270-million pilot project called the Global Environmental Facility (GEF). Since then the Bank - and the Northern industrial nations that fund and control it - have moved with remarkable speed to make the GEF the sole conduit for environmental funds flowing from North to South. As such, it will oversee the disbursement of any monies pledged by national governments during this summer's Earth Summit in Rio de Janeiro, a pot of money expected to total as much as $22 billion. Despite wide opposition among the world's environmental organizations and the under-polluted countries, World Bank management of the Earth Summit funds is apparently a done deal.

Thanks to its own ecologically disastrous development schemes over the last decades, there is no lack of environmental clean-up projects for the Bank to fund. It can even finance both efforts simultaneously, as in China, where the Bank has proposed $400 million in loans for local-fired power plants, $150 million for other fossil-fuel development - and then a $2-million GEF project to reduce [CO.sub.2] emissions. (No more than 2 percent of the Bank's annual $4 billion in energy loans goes for conservation.) In the Philippines, a proposed $30-million GEF grant would simply be lumped in with a $1.5-billion Bank-financed geothermal project, whose drilling wastes are poisoning local aquifers. In the Congo, where the Bank is advocating large-scale logging, a $10-million GEF "biodiversity" grant would open a road through one of the country's last virgin rainforests. The result, according to the U.N. Development Program, will be "a lot worse than if nothing had been done."

Furthermore, since 80 percent of GEF grants are attached to World Bank loans, their net effect is simply to lower the costs of major projects. "In countries where they're liquidating their forest resources to pay back loans," says Cathy Fogel of the Sierra Club's International Program, "a GEF grant amounts to a bribe."

The World Bank is spectacularly ill-suited to the democratic, locally based environmental management advocated by most developing countries and environmental groups. It is addicted to mammoth, multimillion-dollar ventures, typically concocted with no participation from the people they will most affect. (In India, a series of dams funded by the Bank have displaced as many as 800,000 people in the last decade alone.) In its mania for secrecy, the Bank bars nongovernmental organizations from observing GEF meetings. Public information on GEF grants is limited to scanty four-page summaries - which at least is more than what one can learn about the standard development projects to which GEF funds are customarily tied.

The intense embarrassment caused by the release of the Summers memo has made the Bank - at least for the moment - somewhat more receptive to change. Mohammed el-Ashry, head of the environmental department, is generally given high marks for aggressive attempts to improve the quality of Bank loans. Because of a Sierra Club - backed amendment sponsored by Representative Nancy Pelosi (D-Calif.), the United States must now abstain on any project not accompanied by an environmental impact assessment (43 out of 130 since January), a practice that is gradually forcing the regular inclusion of environmental data. The United States, in fact, is the only GEF funder that has been complaining about the lack of environmental accountability. This, according to Larry Williams, director of the Sierra Club's International Program, is due to the constant pressure applied to the Treasury Department by Congress and environmental groups. "While many other nations will talk a good line," he says, "they have not been expressing those concerns to Bank management."