Patrick M. Wood
Wednesday, February 01, 2006
Volume 6, Issue 2
The World Bank, it is,
"a vital source of financial and technical assistance to developing
countries around the world. We are not a bank in the common sense.
We are made up of two unique development institutions owned by 184
member countries—the International Bank for Reconstruction and
Development (IBRD) and the International Development Association
(IDA). Each institution plays a different but supportive role in our
mission of global poverty reduction and the improvement of living
standards. The IBRD focuses on middle income and creditworthy poor
countries, while IDA focuses on the poorest countries in the world.
Together we provide low-interest loans, interest-free credit and
grants to developing countries for education, health,
infrastructure, communications and many other purposes."
High-minded words like "our mission of global poverty reduction and
the improvement of living standards" would lead the reader to
believe that the World Bank is some benevolent and global welfare
organization. Why is it then, that The World Bank joins the
International Monetary Fund and the World Trade Organization as
organizations that people around the world just love to hate?
In reality, the World Bank carries its weight, along with the
International Monetary Fund and the Bank for International
Settlements, to forcibly integrate minor countries of the world into
its own brand of capitalistic democracy.
World Bank Beginnings
A sibling of the IMF, the World Bank was born out of the U.N.
Monetary and Financial Conference at Bretton Woods, New Hampshire in
July, 1944. The original name given to the World Bank was the
International Bank for Reconstruction and Development (IBRD) and
reflects its original mission: to rebuild Europe after the
devastation of World War II. The name "World Bank" was not actually
adopted until 1975.
Both the IBRD and the IMF were created as independent specialized
the United Nations, of which they remain to this day.
The word "Development" in the IBRD name was rather insignificant at
the time because most of the southern hemisphere was still under
colonial rule, with each colonial master responsible for the
business activities in their respective countries.
Note: It is argued by some that there was an original desire by
banking elites to put an end to colonialism by restructuring
investment and trade patterns in colonized countries. This paper
will not deal with this issue, but it should be noted that this has
been exactly what has happened, in many cases being aided by the
operations of the World Bank and the IMF.
As a "reconstruction" bank, however, the World Bank was impotent. It
ultimately loaned only $497(US) million for reconstruction projects.
The Marshall Plan, by contrast, became the true engine of the
reconstruction of Europe by loaning over $41(US) billion by 1953.
The primary architects of the World Bank were Harry Dexter White and
John Maynard Keynes, both of whom are summarized
Global Banking: The
International Monetary Fund as
"Such is the moral fiber and
intellectual credentials of the creators of the IMF [and the
World Bank]: One was an English ideologue economist with a
markedly global bent, and the other a corrupt and high-ranking
U.S. government official who was a top Soviet spy."2
Structure of the World Bank
Today, the World Bank consists of two primary units: The
already-mentioned IBRD and the International Development Association
(IDA), which was created in 1960.
The IBRD lends only to governments who are credit-worthy; in other
words, there is an expectation that they will repay their loans. The
IDA, by contrast, only lends to governments who are not
credit-worthy and are usually the poorest nations. Together, they
create a "one-two" punch in global lending to any government that
they are able to talk into borrowing. The U.S. currently contributes
about $1 billion per year of taxpayer funds to the IDA.
Three other affiliates combine with the World Bank, to be
collectively called the World Bank Group:
IBRD funds its lending operations by selling AAA-rated bonds and
other debt instruments to other banks, pension funds, insurance
companies and corporations around the world. By contrast, the IDA is
funded by (taxpayer) contributions from member countries. Annual
levels of lending is roughly equal between IBRD and IDA. While the
IFC generates its own capital in open markets, MIGA and ICSID
receive the majority of their funding from the World Bank, much of
which is taxpayer funded.
Ownership of the World Bank consists of voting shares held by member
countries, according to size and contributions. Currently, the U.S.
is the largest shareholder with 16.4 percent of total votes. The
next largest voting blocks are Japan (7.9 percent) and Germany (4.5
percent). Because major decisions require an 85 percent
super-majority vote, the U.S. can effectively veto any change (100%
-16.4% = 83.6%).
It should be noted that
the United Nations is headquartered in the
United States, on land originally donated to it by
Rockefeller. The Bretton Woods Conference was held in New Hampshire.
