History of the world economy

World Bank Misleads US Congress

From Probe International (Canada)
18 September 1995

The world's largest development institution, the World Bank, is misleading the US Congress and American taxpayers, says a soon-to-be-released report by Canadian watchdog group Probe International. The new study takes the World Bank to task for recent claims that its loans to Third World nations are good for the American economy because they provide billions of dollars in jobs and contracts for US firms.

The new Probe study refutes the Bank claims, calling them "misleading" and "smoke and mirrors accounting." According to the report, the US contributes more than three times as much money to the Bank's International Development Association as it receives back in contracts for consultants, construction companies, and equipment suppliers. With American firms getting approximately 23 cents in procurement contracts for every dollar US taxpayers contribute, IDA provides few net benefits for the American economy, says the report.

The World Bank began making the inflated claims after Congress proposed slashing US funding for IDA earlier this year. To counter the Congressional threat, the Bank launched an expensive public relations campaign to portray investments in IDA as the "deal of the century" for the United States. As part of the campaign, the Bank ran a series of newspaper ads in major US dailies. The ads, which ran under the theme "The World Bank. A Good Investment,." argue that World Bank loans return "extraordinary" benefits to US firms, and give examples of companies that have won lucrative contracts to supply goods to countries receiving Bank loans.

In recent years, IDA has come under fire from environmental groups and lawmakers who argue that its loans, like those for India's Sardar Sarovar dam project in India, often do more harm than good to Third World environments and economies. These criticisms have been confirmed by internal World Bank reports that have found more than a third of Bank projects are failures, that sink borrowing countries deeper in debt and provide few development benefits. "IDA is a failure for borrowers and for donors," said Probe International's John Thibodeau. "IDA is not the deal of the century, but a black hole into which money goes and from which few benefits emerge."

Congress also expressed its displeasure with the Bank's PR campaign when a number of Congressmen complained that the expensive advertising was inappropriate for an institution whose mandate is poverty alleviation. The ads were subsequently pulled. Meanwhile, Budget and Foreign Operations Committees of the House or Representatives recently voted to slash US contributions to IDA by nearly $800 million next year. The Senate will debate IDA contributions this week.