the early years of the world bank -- 11/26/19
Today's selection -- from Super Imperialism by Michael Hudson. In its early years, the World Bank served as an instrument to facilitate American exports, to promote American foreign policy, and to try and achieve the American goal of reduced world population growth:
"During 1946-52, the World Bank ... provided Europe with some $700 million of loans, about one-half of overall World Bank lending during these seven years.
"From 1952 onward, the Bank's lending activities expanded and were concentrated in the less developed countries, financing some $9.8 billion of exports from the industrial nations to these countries. About one-third of these exports were from the United States, the balance from non-U.S. sources of supply. During 1960-69, Bank operations contributed an average $240 million per year to the United States' balance of payments on current account, for a total of $2.6 billion net inflow since the Bank had been founded. This sum included net payments to the United States by the World Bank, exclusive of special transfer payments from Europe to the United States through the sale of dollar-denominated bond issues that absorbed surplus dollars held by Europeans. Half of this $2.6 billion consisted of long-term World Bank investments in the United States. Goods purchased in the United States by Bank-financed programs totaled $3.3 billion from the Bank's inception; interest payments to the United States and its citizens, about $860 million.
"From the U.S. point of view, its total public and private investments in the Bank, approximating $2,443 million at the close of 1969, was an excellent investment. The aggregate return to this country, on its total net investment position in the Bank, had exceeded 100 per cent from the Bank's inception of through 1969. On public and private account the United States still held a $2.4 billion investment in the Bank at 1969 year-end. On balance-of-payments account, U.S. receipts from Bank operations approximated 2.1 times its investments in the institution. The Bank thus was not exactly an instrument of altruistic American generosity.
"In fact, U.S. officials began to acknowledge the degree to which the Bank's operations had served to benefit the United States. It was this advantage to which Robert McNamara pointed when he resigned his post as U.S. Secretary of Defense to become the World Bank's president. In his maiden speech as president he stated that a new function of its operations would be to transfer funds from payment-surplus to payments-deficit countries, i.e., from Europe to the United States....
"Having enlarged the Pentagon's role in American society to one of dominance, he was elevated to the position as head of the world's major development-lending institution, able to lay down explicit social policy conditions to be adopted by applicants for World Bank loans....
"For in the same way that U.S. foreign aid became increasingly military and paramilitary in character under his regime as Secretary of Defense, more and more employed to prop up politically friendly and anti-democratic governments, so the resources of the World Bank were mobilized as a vehicle for militant U.S. policy abroad.
"[There was a] growing disillusion at the deteriorating economic position of the aid-borrowing countries. In recognition of this governmental inertia, McNamara observed in his speech to the Bank's September 1968 annual meeting that 'blatant mismanagement of economies; diversion of scarce resources to wars of nationalism; perpetuation of discriminatory systems of social behavior and income distribution have been all too common in these countries .... But it is equally clear that the political will to foster development has weakened, is weakening further and needs desperately to be strengthened.'
"Faced with these problems, McNamara effected a fundamental policy change in Bank operations. Without explicitly calling attention to the fact, he renounced Article IV, s. 10 of the Bank's charter, which prohibited it from exerting political pressure upon member nations to alter their social institutions. He also, in effect, rescinded the article obligating it to make loans for productive, i.e., self-amortizing purposes only....
"Dropping the constraints of self-amortization of loans and non-interference in the social structures of aid clients broadened the scope of World Bank operations as it entered the 1970s. But unfortunately, McNamara chose as the principal vehicle through which to introduce these changes a Malthusian policy of population control. The Bank's first course, he announced, would be 'to let the developing nations know the extent to which rapid population growth slows down their potential development, and that, in consequence, the optimum employment of the world's scarce development funds requires attention to this problem.' In this statement he declared his intention that the use of Bank funds would be conditional upon population control in borrowing countries, even where such a policy was repugnant to their governments and often to their dominant religious beliefs as well as pressures for social reform.
"McNamara's speech was widely popularized in the Anglo-Saxon nations, but was generally received with misgivings in Roman Catholic countries and in the more race-conscious of the nonwhite nations."