Foreclosing The Future: The World Bank And The Politics Of Environmental Destruction By Bruce Rich
Reviewed by Honor May Eldridge
In his book, Rich documents the history of the World Bank and its legacy of failure when it comes to protecting the environment. For him, it is essential that the World Band consider the environmental impact since “the Bank’s seal of approval on a project or even on a development approach can have widespread influence on the practices of other institutions around the globe”. Given that Dr. Kim’s book Dying For Growth, written in 2000, discussed the disastrous impact that corporate economic globalization policies have had on public health, the hope was that he would take a more environmental position and aggressively drive the World Bank towards a more sustainable vision when he became President. However, this has not been the case.
This entrenchment is due to the Bank’s history and culture, which Rich goes on to detail in the book. He outlines the different administrations (through the arrivals of Wolfensohn in 1995, Wolfowitz in 2005, Zoellick in 2007 through to Dr. Kim’s in 2012) and compares their approach to sustainability reforms and administrative priorities. He considers the environmental damage that they brought about through case-studies including the gold-mines in the Peruvian mountains and the extensive Indonesian deforestation.
The Background and History of Failure;
The International Bank for Reconstruction and Development, International Development Association, International Finance Corporation and Multilateral Investment Guarantee Agency together form the World Bank Group, sharing the same president, governance structure and ethos. While 187 countries are members of the WBG, voting power on the board is proportional to each country’s financial contribution, which means that the US representative wields the decisive vote. The World Bank’s legacy of environmental damage came to a head in the 1980s and caused a period of reflection. This review was particularly sparked by governments of member countries around the world demanding that the World Bank address their damaging practices and promote end-use efficiency and conservation. Through the 1990s, they placed huge weight publicly on their environmental protections, although potentially only to placate the NGO community.
The pressure led to the establishment of the Independent Evaluation Group, which audits projects and sectors and reports directly to the board on performance, including environmental and energy performance. In addition, the same outside pressure led to the establishment of the Independent Inspection Panel in 1993 to investigate complaints against the World Bank’s lending and saw the introduction of the Environmental Safeguards that “provided a framework for screening and analyzing proposed projects and identifying potential impacts that could trigger the application of the other more specialized policies”. (perhaps there’s a better description of the safeguards?
However, the Bank’s officers quickly tried to find paths around these new measures. The establishment of the Independent Inspection Panel and “the threat that staff might actually be held accountable” led directly to the reform of the Operational Directives into “a simpler, shorter, less rigorous format”. Instead of directly attacking the Environmental Safeguards, officers merely circumvented them initially. Part of their disregard for the Safeguards came from the perception that they increased a project’s expense and slowed delivery. For example, to conduct an Environmental Safeguard Assessment on one transport infrastructure project in Africa increased the cost by an average of $12.2m. However, the “benefits over the project’s life were estimated at $335.5m – a benefit/cost ration of 27.3. Project applications that include a cost/benefit analysis such as this one have declined from 70% in 1970 to only 25% in 2008, with the majority of these being conducted after loan approval. (very important stat)
The lack of understanding and the additional upfront cost caused the Bank to move towards non-project lending, which sees the direct transfer of funds to governments “accompanied by vague policy prescriptions” (i.e. that the money go towards health-care) since these avoided the application of the Environmental Safeguards. However, the developing nations that receive these funds often lack accounting controls, increasing the likelihood of corruption. Corruption, in turn, leads indirectly to greater environmental damage since often “there was not enough money left in the project coffers to address the environmental and social problems”.
However, just as with the Operational Directives, eventually the officers’ disdain for the Environmental Safeguards led to them being softened “in favor of a single, simplified social and environmental sustainability umbrella policy” in 2010. This policy is, in turn, again being currently re-assessed and potentially disbanded.
The Ingrained Culture;
This rejection of sustainability and the belief that environmentalism is incompatible with loan processing appears deep-seated and institutional. During his time at the World Bank, Herman Daly tried to promote a more ecological economic approach. However, he encountered huge resistance and ultimately decided it was a “lost cause” that any World Bank environmental rhetoric was “merely window dressing” since they were too indoctrinated in traditional economic thinking and that their behaviors were too deep-seated. This entrenchment was all the more true with in-country officers than it was for those in Washington.
These behaviors were commented on in the 1992 Wapenhans Report that confirmed the “culture of loan approval was corrupting Bank operations”. The staff’s perception was that the environmental safeguards were marketing strategies and that they needed to push the money out the door as fast as they could. While measures were taken after the release of the report, Wapenhans himself noted that until the performance criteria change, the culture within the Bank was unlikely to.
Failure to Reform;
This need to change the performance culture of the World Bank was at the center of Wolfensohn’s vision when he became President of the Bank in 1995. However, he immediately faced push-back from the staff, who carried on with business as usual. Similarly, the bureaucratic traditions of the Bank seemed to crush Wolfowitz’s desire for reform to a more sustainable approach as he slowly began “surfing the powerful waves of long-standing currents” and allowed the abolition of central environmental unit and the vice-presidency for environmentally and socially sustainable development.
With Zoellick’s arrival and the release of the 2010 World Development Report, climate change finally became an economic issue and not just an environmental one. This shift in perspective causes the World Bank to publicly reprioritize the need for sustainability. However, little seemed to change beyond the rhetoric. In part, this is because of “the Bank’s bias (which it in turn blamed partly on borrowing governments) for new projects in preference over support for maintenance of existing infrastructure” and the lack of support, rewards or incentives that it offers the developing countries that do chose to adopt sustainable practices.
It was initially hoped that the Global Environmental Facility would challenge this model and provide a marked shift towards sustainability. The GEF provides grants to cover the additional costs that developing countries face when they choose more sustainable projects over fossil-fuel intensive projects. An example of GEF’s mandate would be that if a wind farm cost more to develop than a coal plant, the GEF would cover the difference since the wind farm was better for the planet and the country in the long term. This launch met resistance for fear that it would mean countries supporting GEF over IDA, the issue of determining “additional costs” and the possibility of leakage (i.e. environmental damage merely moving elsewhere). Defense of the approach was difficult given the inability to calculate the environmental benefit of a sustainable approach.
The criticism proved true since the GEF lending tended to simply green-wash broader traditional energy lending and pre-approved loans through carbon funds and increasing the efficiency of traditional power plants that, while reducing emissions, dissuaded countries from switching to renewables. This trajectory was additionally damaging to the issue of poverty since none of the Bank’s fossil-fuel energy projects increased electricity access for the impoverished (the stated purpose) while 76% of renewable energy did. (another really good point)
The fundamental culture of the institution is deeply ingrained in all World Bank employees from the in-country loan officers to the vice presidents. They support pushing money out the door and approving projects without much consideration for the environmental and social impacts. They see the environmental measures that have been introduced over the years by each administration as cumbersome and irritating, believing them to be mere marketing tools that complicate and delay their work. Consequently, the measures that were introduced to challenge the environmental damage have be ineffective. Each President has come to realize that the internal politics and the perception of them as a temporary figurehead mean that any attempt that is made to improve the sustainability practices of the World Bank will likely fail. Until the internal structure and attitude of the Bank can be reformed, external pressure and policies will do little to affect change.