IPS Blog

Thanks to The Nation for creating the forum for this important dialogue on the World Bank presidency and also to Jeffrey Sachs for participating. Progressives should not expect that we will always march together to one song; we should savor the venues like this where we can debate as allies. We appreciate the many comments that have been posted and others that were sent to us privately.

We will use our limited “rebuttal” space to respond to two key issues.

Some progressives are urging us all to be more “strategic,” to support Sachs for World Bank president because he is better than possible Obama pick Larry Summers. We agree that Summers would be a terrible choice to head the Bank and, indeed, have joined tens of thousands to sign a petition to the Obama administration opposing his candidacy. However, the deadline for governments to announce their candidates is not until March 23. By then, several governments will nominate Sachs. The United States will announce a candidate. And, other governments may nominate someone else. After that point, it will be important for progressives around the world to debate who, if anyone, deserves our support. Before the 23^rd, we believe that one productive strategic role for progressives is to critique the traditional presumption that Americans will support the European choice for the IMF head and Europeans will back the U.S. choice at the Bank, virtually assuring that the rich countries get their way. We commend the Bretton Woods Project for their open letter arguing for a reformed selection process.

So too do we think it strategic for progressives to put forward the best candidates from across the globe, candidates with the qualifications to run a large organization and with the vision, humility, sensibility, and ability to listen to the 99 percent -- all necessary to transform the Bank. Since we wrote our initial piece, dozens of people have sent us such names: Nobel laureate Amartya Sen, former UNDP head Gus Speth, urban poor advocate Sheela Patel, Greenpeace International chair Kumi Naidoo, UN Special Rapporteur on the Right to Food Olivier de Schutter, former Brazilian president Lula, and ActionAid International head Joanna Kerr, among others. Any could be a great leader of the Bank, but people and governments hesitate to put "best" names forward so long as the U.S.-European grip on the selection process continues. If U.S. progressives spent as much time promoting a "best" candidate as they are backing Sachs, that person might take-off as a candidate. Such a "best-person" list also presses those who are running to prove they match such high credentials, not that they are better than the worst.

Our second rebuttal issue has to do with the development record of Jeffrey Sachs. Knowledgeable commentators below have added their reflections on Sachs’s role in "shock therapy" and its impacts, particularly in Bolivia. In terms of Sachs’s current work, we note that nobody supporting Sachs has demonstrated that the Millennium Villages represent a "sustainable" future; whatever the pesticide costs per person, fossil-fuel dependent agriculture is not the way forward. We have spent time on the ground with sustainable farmers and "farmer scientists" who are restoring the soil, cutting costs, and raising yields without chemicals. In the era of climate catastrophe, they are the future of agriculture. Millennium Villages and the World Bank should be on board to accelerate the transition to post-chemical, sustainable farming that is good for farmers, consumers, the land, and the climate. Agribusiness firms and fertilizer corporations will fight this transition every step of the way; we need a World Bank president who will stand up to them.

Now here is what sounds like a New York Times headline to celebrate: “Dire Poverty Falls Despite Global Slump, Report Finds.” That report would be a 6-page World Bank briefing note, the press release for which is titled: “New Estimates Reveal Drop in Extreme Poverty 2005-2010.” Echoes The Economist: “For the first time ever, the number of poor people is declining everywhere.”

If it were only that easy. Let us dig into what the World Bank’s new briefing note really tells us and ask two questions: Do the statistics really show a fall in extreme poverty across the world? And, what policies lie behind the changing poverty figures?

What the figures tell us and do not tell us:

1. The figures do not tell us anything about the impact of the recession: The actual data cover 1981-2008; figures ending in 2008 cannot possibly tell us anything about the impact of a recession that started in the United States in late 2008. The briefing note alludes to “preliminary estimates” for 2010; based on these, the Bank makes the bold assertion that the Millennium Development Goal of halving poverty (defined as $1.25/day) from its 1990 level was achieved in 2010. But, preliminary estimates are, well, just preliminary estimates. These are extrapolated from significantly smaller samples. Hence, the data cannot back up the Bank’s confident claim because, again, the real data end in 2008. We have been following World Bank projections and estimates for decades now and have found them highly unreliable – and typically over-optimistic.
2. If one sticks to the 1981-2008 period, China is the key: Between 1981 and 2008, the entire drop in the number of people living in “extreme poverty,” that is those who live below $1.25 a day, is accounted for by China — where the number of extreme poor fell by 662 million. Over this period, the number of people living below $1.25 a day outside China actually rose by 13 million, and hovered around 1.1 billion people throughout this period. More people fell into poverty in South Asia over this period (interesting, given India’s rapid growth over the past decade) and in sub-Saharan Africa. Hence, a more accurate headline would have read: “Numbers in poverty plunge in China over past three decades from 1981-2008, while rising marginally in the rest of the world.”
3. To extend this last point: As we have argued elsewhere (pdf), in countries such as South Africa, where government services are generous, $1.25 a day goes further than, say, in Haiti. Furthermore, as nations grow rapidly, as have China and India over the past decade and a half, the amount of money needed for people in the cash economy to maintain a decent standard of living also rises. As for those who subsist in rural areas on less than $1.25 a day, many consume much of what they produce. Many live in self-built homes and depend on traditional medicines. While their poverty may be “extreme” by the Bank’s monetary measure, their quality of life may be much better than that of their urban counterparts, even though their incomes are often smaller.

