The protesters marching in the streets of Washington last weekend did a good job calling attention to the World Bank, but the bank itself remains mysterious to many, so I thought I’d spend a few minutes talking about how all this international high finance works. This description will be, by necessity, very simple, so I apologize in advance to any economists who may be listening and take offense.
The World Bank is just that, a bank, although I don’t think you can open a Christmas Club account. Subsidized by the industrial nations of the northern hemisphere, the World Bank lends money to poor countries to assist their economic development. The idea is, that as these countries develop and prosper, they will be able to pay back the loan, plus interest and the money can be lent again, to another poor country. Sound good so far? Here’s where it gets complicated.
Like any bank, the World Bank doesn’t just hand out money. It lends specific sums for specific development projects. One of the World Bank projects demonstrators were protesting last week is an oil pipeline, which would run from the landlocked African nation Chad, through Cameroon to a port on Cameroon’s Atlantic coast. The World Bank is going to sink 190 million dollars into this project. The entire project is expected to cost 3.5 billion dollars. Ninety-five percent of the cost is being picked up by the American oil company ExxonMobil, the Dutch oil company Shell and the French oil company Elf Aquitaine. So, is the World Bank helping develop two impoverished African nations or providing corporate welfare for oil companies?
The pipeline would originate in southern Chad, which has 300 producing oil wells. Southern Chad is also home to the most fertile farmland in that country. Oil companies operating in Africa have notoriously poor environmental records, making the regions in which they drill uninhabitable through spills and gas flaring. As the pipeline crosses Cameroon, it will cut through a tropical rainforest and most of Cameroon’s river systems.
The governments of Chad and Cameroon have been labeled as among the most corrupt on earth by human rights groups, so what chance does a Chadian farmer stand when three oil companies want to run their pipeline across his land? What hope is there for Cameroonians whose drinking water will be fouled by spills from the pipeline?
So when you heard the newscasters saying demonstrators were protesting human rights and environmental abuses, these are the types of things they’re shouting about. Unfortunately, that was as much substance as there was to be found in most news reports from Washington. Plenty of coverage of pepper spray here and giant puppets there, but I didn’t see one in-depth look at a controversial World Bank loan. Why is that?
The problems of the World Bank are the same problems with almost any bank. Most of the money gets lent to those who don’t need it. Most World Bank loans go to the richest of the poor, rather than the poorest of the poor. Problem is, the richer developing nations can get loans from commercial banks, but they get a better rate at the World Bank. By the time they’re finished borrowing, there’s precious little left for the truly poor nations.
Instead of helping farmers in Chad be more productive, the World Bank helps finance a pipeline, thereby propping up two despotic governments, further enriching the oil companies and guaranteeing the flow of the petroleum drug to the northern hemisphere.
Remember Seattle and the protest against the World Trade Organization? The World Bank is another pillar supporting the same system of globalization.
Hold onto your hats, these protests are far from over.
Far From Over
The protesters marching in the streets of Washington last weekend did a good job calling attention to the World Bank, but the bank itself remains mysterious to many, so I thought I’d spend a few minutes talking about how all this international high finance works. This description will be, by necessity, very simple, so I apologize in advance to any economists who may be listening and take offense.
The World Bank is just that, a bank, although I don’t think you can open a Christmas Club account. Subsidized by the industrial nations of the northern hemisphere, the World Bank lends money to poor countries to assist their economic development. The idea is, that as these countries develop and prosper, they will be able to pay back the loan, plus interest and the money can be lent again, to another poor country. Sound good so far? Here’s where it gets complicated.
Like any bank, the World Bank doesn’t just hand out money. It lends specific sums for specific development projects. One of the World Bank projects demonstrators were protesting last week is an oil pipeline, which would run from the landlocked African nation Chad, through Cameroon to a port on Cameroon’s Atlantic coast. The World Bank is going to sink 190 million dollars into this project. The entire project is expected to cost 3.5 billion dollars. Ninety-five percent of the cost is being picked up by the American oil company ExxonMobil, the Dutch oil company Shell and the French oil company Elf Aquitaine. So, is the World Bank helping develop two impoverished African nations or providing corporate welfare for oil companies?
The pipeline would originate in southern Chad, which has 300 producing oil wells. Southern Chad is also home to the most fertile farmland in that country. Oil companies operating in Africa have notoriously poor environmental records, making the regions in which they drill uninhabitable through spills and gas flaring. As the pipeline crosses Cameroon, it will cut through a tropical rainforest and most of Cameroon’s river systems.
The governments of Chad and Cameroon have been labeled as among the most corrupt on earth by human rights groups, so what chance does a Chadian farmer stand when three oil companies want to run their pipeline across his land? What hope is there for Cameroonians whose drinking water will be fouled by spills from the pipeline?
So when you heard the newscasters saying demonstrators were protesting human rights and environmental abuses, these are the types of things they’re shouting about. Unfortunately, that was as much substance as there was to be found in most news reports from Washington. Plenty of coverage of pepper spray here and giant puppets there, but I didn’t see one in-depth look at a controversial World Bank loan. Why is that?
The problems of the World Bank are the same problems with almost any bank. Most of the money gets lent to those who don’t need it. Most World Bank loans go to the richest of the poor, rather than the poorest of the poor. Problem is, the richer developing nations can get loans from commercial banks, but they get a better rate at the World Bank. By the time they’re finished borrowing, there’s precious little left for the truly poor nations.
Instead of helping farmers in Chad be more productive, the World Bank helps finance a pipeline, thereby propping up two despotic governments, further enriching the oil companies and guaranteeing the flow of the petroleum drug to the northern hemisphere.
Remember Seattle and the protest against the World Trade Organization? The World Bank is another pillar supporting the same system of globalization.
Hold onto your hats, these protests are far from over.