The World Bank and Civil Society: Forward to the Past?

Peter Bosshard
Saturday, November 6, 2004

A Review of The World’s Banker, A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations by Sebastian Mallaby (Penguin Press, October 2004)

In The World’s Banker, Sebastian Mallaby presents an insightful account of the World Bank during the presidency of James Wolfensohn. The author loses his cool when he discusses the role of advocacy groups that campaign against Bank projects, substituting research with polemic and a substantive debate with catchy slogans.

Sebastian Mallaby’s preferred method of work is the interview. For his new book, The World’s Banker, the Washington Post columnist conducted more than two hundred long interviews. By his own account, he spent nearly twenty hours conversing with World Bank President James Wolfensohn, and talked with scores of other Bank staff and managers. Mallaby spent so much time at the World Bank that he ran out of time to talk with those he calls the "Berkeley mafia" – the environmental activists whom he holds responsible for the woes of the financial institution. As a consequence, his tirade against advocacy NGOs is so ill informed and ideological that it undermines the useful insights in the remainder of his book.

"A fantastic force of nature"

Mallaby’s book centers on James D. Wolfensohn, and with good reason. Few other people have shaped the institution as much as its current President, whose second term ends in 2005. Mallaby portrays the subject of his fascination as a "screamer, schemer, seducer; Olympian, musician, multimillionaire; by no means a saint but by any standards a fantastic force of nature". Notes Mallaby: "It is as though Jim Wolfensohn were born with a triple dose of all the contradictory energies that animate our lopsided progress: avarice and generosity, egocentricity and compassion, curiosity and insecurity, and most of all a roaring restless hunger to do all the things that man can do, and succeed in all of them."

The World’s Banker leads the reader through the many turns of James Wolfensohn’s presidency – the newcomer’s desire to "walk with the poor" and dine with environmental activists, his bold decision to put the "cancer of corruption" on the agenda of his institution, Wolfensohn’s growing caution regarding controversial large–scale infrastructure projects, his often chaotic attempts to reorganize the Bank’s bureaucracy, and his efforts to engage the World Bank in challenges such as the AIDS pandemic and the reconstruction of war–torn Bosnia. The book shows how James Wolfensohn in the end comes full circle. With the support of Southern governments, Northern equipment suppliers and World Bank bureaucrats, he re–embraces controversial infrastructure projects in a so–called "high risk/high reward" strategy.

Mallaby’s book is well written. The reader accompanies James Wolfensohn as he meets slum dwellers and corrupt Bank clients, and witnesses Bank managers attending a state dinner of processed cheese in besieged Sarajevo. However, the book neglects important issues. Mallaby gives short shrift to environmental issues (except as a subject of NGO campaigns). And he fails to mention how the Bank’s dogmatic privatization policies have wreaked havoc on the infrastructure and social sectors of many Southern countries.

Fundamental contradictions

James Wolfensohn is a relationship man. His friends include Bill Clinton and Paul Volcker, Harrison Ford and the Dalai Lama. As Mallaby writes, Wolfensohn "hated the idea that it was impossible to be friends with everyone". The Bank President listened to the concerns and made assurances to governments and private investors, church leaders and environmental activists alike. As a consequence, the Bank’s policy initiatives of the past decade were marked by fundamental contradictions.

Wolfensohn stresses the importance of "country ownership" of Bank projects, a concept that the Bank interprets exclusively as ownership by governments. He has decentralized the decision–making at the Bank, encouraged the streamlining of its procurement guidelines, and a reliance on national rather than the Bank’s own social and environmental policies. At the same time, Wolfensohn has been sensitive regarding the issue of corruption in Bank projects. Mallaby recognizes that the weakening of Bank oversight that country ownership entails contradicts the efforts to fight corruption. "Wolfensohn’s two main instincts on development – that the Bank should listen to its clients, and that development depended upon noneconomic factors such as corruption – were in some ways in tension with each other", he notes.

