The World Bank hands out largesse to the wealthy and powerful
At the World Bank, we have made the world’s most pressing development issue — to reduce global poverty — our mission. We focus on achieving the Millennium Development Goals, which call for the elimination of poverty and sustained development. These goals provide us with targets and yardsticks for measuring results.
The reality, reported in ProPublica by Cheryl Strauss Einhorn:
Accra is a city of choking red dust where almost no rain falls for three months at a time and clothes hung out on a line dry in 15 minutes. So the new five-star Mövenpick hotel affords a haven of sorts in Ghana’s crowded capital, with manicured lawns, amply watered vegetation, and uniformed waiters gliding poolside on roller skates to offer icy drinks to guests. A high concrete wall rings the grounds, keeping out the city’s overflowing poor who hawk goods in the street by day and the homeless who lie on the sidewalks by night.
The Mövenpick, which opened in 2011, fits the model of a modern international luxury hotel, with 260 rooms, seven floors, and 13,500 square feet of retail space displaying $2,000 Italian handbags and other wares. But it is exceptional in at least one respect: It was financed by a combination of two very different entities: a multibillion-dollar investment company largely controlled by a Saudi prince, and the poverty-fighting World Bank.
The investment company, Kingdom Holding Company, has a market value of $12 billion, and Forbes ranks its principal owner, Prince Alwaleed bin Talal, as the world’s 29th-richest person, estimating his net worth at $18 billion. The World Bank, meanwhile, contributed its part through its International Finance Corporation (IFC), set up back in 1956to muster cheap loans and other financial support for private businesses that contribute to its planet-improving mandate. “At the World Bank, we have made the world’s most pressing development issue—to reduce global poverty—our mission,” the bank proclaims.
Why, then, did the IFC give a Saudi prince’s company an attractively priced $26 million loan to help build the Mövenpick, a hotel the prince was fully capable of financing himself? The answer is that the IFC’s portfolio of billions of dollars in loans and investments is not in fact primarily targeted at helping the impoverished. At least as important is the goal of making a profit for the World Bank.
I reached this conclusion after traveling to Ghana—in many ways typical of the more than 100 countries where the IFC works—to see firsthand the kinds of problems the World Bank’s lenders are supposed to tackle and whether their efforts are really working on the ground. I pored through thousands of pages of the bank’s publicly available reports and financial statements and talked to dozens of experts familiar with its performance in Ghana and many other countries.
In case after case, the verdict was the same: The IFC likes to work with huge corporations, funding projects these companies could finance themselves. Its partners are billionaires and massive multinationals, from oil giants like ExxonMobil to Grupo Arcor, the huge Argentine candy-maker. Its projects include not only glitzy hotels and high-end shopping malls, but also gritty gold and copper mines and oil pipelines, some of which end up benefiting the very corrupt, authoritarian regimes that the rest of the World Bank is urging to change. Nearly a quarter of the IFC’s paid-in capital from member governments—now standing at $2.4 billion—came from U.S. taxpayers, and every president in the World Bank’s 69-year history has been an American. But the United States has had little complaint with these practices, even when they have become a subject of public controversy.
Not long ago, the World Bank’s internal watchdog sharply criticized the IFC’s approach, saying it gives little more than lip service to the bank’s poverty-fighting mission. The report, a major 2011 review by the bank’s Independent Evaluation Group, found that fewer than half the IFC investments it studied involved fighting poverty. “[M]ost IFC investment projects generate satisfactory returns but do not provide evidence of identifiable opportunities for the poor to participate in, contribute to, or benefit from the economic activities that the project supports,” the report concluded. In fact, it said, only 13 percent of 500 projects studied “had objectives with an explicit focus on poor people,” and even those that did, the report found, had a “limited” impact. The IFC did not dispute the conclusions. . .