Every president of the World Bank has hailed from the United States.
It is no wonder that the rest of the world views the World Bank as
an American operation.
There has been an unwritten but traditional rule that the World Bank
president will always be an American, while the president of the IMF
is European. (A recent exception to this is the current IMF
president, who is Canadian)
It is instructive to review the past presidents of the World Bank,
because it demonstrates which elite cabal is really in control of
World Bank operations. In turn, this will point strongly to the
beneficiaries of the World Bank hegemony. The complete biographies
and accomplishments of these men far exceed the available space in
this report, so only a few highlights are noted.
1. Eugene Meyer. June to December, 1946.
Chairman, Board of
Governors of the Federal Reserve from 1930-1933; owner of the
Washington Post; Member,
Foreign Relations; agent of Lazard Freres, Brown Brothers, Harriman; appointed head of the War
Finance Corporation during WWI by Woodrow Wilson.
2. John J. McCloy. March 1947 to April 1949.
Member and chair of the
Foreign Relations; Chairman, Ford Foundation; Chairman,
Chase Manhattan Bank; lawyer whose firm was council to Chase
3. Eugene Black. July 1949 to December 1962.
Chairman, Board of
Directors for the Federal Reserve System (1933-34); senior vice
president of Chase Manhattan Bank; Member,
Foreign Relations; member of
Bilderbergers; created the International
Finance Corporation and the International Development Association at
the World Bank.
4. George Woods. January 1963 to March 1968.
Vice president of
Harris, Forbes & Co.; vice president of Chase Bank; vice president
of and board member of First Boston Corp. (one of the largest U.S.
investment banking firms).
5. Robert Strange McNamara. April 1968 to June 1981.
director of Ford Motor Company; Secretary of Defense in the Kennedy
and Johnson administrations; member of
Foreign Relations and
Bilderbergers; honorary council
trustee of Aspen Institute. Personally negotiated China’s entrance
into the World Bank.
6. A.W. Clausen. July 1981 to June 1986.
President, CEO and chairman
of Bank of America; member,
Trilateral Commission; member, Bretton-Woods
7. Barber B. Conable. July 1986 to August 1991.
Member of U.S. House
of Representatives from 1965 to 1985; member
Foreign Relations; senior fellow, American Enterprise
Institute; board member, New York Stock Exchange; member, Commission
on Global Governance.
8. Lewis T. Preston. September 1991 to May 1995.
President, CEO and
chairman of J.P. Morgan & Co., and chairman of the executive
committee; vice president of Morgan Guaranty Trust Co.; member and
Foreign Relations; director of General
9. James D. Wolfensohn. June 1995 to 2005
Executive partner and head
of the investment banking department, Salomon Brothers (New York);
executive deputy chairman and managing director, Schroders Ltd.
(London); director, Rockefeller Foundation; board member,
Rockefeller University; honorary trustee, Brookings Institution;
Director, Population Council (founded by John D. Rockefeller);
10. Paul Wolfowitz. 2005 - present.
Deputy Secretary of Defense
Trilateral Commission; member,
Foreign Relations; member,
Bilderbergers; director of the neocon
flagship, Project for the New American Century (PNAC); member of the
elite "Vulcans" group that advised
George W. Bush on foreign policy
during the 2000 presidential elections (other neocon members
included Condoleezza Rice, Colin Powell and Richard Perle); member
of and frequent speaker at Social Democrats USA (successor to the
Socialist Party of America).
An important pattern emerges here. These men frame a 50-year time
period stretching from 1946 to 2006. The early players have long
since passed away. There was no social connection between the early
and latter presidents. Yet, seven out of ten are members of the
Council on Foreign Relations; four are members of the Trilateral
Commission, seven have major global bank affiliations (Chase
Manhattan, J.P. Morgan, Bank of America, First Boston, Brown
Brothers, Harriman, Salomon Brothers, Federal Reserve), and four men
were directly connected to
A detailed analysis is not required to see the pattern emerge:
Global bankers (the same old crowd) and their related global
proxies, have completely dominated the World Bank for its entire
history. Collectively and individually, they have always operated
purposefully and consistently for their own self-interested,
financial gain. Why would anyone expect even one of them to act out
of character (e.g., be concerned for world poverty) while directing
the helm of the World Bank?
