BREAKING NEWS: Wolfowitz Tapped To Head World Bank

Wolfowitz tapped to head World Bank
Pentagon official to replace James Wolfensohn

The Associated Press

Updated: 9:35 a.m. ET March 16, 2005 WASHINGTON - President Bush will recommend that Defense Deputy Secretary Paul Wolfowitz take over as head of the World Bank, a senior administration official said Wednesday.

The administration began notifying other countries that Wolfowitz was the U.S. candidate to replace replace World Bank President James Wolfensohn. He is stepping down as head of the 184-nation development bank on June 1 at the end of his second five-year term.

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What Is The World Bank

The International Bank for Reconstruction and Development (IBRD, in Romance languages: BIRD), better known as the World Bank, is an international organization whose original mission was to finance the reconstruction of nations devastated by WWII. Now, its mission has expanded to fight poverty by means of financing states. Its operation is maintained through payments as regulated by member states.
The World Bank's activities are currently focused on developing countries, (since 2000, the preferred term is Less Developed Country (LDC)), in fields such as education, agriculture and industry. It provides loans at preferential rates to member countries who are in difficulty. In counterpart, it also asks that political measures be taken to, for example, limit corruption or foster democracy.

It came into existence on December 27, 1945 following international ratification of the agreements reached at the Bretton Woods Conference of July 1–July 22, 1944.

Goals

Inside the main hall of the headquarters of the World Bank Group in Washington D.C.The World Bank provides long term loans, grants, and technical assistance, to help developing countries implement their poverty reduction strategies. As such, World Bank financing is used in many different areas, from reform of health and education sector, to environmental and infrastructure projects, including dams, roads, and national parks.

The IBRD provides loans to governments and public enterprises, always with a government (or "sovereign") guarantee. The funds for this lending come from a combination of the repayment of past loans and the issuing of bonds on the global capital markets. The IBRD is one of the highest rated borrowers on the international markets, and is thus able to borrow at relatively low interest rates. It lends to countries at interest rates that are usually still quite attractive to them, by adding a small margin (about 1%) to its borrowing costs to cover administrative overheads.

In addition to financing, the World Bank Group provides advice and assistance to developing countries on almost every aspect of economic development.

Private Sector Development (PSD) is one strategy to promote privatisation in developing countries, it is universally valid for all parts of the World Bank, and all other strategies must be coordinated with PSD.

Criticism

Though repeatedly relied upon by impoverished governments around the world as a contributor of development finance, the World Bank is often and primarily criticised by opponents of corporate "neo-colonial" globalization. These advocates of alter-globalization fault the bank for undermining the national sovereignty of recipient countries through various structural adjustment programs that pursue economic liberalisation and de-emphasize the role of the state.

One general critique is that the Bank is under the marked political influence of certain countries (notably, the United States), that would profit from advancing their interests.

Another critique is that the Bank operates under essentially "neo-liberal" principles, under the belief that the market can solely, and by its own nature, bring prosperity to nations that practice free competition. In this perspective, reforms born of "neo-liberal" inspiration are not always suitable for nations experiencing conflicts (ethnic wars, border conflicts, etc.), or that are long-oppressed (dictatorship or colonization) and do not have stable, democratic political systems. In this point of view, the World Bank would favor the installation of foreign enteprises to the detriment of the development of a local economy.

On the other hand, liberals criticize the Bank as a purely political organization. In this perspective, the Bank represents the rejection of the belief in the ability of the market to regulate the economy. Liberal critics see it as a state-owned tool, of international economic use, that works to mask the blemishes of currently-practiced policies. In this point of view, the World Bank assumes the responsibility of a liberal economy, rather than leaving governmental polices in their proper place.

Other criticism regarding the World Bank Group relates to the physical and social environment:

Throughout the period from 1972 to 1989, the Bank did not conduct its own environmental assessments and did not require assessments for every project that was proposed. Assessments were required only for a varying, small percentage of projects, with the environmental staff, in the early 1970s, sending check-off forms to the borrowers and, in the latter part of the period, sending more detailed documentation and suggestions for analysis.

During this same period, the Bank’s failure to adequately consider social environmental factors was most evident in the 1974 Indonesian Transmigration program (Transmigration V). Please note that this project was funded after President McNamara’s pledge noted above and after the establishment of the Bank’s OESA (environmental) office in 1971. According to the Bank critic Le Prestre, Transmigration V was the “largest resettlement program ever attempted... designed ultimately to transfer, over a period of twenty years, 65 million of the nation’s 165 million inhabitants from the overcrowded islands of Java, Bali, Madura, and Lombok...” (175). The objectives were: relief of the economic and social problems of the inner islands, reduction of unemployment on Java, relocation of manpower to the outer islands, the “strengthen[ing of] national unity through ethnic integration, and improve[ment of] the living standard of the poor” (ibid, 175).

Putting aside the possibly Machiavellian politics of such a project, it otherwise failed as the new settlements went out of control; local populations fought with the migrators and the tropical forest was devastated (destroying the lives of indigenous peoples). Also, “[s]ome settlements were established in inhospitable sites, and failures were common;” these concerns were noted by the Bank's environmental unit whose recommendations (to Bank management) and analyses were ignored (Le Prestre, 176). Funding continued through 1987, despite the problems noted and despite the Bank’s published stipulations (1982) concerning the treatment of groups to be resettled.

The World Bank (and its sister organization, the International Monetary Fund) is a closed system; that is, the decision-making processes are shielded from those who, in fact, fund the projects: primarily the taxpayers in the member nations. The number of votes allocated to member countries are linked to the size of its shareholding. Membership in itself gives certain voting rights that are the same for all countries but there are also additional votes. The additional votes depend on financial contributions to the organisation implying undemocratic decisionmaking. As of November 1, 2004 USA held 16.4% of total votes, Japan 7.9%, Germany 4.5% and UK and France both ?? each held 4.3%.