Related to this, our experience living with poor families in rural areas suggests that it has been the opening of their natural resources to global agribusiness, factory fishing fleets, and corporate interests that often leads to real poverty. Millions have been pushed off their land over the past few generations into urban slums where they live in squalor, although they may bring home a few dollars a day. In sum, the statistics upon which most poverty elimination strategies are based are extremely misleading, and often steer experts toward the wrong solutions.

This raises the other question of what policies are behind the figures:

1. Neoliberalism and poverty: What is behind the data that shows those in poverty outside China increasing in most regions from 1981 to 2005? This period coincided with the heyday of corporate-friendly neoliberal policies in most countries. So the data could be read as a confirmation of what critics of neoliberalism have been saying: the wave of market fundamentalism contributed to increases in the numbers of people in poverty. That data also reveals that in one region, sub-Saharan Africa, the percent of people living below the poverty threshold also rose over this period. We hardly need to point out that in the one country where poverty plunged – China – leaders did not pursue blind neoliberalism, but instead combined state direction of much of the economy with market-openings in selected sectors.
2. How about the subsequent period from 2005 to 2008, a time range during which the data reveal poverty numbers and rates falling in all regions of the world? As opposed to 1981-2005, this was a period of spreading cracks in the neoliberal Washington Consensus. It was also a period of rising of commodity prices and rising of balance of payments surpluses in many Southern countries. As a result, many Southern countries were able to repay the IMF and World Bank and wean themselves from World Bank and IMF loans and neoliberal conditionality.

Hence, the new World Bank poverty figures may tell a very different story from what has been suggested elsewhere: The numbers in poverty outside China rose during the heyday of neoliberal policies, and began to fall as the grip of those policies was loosened after 2005.

Robin Broad is Professor of International Development, School of International Service, American University. John Cavanagh is director of the Institute for Policy Studies. They are authors of Development Redefined: How the Market Met Its Match. This post originally appeared in the Triple Crisis blog.

Massive protests have broken out in Nigeria following the government's announcement that long-standing oil subsidies will be terminated. Reuters has reported that tens of thousands have taken to the streets, and that confrontations with police have left at least five dead.

Thousands gathered outside the labour union headquarters in Lagos and marched to the marina that runs along its wide lagoon. The roads of the normally heaving commercial hub, notorious for its traffic jams, were largely empty.

Oil workers were also on strike and the offices of international companies such as Shell and Exxon Mobil were shut. But Shell and the state oil company said output was unaffected.

Subsidies on imports of motor fuel were scrapped on Jan 1., leaving countless Nigerians without the only welfare program they depend on. With the change, Nigerians will be paying one dollar per liter in a country where most people make less than two dollars per day. People from all walks of life, including novelist Chinua Achebe, have lent support to the nascent movement to oppose this gutting of the Nigerian safety net.

A small, but high-energy crowd demonstrated at the World Bank to stand in solidarity with Nigeria, and to say no to the policies proposed by global institutions like the World Bank and the International Monetary Fund. Here's a video (catch IPS'er Emira Woods leading the chants at the 0:58 mark):

The government argues that the subsidy program is riddled with corruption, and that this step is necessary to curtail government spending. The rhetoric is eerily familiar. All over the world, states once held the power to create a safety net for their citizens. In today's political environment, corporations are able to flex their muscle to impede on government taking that role from Wisconsin and El Salvador, to Lagos.

Today I will join leaders from the labor, environmental, faith, and human rights communities to protest in front of the World Bank.

Why?

We'll be there to stand up for the democratic rights of people everywhere in the face of ever-expanding corporate rule.

There's a set of people from the 1 percent who don't think we should be there. Twenty-one years ago, those people got together just two blocks north of the World Bank, in the K Street corporate lobbyist corridor, and crafted a set of corporate rights that they then inserted in the North American Free Trade Agreement (NAFTA).

These so-called "investor protections," now in dozens of U.S. trade and investment treaties, are some of the most extreme examples of excessive corporate powers you could find. They grant corporations the right to sue governments in international tribunals over actions that reduce the value of their investment. This can even include environmental, health, and other measures to protect the public developed through a democratic process.

These rules empowered an obscure tribunal in the World Bank to rule on these "investor-state" cases. Three people who no one elected can decide the fate of millions.