Purposes of convenience
Whatever the true purposes of the World Bank and IMF might have
been, the publicly displayed purposes have changed when it was
convenient and necessary.
In 1944, reconstruction of war torn countries after WW II was the
When the Bank demonstrated its impotence by loaning only a pittance
of less than $500 million, it changed its pubic image by positioning
itself as a check and balance to the expansion of communism. Without
the World Bank to engage all of the lesser countries of the world
who were susceptible to communist influence, communism might spread
and ultimately threaten to end the cold war with an ugly nuclear
Public and legislative sentiment ultimately fizzled and the Bank was
again under heavy criticism when Robert Strange McNamara was
Poverty Reduction: Trojan Horse
As noted above, McNamara was president of the World Bank from 1968
through 1981. He was also among the original membership of the
Trilateral Commission, founded in 1973 by Rockefeller and
and was widely considered to be a central figure in
the global elite
of his day.
It was McNamara who caused the focus of the World Bank to fall on
poverty and poverty reduction. This has essentially remained the
siren call right into the present. This was a brilliant maneuver
because who would ever say they are anti-poor or pro-poverty? Any
attack on the Bank would thus be viewed as an attack on poverty
relief itself. From 1968 onward, the battle cry of the Bank has been
This is clearly seen on the About Us page of the World Bank web
site, where these words are prominently displayed:
"Each institution (IBRD and IDA) plays a different but supportive
role in our mission of global poverty reduction and the improvement
of living standards." [emphasis added]
However, Article I of The Articles of Agreement of the IBRD, as
amended on February 16, 1989, state its official Purposes as
(i) To assist in the reconstruction and development of territories
of members by facilitating the investment of capital for productive
purposes, including the restoration of economies destroyed or
disrupted by war, the reconversion of productive facilities to
peacetime needs and the encouragement of the development of
productive facilities and resources in less developed countries.
(ii) To promote private foreign investment by means of guarantees or
participations in loans and other investments made by private
investors; and when private capital is not available on reasonable
terms, to supplement private investment by providing, on suitable
conditions, finance for productive purposes out of its own capital,
funds raised by it and its other resources.
(iii) To promote the long-range balanced growth of international
trade and the maintenance of equilibrium in balances of payments by
encouraging international investment for the development of the
productive resources of members, thereby assisting in raising
productivity, the standard of living and conditions of labor in
(iv) To arrange the loans made or guaranteed by it in relation to
international loans through other channels so that the more useful
and urgent projects, large and small alike, will be dealt with
(v) To conduct its operations with due regard to the effect of
international investment on business conditions in the territories
of members and, in the immediate postwar years, to assist in
bringing about a smooth transition from a wartime to a peacetime
The Bank shall be guided in all its decisions by the purposes set
Note that the word "poverty" does not appear even once. The reason
is clear: Whatever "business as usual" might be with the Bank,
has nothing to do with poverty or poverty reduction. Rather, the
Bank is in business to loan money by stimulating borrowing demand in
developing countries, with a view to increasing international trade.
The primary beneficiaries of international trade are the global
corporations, and the poor are actually poorer as a result.
This hypocrisy was noted even by Nobel laureate and former World
Bank chief economist, Joseph Stiglitz, as late as 2002:
As far as these ’client countries’ were concerned, it was a charade
in which the politicians pretended to do something to redress the
problems [of poverty] while financial interests worked to preserve
as much of the status quo as they could.
Liberalization and Structural Adjustments
When Alden Clausen (also an original member of the Trilateral
Commission) took over the reins from Robert McNamara in 1981, a
massive shakeup in the bank occurred. As Stiglitz noted,
"In the early 1980’s a purge occurred inside the World Bank, in its
research department, which guided the Bank’s thinking and
Clausen, a true core member of the
global elite, brought in a new
chief economist with radical new ideas:
"...Ann Krueger, an international trade specialist, best known for
her work on ’rent seeking’ -- how special interests use tariffs and
other protectionist measures to increase their incomes at the
expense of others... Krueger saw government as the problem. Free
markets were the solution to the problems of developing countries."