When environmental and human rights concerns took a backseat in global politics under the Bush administration, and particularly after the terrorist attacks of September 11, Wolfensohn aligned his institution with the new political realities. Under his leadership, the Bank began weakening its social and environmental standards in order to increase its lending to middle income countries, and marginalized the concerns of affected communities and non–governmental organizations. The Bank also rejected the adoption of the key recommendations of the independent reports on large dams and extractive industries that Wolfensohn had commissioned.

Gratuitous concerns

Sebastian Mallaby strongly supports the Bank’s backlash on social and environmental issues as a move "back towards its future" (or maybe rather, forward towards its past). He charges that since the 1990s, the Northern NGOs have "overplayed their hand", and that "despite their diminutive stature, the Lilliputians are winning".

Mallaby claims that social and environmental safeguard policies have increased the cost of doing business with the World Bank to the point that industrializing countries like South Africa prefer to borrow from other sources. He bolsters his case by misrepresenting the Bank’s "Cost of Doing Business" report. He claims that these standards add $300 million a year to the cost of lending, but does not mention that most costs are caused by procurement and fiduciary obligations – including the country’s own regulations – and not the environmental safeguards. The Bank’s social and environmental standards, he argues, are marked by "Byzantine excess" that must be discarded. Mallaby is also concerned that the decrease in lending to middle income countries, particularly for infrastructure projects, undermines the Bank’s own financial health, because the profits from these loans pay for a large part of its administrative expenses.

Sebastian Mallaby’s positions are marked by the same contradictions as the Bank policies that he analyzes. He applauds the new focus on non–economic factors such as corruption and dismisses "the idea that you could ignore this political context and proceed by technocratic means alone". He also recognizes that the new push for large infrastructure projects is partly motivated by the pork–barrel interests of Northern equipment suppliers. Yet he supports the renewed promotion of such projects in repressive and corrupt countries like Laos under the motto of country ownership. The author thus falls into the same technocratic trap that marks the Bank’s lending.

Mallaby points out that before Wolfensohn’s presidency, the Bank regularly propped up corrupt governments so that they would not default on their debts. "To defend against default, you lent money to absurd Napoleons", he points out. Today, the Bank pushes loans to governments with questionable records on corruption to defend its own budgetary bottom line, and again the author supports the new strategy.

Mallaby insists that the World Bank should listen to the poor, and not to Northern environmentalists. He argues that it is unfair to apply what he calls the "Volvo" standards of the North in poor countries like Laos. Yet what he dismisses as "infernal safeguards" is exactly what gives the poor a voice in Bank projects. And while the environment is sometimes considered a luxury issue in the North, environmental resources such as fisheries are a matter of basic livelihood for poor people in countries like Laos.

Mallaby admires the "smart, attractive, poverty–fighting idealists" that devise innovative Bank projects in countries like Mali, Indonesia and Bosnia, and in fighting AIDS. Yet it is not the opposition of NGOs and the environmental policies that prevent the Bank from financing more cooperatives for the widows of Srebrenica, more AIDS prevention programs and village–level projects. It is the governments (in the North and South) that do not prioritize innovative and grassroots–oriented approaches. Given his support for the Bank’s renewed focus on exclusive government ownership, Mallaby’s concerns about corruption, financial self–interest and top–down development appear rather gratuitous.

A relationship man...

When James Wolfensohn visited Mali right after taking on his job, he was presented a large goat as a welcome gift. When he departed, he left the goat in the custody of his country director. The billy was so unruly that he was sent to a village as a present from the Bank, and promptly ended up in a barbeque. The country director still regularly reported the goat’s progress to her President, and it was years before Wolfensohn learned about the true fate of his African pet.

Mallaby reports the goat story because it stands for a larger problem. It takes thorough research and reality checks on the ground to distinguish facts from propaganda in the constant stream of good news that pours from the World Bank’s public relations machine. For this reason, Wolfensohn tried to meet with poor people on every trip to a borrowing country, at least in the early years of his presidency.

