A clearly perturbed Secretary of State Hillary Clinton angrily denied that she was seeking the top spot at the World Bank this weekend as rumors flew that she plans to resign in 2012 and do just that. One Clinton spokesperson less charitably called the rumor “grade A BS.”
But the rumor of Clinton as World Bank president cast yet another glare on the World Bank’s policies in developing nations. Those policies have been roundly and justifiably criticized for wreaking havoc on the economies of poor nations.
The Bank is and has been for the nearly seventy years of its existence run exclusively by European and especially American bankers and politicians. The U.S. President nominates the World Bank president. In theory the nominee must be approved by the other member countries. But this is a rubber stamp procedure. Whoever the U.S. president chooses will be the Bank president.
The U.S. domination of World Bank policies is assured by the nearly 20 percent of the shares that it owns in the Bank. The World Bank leadership has through its entire Post World War Ii existence been not only a tight knit European and American club, but a rigidly male club. With one exception every one of the past 11 World Bank presidents has been American. In addition, every one of them has been male.
If Obama had nominated Clinton to run the World Bank and she had accepted, she would have been the first female president of the Bank.
The U.S.’s control of the Bank, gender notwithstanding, strikes at the heart of how decisions are made by the Bank and how they affect poor nations that are in dire need of capital and technical assistance and must come hat-in-hand seeking that aid from the Bank.
The standard method of operation of the World Bank in “aiding” distressed developing countries has been well-documented. It dispenses development aid, technical assistance, and loans to needy countries but the price for the cash and assistance is steep. The Bank demands that the nations get their fiscal house in order and that means toeing the rigid free market line that the donor governments, Western banks, private capital markets, and other international organizations demand.
That requires wholesale slashes in public spending, the loosening or scrapping entirely of labor and environmental controls and regulations, cutbacks in public health care services, and dumping price controls and subsidies on food.
During the 1990s, the World Bank tightened standards even more for aid to developing nations. The requirement for distressed nations to get the cash was deregulation, liberalization of markets, privatization and the downscaling of government. This had an even deeper ruinous effect on the nations. It further depressed wages, increased employment, stunted manufacturing growth, escalated prices, and retarded development projects.
The World Bank’s draconian lending policies and requirements and heavy handed political domination came under especially bitter criticism in Sub-Saharan African countries following the first major global energy crisis in 1979. The Bank forced the borrowing nations to drastically cut government spending on health, education and public services under the guise of curbing corruption, waste and promoting good fiscal management.
The restrictions were supposed to further the expansion of labor intensive manufacturing enterprises, infrastructure development, and inflation reduction. Just the opposite happened. Inflation skyrocketed, food shortages increased, price controls and subsidies on food were scrapped, and labor regulations were watered down or eliminated.
Poverty in the nations worsened.
World Bank officials have repeatedly heard the drumbeat criticisms of their policies. In an effort to placate critics, they devised the Poverty Reduction Strategy Paper. This supposedly was a blueprint to reduce the flaws in the structural adjustment policies that widened the economic disparities between rich and poor countries. It didn’t. The Bank continued to impose the same austerity requirements for getting loans and technical aid on debtor nations. This reinforced the age old subservient role that poor nations have played to the World Bank.
Clinton, for her part, was sanguine about the Bank and its importance, “It’s a very important institution, and obviously we want to see the World Bank well led.” But leadership still means keeping the World Bank firmly under the thumb of the U.S.
But whether Clinton is at the helm, or someone else is — Brazil, Mexico, China and India have called for it to be led by a non-European and non-American — that wouldn’t change the one troubling fact that World Bank policies have done more harm than good for poor nations and their people.
Earl Ofari Hutchinson is an author and political analyst. He is an associate editor of New America Media. He is host of the weekly Hutchinson Report Newsmaker Hour on KTYM Radio Los Angeles streamed on ktym.com podcast on blogtalkradio.com and internet TV broadcast on thehutchinsonreportnews.com Follow Earl Ofari Hutchinson on Twitter: http://twitter.com/earlhutchinson
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