This was precisely the time when so-called
and Structural Adjustments were forcefully implemented as a means of
forcing countries to privatize industries. If governments were the
problem, then they should turn over areas of critical infrastructure
to private multinational corporations which, according to Krueger,
could perform better and more efficiently than bureaucratic
Not surprisingly, most of the career staff economists left the Bank
in the early 1980’s in protest over Clausen and Krueger’s policies.
How the Money Laundry Works
The mechanism and operation of Structural Adjustments, along with
the tight cooperation between the IMF and the World Bank, was
adequately covered in
The August Review’s Global Banking: The
International Monetary Fund. The following well-documented example
will be the "picture worth a thousand words" in the Review’s effort
to profile self-serving Bank and global corporate policies. It also
demonstrates the "tag-team" approach used by the Bank and IMF in the
prying open of closed markets in uncooperative countries. It’s a
rather tangled story, but careful reading will produce understanding
of how the "system" works.
In 1998, the IMF approved a loan of $138 million for Bolivia it
described as designed to help the country control inflation and
stabilize its domestic economy. The loan was contingent upon
Bolivia’s adoption of a series of "structural reforms," including
privatization of "all remaining public enterprises," including
services. Once these loans were approved, Bolivia was under intense
pressure from the World Bank to ensure that no public subsidies for
water existed and that all water projects would be run on a "cost
recovery" basis, meaning that citizens must pay the full
construction, financing, operation and maintenance costs of a water
project. Because water is an essential human need and is crucial for
agriculture, cost recovery pricing is unusual, even in the developed
In this context, Cochabamba, the third largest city in Bolivia, put
its water works up for sale in late 1999. Only one entity, a
consortium led by Bechtel subsidiary Aguas del Tunari, offered a
bid, and it was awarded a 40-year concession to provide water. The
exact details of the negotiation were kept secret, and Bechtel
claimed that the numbers within the contract are "intellectual
property." But, it later came to light that the price included the
financing by Cochabamba’s citizens of a part of a huge dam
construction project being undertaken by Bechtel, even though water
Misicuni Dam Project would be
600% more expensive than
alternative water sources. Cochabambans were also required to pay
Bechtel a contractually guaranteed 15% profit, meaning that the
people of Cochabamba were asked to pay for investments while the
private sector got the profits.
Immediately upon receiving the concession, the company raised water
rates by as much as 400% in some instances. These increases came in
an area where the minimum wage is less than $100 a month. After the
price hike, self-employed men and women were estimated to pay one
quarter of their monthly earnings for water.
The city’s residents were outraged. In January of 2000, a broad
coalition called the Coordination for the Defense of Water and Life,
or simply La Coordinadora, led by a local worker, Oscar Olivera,
called for peaceful demonstrations. Cochabamba was shut down for
four days by a general strike and transportation stoppage, but the
demonstrations stopped once the government promised to intervene to
lower water rates. However, when there were no results in February,
the demonstrations started again. This time, however, demonstrators
were met with tear gas and police opposition, leaving 175 injured
and two youths blinded.
The threat that privatization of public services under GATS (General
Agreement on Trade in Services) poses to democracy were demonstrated
in March 2000. La Coordinadora held an unofficial referendum,
counted nearly 50,000 votes, and announced that 96% of the
respondents favored the cancellation of the contract with Aguas del
Tunari. They were told by the water company that there was nothing
On April 4, the residents of the city returned to the streets,
shutting down the city. Again, they were met with police resistance,
and on April 8, the government declared martial law. The Bolivian
military shot a 17-year-old protester in the face, killing him.
However, the protests continued, and, on April 10, the government
relented, signing an accord that agreed to the demand of the
protesters to reverse the water concession. The people of Cochabamba
took back their water.
Unfortunately, this inspiring story didn’t simply end with the
victory for the people of Cochabamba. On February 25, 2002,
filed a grievance using investor protections granted in a
Bolivia-Netherlands Bilateral Investment Agreement at the World
Bank, demanding a $25 million dollar payment as compensation for
Note: Bechtel Engineering is the largest civil engineering company
in the world. It is privately owned by the Bechtel family. For many
years, general counsel (and vice-president) for Bechtel was none
other than original Trilateral Commission member Caspar Weinberger.
