Do-Good Bank Can't Please All

"It's allowed governments to thrive without being accountable to their people," says economist Patricia Adams, executive director of Probe International, an environmental organization based in Toronto. "If the bank disappeared, the world would be a better place."

The bank is funded by taxpayer money from the United States and other wealthy nations. It can only lend to governments for specific projects. These traditional lending operations have been challenged - some say made obsolete - by the advent of the global marketplace. Private capital flows to developing countries quadrupled from 1991 to 1996, reducing the need for the bank's loans in many countries.

"I don't think the bank is relevant in today's world," says Ian Vasquez, an analyst at the libertarian Cato Institute in Washington. "The bank's lending just reduces the pressure on governments to make the economic reforms that would attract private investment and reduce poverty," he says.

Much of the bank's emphasis has been on building new partnerships with other lenders, nongovernmental organizations, corporations, and the poor people the bank is intended to help. Hundreds of bank personnel have moved from headquarters to field offices to be closer to clients. It has joined with the World Wildlife Fund to save the rain forests, and with the International Union for the Conservation of Nature to assess the effects of large dams. Together with the Paris Club of international lenders it has been working to ease the heavy debt burden in poor countries, mostly in sub-Saharan Africa.

Lending for projects in education, health, nutrition, and the environment has been increased, although most project loans still go to transportation, energy, and agriculture.

Bank officials say the most important change is an emphasis on "policy loans" - money packages to finance fiscal, economic, and regulatory policy changes that encourage foreign investment.

The proportion of loans considered at risk of failure also has declined, from 32 percent in 1992 to 25 percent in fiscal 1997. The proportion of newly completed projects considered "unsatisfactory" declined from 35 percent to 27 percent between 1994 and 1995. And 90 percent of the multinational firms interviewed for a 1996 US Government Accounting Office report said that World Bank activities enhance private investment opportunities.

"They've done a little tinkering on the margins, but the economic-policy framework at the bank remains the same," allows Douglas Hellinger, executive director of the Development Group for Alternative Policies, a Washington-based advocacy group. "The bank acts primarily in the interests of bankers and investors in the West, not on behalf of the world's poor."

Bank officials counter that despite its shortcomings, the bank has helped improve the lives of poor people. The proportion of the developing world living in poverty has decreased in the past 25 years from 40 percent to 25 percent. Infant mortality, food supplies, and other poverty indicators have also improved.

"There have been some mistakes and disasters, but many more people have benefited from the bank's projects," Mr. Baird says. "There's a lot of work to be done to improve our effectiveness, but we're still the best vehicle if you want to channel money or ideas to reduce poverty. Our successes aren't always as well celebrated as our failures."

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