Q. What is the World Bank?

A. The World Bank is one of the most powerful financial institutions in the world. Together with its sister organization, the International Monetary Fund (IMF), it formulates and enforces major economic policy decisions for over 75 mostly poor countries. The Bank and IMF are able to exercise such unrivaled power because other lending institutions and governments generally deny credit to countries that have not complied with the Bank and IMF’s demands, and many of the countries subject to World Bank and IMF supervision are desperate for the funds that these institutions provide.

Founded in 1944, the World Bank today consists of four financing arms, the largest of which is the International Bank for Reconstruction and Development (IBRD). At its founding, the IBRD was conceived as an institution that would finance reconstruction projects in war-ravaged countries following World War II. But since the early 1980s the IBRD and the International Development Association (the Bank’s concessional [no-interest] lending arm) have accelerated so-called "structural adjustment" lending, for which they have been sharply criticized by developing countries and human rights groups. The Bank has also been criticized for its role in financing projects that have been detrimental to human rights and the natural environment.

Q. What is "structural adjustment"?

A. Structural adjustment programs (SAPs) are a set of economic policies required by the World Bank and the IMF as a condition of loans these institutions make to developing countries. These programs often include "austerity measures" such as high interest rates and reduced access to credit, which result in slower economic growth as well as increased poverty and unemployment. Other adjustment policies include cuts in government spending on health care and education, increases in the cost of food, health care and other basic necessities, mandates to open markets to foreign trade and investment, and privatization of state-run enterprises.

Q. What is the role of the World Bank in structural adjustment?

A. Although the IMF is the lead institution in imposing structural adjustment, the World Bank provides much of the money for structural adjustment programs. The World Bank has often been the lead institution in requiring governments to privatize public services and increase fees for poor people’s access to health care. Sixty-five percent of the Bank’s lending is now directed to the implementation of adjustment policies.

Q. How is the World Bank funded, and what is the significance of World Bank bonds?

A. The World Bank (IBRD) raises almost all of its money from private financial markets. Eighty percent of the money the Bank uses for its programs comes from the sale of World Bank bonds. These bonds are owned by private investors – including retirement funds, university endowments, churches, local governments, and trade union pension funds. By raising money in this way, the Bank is able to evade the public oversight that would accompany the use of taxpayer funds. The Bank bonds boycott campaign leverages the power of citizens – working people, students, the religious community, and public employees – by going after the World Bank’s achilles heel: its public perception and its financing.

Q. What does the World Bank have to do with sweatshops, and how do its policies affect women?

A. IMF and World Bank policies encourage countries to center their economic development strategies around production for export to developed countries, often based on imported inputs and foreign investment. These policies typically include keeping wages low and repressing unions. In addition to promoting sweatshops where the majority of workers are women, World Bank policies have forced the governments to cut services such as education, childcare, and health care. This increases the burden of women’s unpaid labor while simultaneously pushing women into the formal work sector, where they are paid much less than men. Women’s economic and social power decline as a result.

Q. What is the role of the World Bank in Third World debt?

A. Along with the IMF, the World Bank has refused to cancel unpayable debts owed by poor countries, even though it has the resources to easily do so. Debts owed to the World Bank and the IMF give the Bank and Fund leverage to retain control over these countries’ economies. Meanwhile, the resources of poor countries are diverted away from urgently needed spending on health care and education toward debt payments to the World Bank and the IMF.

Q. Hasn’t the World Bank "reformed"?

A. It is important to distinguish between the Bank’s rhetoric and its actual record. The Bank’s involvement in harmful adjustment lending is actually increasing—by over 100% in the period from 1997-1999. Meanwhile, the Bank continues to finance projects that violate human rights and despoil the environment in violation of its own supposedly reformed policies on these issues.

Q. What are some recent examples of destructive World Bank projects?

A. The World Bank recently approved $160 million in financing for the "Western China Poverty Reduction Project," which through resettlement will double the population of the environmentally fragile Qinghai region and increase ethnic tensions in the area. The Bank ignored its own procedures in order to expedite approval of the project without the required assessments of impacts on the environment and rights of local people. The World Bank is also poised to provide Exxon and Shell with financing for a 600-mile pipeline that will carry oil from Chad to the coast of Cameroon. The pipeline would cause severe, irreversible environmental damage as it cuts through indigenous villages, hundreds of miles of rainforest, and several wildlife sanctuaries.

Q. What can I do?

A. Get involved in the campaign to boycott World Bank bonds. Find out what steps would be required to ask your university, religious institution, labor union or civic organization to pledge that it will not purchase World Bank bonds. Contact us for assistance.