Since then, the World Bank has granted additional "poverty
reduction" loans to Bolivia. Carefully read the Bank’s current
(2006) assessment on Bolivia found on its web site:
"Bolivia is experiencing a time of difficulty and uncertainty. In
recent months, various political and social disturbances have
escalated with serious consequences, culminating in the resignation
of President Gonzalo Sánchez de Lozada in October 2003, and the
appointment of Vice-President Carlos Mesa as President. The current
administration inherits a difficult economic, political and social
climate, which is compounded by long-term issues, such as profound
inequality, an economy that has been adversely affected by the
region’s recent economic slump, and widespread public disenchantment
with corruption." 8
Political and social disturbances?
Difficult economic, political and
social climate? Profound inequality? Widespread disenchantment with
corruption? It leaves one speechless.
So, in the case of Bolivia, we see the following in operation:
An IMF loan is made to Bolivia, with conditionalities
The World Bank steps in to enforce the conditionalities and impose
The World Bank loans "development" funds to Bolivia, and
simultaneously brings in private bank consortiums to fund the
various projects that Bechtel had in mind.
Bechtel makes a sole-source bid, and it is accepted.
The water project ends in total failure and Bechtel gets kicked out
after extreme political pressure from consumers.
Bechtel files a "lost profit" claim according to a pre-negotiated
"insurance guarantee" with the World Bank Group (MIGA, see above.)
If Bechtel wins its claim, it will be paid off with taxpayer money
contributed by member countries.
Undoubtedly, any loans from private-sector banks that later turn
sour, will be bailed-out with taxpayer funds as well.
This kind of operation is brazen stealing (albeit perhaps
of funds from everyone in sight: Bolivia, the city of Cochabamba,
the people of Cochabamba, U.S. taxpayers. The only beneficiaries are
Bechtel, the commercial banks and a few corrupt politicians who got
their customary bribes and kickbacks.
A penetrating question remains to be answered: When did Bechtel
first set their sights on the Bolivia deal? Did Bechtel have a role
in suggesting or creating the conditionalities and Structural
Adjustments specified by the World Bank in the first place? If so,
there would be grounds for criminal investigation.
It is not likely that the World Bank will tell us, because of its
very secretive inner workings. Even Stiglitz has noted,
"The IMF and World Bank still have disclosure standards far weaker
than those of governments in democracies like the United States, or
Sweden or Canada. They attempt to hide critical reports; it is only
their inability to prevent leaks that often forces the eventual
The World Bank has received accusations of corruption for many
years. Since the Bank is an independent specialized agency of
United Nations and considering the old adage, "The fruit doesn’t
fall far from the tree", this might not come as a surprise to most.
The United Nations has a major and documented track record on
corruption of every conceivable sort. It would be too simplistic to
just leave it at that.
In May, 2004, Sen. Richard Lugar (R-Indiana), as Chairman of the
Foreign Relations Committee, kicked off the most recent inquiry into
corruption related to the activities of the multilateral development
banks, of which the World Bank is foremost.
The heads of the various development banks were invited to testify
(voluntarily) before the Committee. According to Sen. Lugar, James Wolfensohn,
"declined the invitation, citing the established practice
of Bank officials not to testify before the legislatures of their
numerous member countries."
Witnesses before the Committee testified that as much as $100
billion may have been lost to corruption in World Bank lending
In Sen. Lugar’s opening remarks, he points out that the entire
history of the World Bank is suspect, with between 5 percent and 25
percent of all lending being lost to corruption.
"But corruption remains a serious problem.
Dr. Jeffrey Winters of
Northwestern University, who will testify before us today, estimates
that the World Bank ’has participated mostly passively in the
corruption of roughly $100 billion of its loan funds intended for
development.’ Other experts estimate that between 5 percent and 25
percent of the $525 billion that the World Bank has lent since 1946
has been misused. This is equivalent to between $26 billion and $130
billion. Even if corruption is at the low end of estimates, millions
of people living in poverty may have lost opportunities to improve
their health, education, and economic condition."
One must wonder why World Bank officials have been so sloppy and
careless with taxpayer dollars. Even further, one must wonder if the
corruption was a necessity to achieve the underlying purposes of the
Bank, that is, to create bogus and unwanted projects in order to
Sen. Lugar continued his opening remarks,
"Corruption thwarts development efforts in many ways. Bribes can
influence important bank decisions on projects and on contractors.