Like the World Bank President, Sebastian Mallaby is a relationship man. The World’s Banker is primarily based on a large number of personal interviews. Yet unlike the subject of his book, Mallaby spent very little time in Southern countries, let alone with project affected–communities. He did not bother to check the many internal evaluations that document the ongoing social and environmental problems of World Bank projects (or if he read them, did not use their findings). Again and again, he takes announcements, administrative changes and symbolic gestures (such as Wolfensohn’s dinner with environmentalists) for reality changes. And he bases crucial assertions – for example regarding the improvement of the Bank’s environmental record – on hearsay.

... turned ideologue

Sebastian Mallaby, a historian trained at Oxford, writes with British cool. He admires the reserve, modesty and gentlemanly style of the former Bank President Lewis Preston – an old Marine who had little interest in the development impacts of his institution’s policies. Mallaby deplores that Preston was "no match for the theatrical talents of his NGO critics ... who didn’t know or care what ‘gentlemanly’ meant".

When he writes about the role of advocacy NGOs, it is Mallaby’s turn to lose his gentlemanly cool. With rapid fire, he disparages the NGOs as "ragtag legions", "globophobes" and "the Berkeley mafia". He complains that campaigning groups "do not have an off switch", and has repeated this catchy phrase at numerous public appearances. The author has never explained why in a free society, NGOs – presumably in contrast to the World Bank, the Washington Post and Penguin Press – should be switched off.

Mallaby argues that "discussions with the screamers from the Berkeley mafia will not get you anywhere". In The World’s Banker and newspaper articles, he slanders the activities of International Rivers and other NGOs that he subsumes under the label of the "Berkeley mafia" at considerable length. He interviewed various NGO activists as part of his research. Yet in line with his own advice to the Bank, he did not bother to talk with the groups that he slanders before publishing his book.

Research substituted by polemic

As a consequence of his sloppy research and ideological bias, Mallaby’s accusations against campaigning groups are infuriatingly ill informed. The author reserves particular ire for the groups that campaign against destructive dams, and for the broad–based, independent World Commission on Dams. He wrongly claims that International Rivers used its enormous clout "to ensure that developing country governments were kept out of the deliberations" of this comprehensive evaluation of large dams. Without further discussion, he charges that the guidelines proposed by the commission were "appalling" and "amounted to a virtual ban" on dams. In reality, the members of the WCD were selected by the World Bank and the World Conservation Union, the body was chaired by South Africa’s minister for water affairs, and today several governments are working with the WCD’s recommendations.

Mallaby criticizes Wolfensohn for canceling Nepal’s Arun III dam when 88% of the country’s population had no access to electricity, and the NGOs campaigning against the dam were not located in the Arun valley. He ignores the fact that the electricity generated by the dam would have been prohibitively expensive, that better alternatives were available, and that Wolfensohn cancelled the project after Maurice Strong, the coordinator of the UN environment summit and head of Ontario Hydro, confirmed that it did not make economic sense.

In his opening salvo, Mallaby asserts that a campaign orchestrated by International Rivers opposed a dam in Uganda that even the affected communities supported. He does not mention that once they were displaced, the affected people found that the promises made to them were broken, and turned furiously against the dam. More fundamentally, the author ignores that Ugandan parliamentarians, civil society groups and academics opposed the Bujagali dam (and favored an alternative) because it was corrupt and excessively expensive. The project eventually collapsed because an anti–corruption investigation refused to clear it and the private investor withdrew from it.

In a public debate, the author agreed that even from his own perspective, International Rivers was right on most issues in the campaign against the Bujagali dam. Yet in his book, he charges that "millions of Ugandans are being deprived of electricity – deprived by Californians whose idea of an electricity ‘crisis’ is a handful of summer blackouts".

Throughout his book, Mallaby accuses campaigning NGOs of being ill informed and ideologically biased. "They always found new things to hate, even if they found them by imagining them", he claims. In his tirade against NGOs, he does exactly what he accuses NGOs of doing, and undermines the credibility of his book in the process.

Additional Information