One of these tribunals will soon decide the fate of El Salvador. A gold mining company, Pacific Rim, is suing for compensation because that government has not approved a permit for a gold mining project. The majority of Salvadorans oppose this project because of legitimate concerns that it could poison a river that's the country's biggest source of drinking water. Pacific Rim is demanding in excess of $77 million.

The story gets even more outrageous. Pacific Rim is suing under the U.S. trade agreement with Central America and the Dominican Republic, called DR-CAFTA. But since Pacific Rim is based in Canada, and Canada isn't part of the DR-CAFTA pact, they created a subsidiary in Nevada in order to file this lawsuit.

If Pacific Rim gets away with this, it will give a green light to global corporations everywhere to pull this same trick. U.S. corporations could set up subsidiaries in other countries that are trade partners with the United States, in order to sue the U.S. government.

During today's protest, I'll be part of a group of us that will walk across the street and deliver an open letter to this tribunal (called the International Center for the Settlement of Investment Disputes) and to the president of the World Bank, who chairs the tribunal's administrative council.

The letter, signed by over 240 labor unions and other international organizations representing more than 180 million people, demands that El Salvador's domestic governance processes and national sovereignty be respected and that the Pacific Rim case be thrown out. This is the 99 percent standing up to the 1 percent. We're saying: You must stop trampling on democracy.

John Cavanagh is Director of the Washington-based Institute for Policy Studies. In August, he published in The Nation , with Robin Broad the article Like Water for Gold in El Salvador.

Chad - (noun) 
1. Paper fragments created when holes are made in paper. 
2. A landlocked country in Central Africa bordered by Libya to the north, Sudan to the east, the Central African Republic to the south, and Cameroon to the southwest.

It might seem that these two meanings are unrelated. However, in the June 15, 2011 discussion about the effect of oil extraction on the citizens of Chad, it was apparent that both definitions describe the country of Chad. Drilling holes into Chadian territory for the purpose of extracting oil has resulted in increased fragmentation of Chad’s society.

Delphine Djiraibe, founder of the Public Interest Law Center in Chad; Ian Gary, senior policy manager for extractive industries at Oxfam America; and Corinna Gilfillan, head of the U.S. Office of Global Witness, spoke to a group of over 20 people regarding the results of the World Bank’s decision to financially support the Chad-Cameroon pipeline project.

The pipeline project has had reciprocal effects for the World Bank and Chadians. Approved by the World Bank in 2000, the pipeline project was intended to alleviate poverty in Chad. Chad is the fifth poorest country in the world with an annual per capita income of $230. Despite its intended purpose, the Chad-Cameroon pipeline has resulted in decreased quality of life for Chadians. Deaths due to hunger and disease have increased, and citizens often do not have access to electricity and clean drinking water. While the government has built a few hospitals and schools, many of them are useless since they do not have staff or equipment. A significant portion of the oil profits intended for these projects are diverted for President Idriss Déby’s personal expenses.

Rebel groups have formed in response to the repression experienced by Chadians and have consequently caused security issues in Chad. Chad rebel groups have also recruited Libyan rebels to assist in overturning the Déby government. However, this fight will be difficult as the president has used oil profits to purchase weapons for his protection and defend his regime. In this country with no rule of law and a history of human rights violations, the pipeline project has served as a catalyst for further violations.

Gary weighed in by revealing that many civil society groups lobbied the World Bank to institute a moratorium on the pipeline initiative until human rights and government issues were resolved.  Civil society groups accurately predicted that the pipeline project would create a greater opportunity for corruption in Chad and cause additional problems in the country. Despite these warnings, the World Bank proceeded with funding the initiative which it would abandon in 2008, after Chad failed to reach the goal of reducing poverty. The bank attempted to pressure the Chadian government to uphold its promise to build structures that would alleviate poverty but the Chadian government paid its loan early and was no longer obligated to abide to the established guidelines.

The Chad-Cameroon pipeline project shed light on problems that arise as a result of the extraction of oil in unstable countries and spurred reforms at the World Bank and the International Financial Corporation (IFC). The World Bank now requires the disclosure of payments for any project it funds and the IFC requires disclosure of contracts. (Chadian oil contracts were confidential). Also, free prior informed consent of indigenous population is required before oil, mining, or any high-risk project goes forward. Furthermore, the president of the bank agreed to an Extractive Industries Review (EIR), a two year process that examined the banks’ involvement in the oil sector. The EIR report recommended that the World Bank never support oil or mining projects where the government is corrupt and human rights violations are common and government, human rights and institutional capacity should be rectified before the start of the project, not during. However, the World Bank has continued its attempt to rectify issues along the way.

The pipeline project unintentionally strengthened the power of a corrupt government and negatively impacted the citizens of Chad. This could have been avoided had the World Bank listened to the concerns of civil society groups.

So what happens now? What can the international community do to support the citizens of Chad?  Clearly there needs to be a system of improved governance over resources as well as transparency of revenues and expenditures to ensure that resources granted to the government are benefiting its citizens.

Click here to listen to what the panelists had to say about oil extraction in Chad.