The recent appointment of Paul Wolfowitz as
head of the World Bank was viewed around the world as a scandalous
example of the Bush administration’s arrogance. Perhaps more
than any other member of the clique that has taken control of the
White House, it was Wolfowitz who masterminded the illegal war in
Iraq. This, together with his history as apologist for
Suharto’s atrocities while serving as ambassador to
Indonesia, would seem to disqualify Wolfowitz from heading an
organization supposedly dedicated to eliminating global poverty.
When one looks closely at the World Bank’s activities in the
Third World, however, it becomes clear that Wolfowitz and the bank
are a perfect match.
The World Bank and its sister institution, the
International Monetary Fund, are vehicles for penetrating the
economies of poor nations and assuring the dominance of First World
financial institutions. The bank advocates the belief that all
economic problems can and should be solved by the free market. The
so-called Washington Consensus is the theory that poor nations can only develop by
opening their economies to foreign investment, making their
currencies convertible, eliminating tariffs and subsidies, and
privatizing state-owned enterprises. According to this philosophy,
an underdeveloped economy will prosper by embracing
globalization.
Experience has shown otherwise. Chalmers
Johnson, president of the Japan Policy Research Institute, has
written, “There is no known case in which globalization has
led to prosperity in any Third World country, and none of the
world’s . . . developed capitalist nations . . . got where
they are by following any of the prescriptions contained in
globalization doctrine.” The result, and many would argue the
intent, of World Bank interventions in the Third World has been the
establishment of a string of sweatshop colonies whose economies are
based on cheap labor and resource extraction. Winners in this
process include banks such as Citigroup and JPMorgan Chase; losers
include citizens of the Third World and U.S. taxpayers who finance
the bank.
Perhaps the most egregious example of World
Bank activities can be found in the reconstruction of Iraq. In
September 2003, Paul Bremer, head of the Coalition Provisional
Authority, signed into law Order 39, a document which permits full
foreign ownership of businesses in Iraq, except in the oil
industry. It is here, where global capital sniffs potential profit,
that the World Bank facilitates foreign investment by offering
“political risk insurance” to companies nervous about investing in developing
countries. PRI insures against the possibility that profits made in a
target country could not be withdrawn and sent abroad as a result of
government-imposed transfer restrictions or because of market
fluctuations. What sounds like a rational and benign facilitator of
investment is in effect a powerful tool for crushing democracy and
developing a de facto economic colony. PRI guarantees that profits
generated in a given market can be withdrawn and sent in search of
higher interest rates in other countries. This constant threat of
capital flight does two things: gives foreign firms an insurmountable
advantage over domestic companies that are not eligible for such
insurance and forces the local government to follow the dictates of
foreign business or else suffer from the withdrawal of capital.
Governments that do not crack down on unions, weaken environmentallegislation, or reduce taxes on corporate profits
are punished.
Favorite targets of the World Bank wrecking
ball are state-owned enterprises and subsidy programs of any kind.
Under Saddam Hussein, about 10 percent of the Iraqi workforce was
employed by state industries. Since the invasion, most state-owned
industries have been closed or sold off, contributing to
today’s massive unemployment in Iraq. Between the first and
second Gulf wars, Saddam’s regime rationed food to most of
the population in order to soften the effects of the U.S.-imposed
embargo. After the collapse of the regime the World Bank largely
eliminated this subsidy. An April 5 report by the BBC claimed that
child malnutrition has doubled since the invasion. These are the
salutary effects of the free market.
As dubious a character as Wolfowitz is, it is
unlikely that the World Bank under his leadership will be a
significantly more manipulative organization than it has been in
the past. His appointment as president has generated a great deal
of interest toward an institution that until now has operated
largely under the radar screen. Let us hope that a leader as venal
as Paul Wolfowitz will help attract the global spotlight that the
World Bank deserves.
This article appears in May 12-18, 2005.