Misuse of funds can inflate project costs, deny needed assistance to
the poor, and cause projects to fail. Stolen money may prop up
dictatorships and finance human rights abuses. Moreover, when
developing countries lose development bank funds through corruption,
the taxpayers in those poor countries are still obligated to repay
the development banks. So, not only are the impoverished cheated out
of development benefits, they are left to repay the resulting debts
to the banks."11
It has not been determined which Bank employees might have taken
bribes in exchange for influence, but one can be sure that any deal
starting with corruption only has one direction to go -- down. In
the end, it is helpless individuals who are left holding the bag.
The incurred debts and failed projects just add to the
impoverishment of already poor people.
This is not to say that charges of corruption at the World Bank are
modern revelations only. In 1994, marking the 50th anniversary of
its creation at Bretton Woods, South End Press released "50 Years is
Enough: The Case Against the World Bank and the International
Monetary Fund,." edited by Kevin Danaher. The book details official
Bank and IMF reports that reveal the same kind of corruption back
then. In addition, it revealed different types of corruption, for
"Beyond the wasted money and the environmental devastation, there
was an even more sinister side to the Bank during the McNamara
years: the World Bank’s predilection for increasing support to
military regimes that tortured and murdered their subjects,
sometimes immediately after the violent overthrow of more democratic
governments. In 1979, Senator James Abourezk (D-South Dakota)
denounced the bank on the Senate floor, noting that the Bank was
increasing ’loans to four newly repressive governments [Chile,
Uruguay, Argentina and the Philippines] twice as fast as all
He noted that 15 of the world’s most repressive governments
would receive a third of all World Bank loan commitments in 1979,
and that Congress and the Carter administration had cut off
bilateral aid to four of the 15 -- Argentina, Chile, Uruguay and
Ethiopia -- for flagrant human rights violations. He blasted the
Bank’s ’excessive secretiveness’ and reminded his colleagues that
’we vote the money, yet we do not know where it goes.’"
The text speaks for itself and needs no comment. Readers of this
report will likely have a better understanding of where the money
This report does not pretend to be an exhaustive analysis of the
World Bank. There are many facets, examples and case studies that
could be explored. In fact, many critical and analytical books have
been written about the World Bank. The object of this report was to
show how the World Bank fits into globalization as a central member
in the triad of global monetary powers: The IMF, the BIS and the
The World Bank is likely to continue to operate despite any amount
of political flack or public protest. Such is the pattern of
elitist-dominated institutions. Such is the history of the
International Monetary Fund and the Bank for International
It is sufficient to conclude that...
of the two architects of the World Bank, one was a top Soviet
communist agent (Harry Dexter White) and the other was a British
ideologue (John Maynard Keynes) totally dedicated to globalism (See
Global Banking: The International Monetary Fund for more details on
White and Keynes)
From the beginning, the Bank has been dominated by international
banking interests and members of the Council on Foreign Relations
and later by the Trilateral Commission
the cry of "poverty reduction" is a sham to conceal the recycling of
billions of taxpayer dollars, if not trillions, into private hands
the cry of "poverty reduction" defuses critics of the Bank as being
anti-poor and pro-poverty
corruption at the World Bank goes back decades, if not all the way
to the very beginning
World Bank web site, About Page
The August Review, Global Banking: The International Monetary Fund
World Bank web site, IBRD Articles of Agreement: Article I
Stiglitz, Globalization and its Discontents (Norton, 2002), p. 234
ibid, p. 13
Wallach, Whose Trade Organization? (The New Press, 2004), p.125]
See also, Bechtel Vs. Bolivia: The Bolivian Water Revolt
See also, The New Yorker, letter on Leasing the Rain
See also, PBS, Leasing the Rain
World Bank web site, Bolivia Country Brief
Stiglitz, op. cit., p. 234
Lugar, U.S. Senate Website, $100 billion may have been lost to World
Bank Corruption, May 13, 2004
Hanaher, 50 Years is Enough: The Case Against the World Bank and the
International Monetary Fund, (South End Press, 1994), p. 10
NOTE: Carl Teichrib, Senior Fellow at
World Research Library,
contributed to this report