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About three-quarters of the world's population lives in developing
countries. Until recently, a developing country was generally
understood to be one that was not yet highly industrialized. It was
usually located in Africa, Asia or Latin America. Lately, however, with
the fall of communism in Eastern Europe and the break-up of the Soviet
bloc nations, semi-industrialized countries that are struggling to survive
as they build new economic systems have also been placed in the
developing nation category. What all developing countries have in
common is that the people of these countries do not have enough money
to invest in schools, utilities, factories and highways. One way in which
these countries can get money is by borrowing from an organization
called the World Bank.
The World Bank is actually the umbrella term, the general term,
for three separate organizations with three slightly different purposes.
First, there is the International Bank of Reconstruction and
Development. This is the organization most people have in mind when
they think of the World Bank. In order to borrow money from this
branch of the World Bank, a country must be a member. It is like joining
a club, but instead of paving an initiation fee to join the club, the club
lends you money (although the money is supposed to be paid back
with interest, as with any bank loan).
The International Bank of Reconstruction and Development loans
money to countries for projects that will aid economic development. It
also provides technical assistance. For example, Cameroon applied for
a loan for a new irrigation system along the Logone River. They hope
that with this new irrigation system the cash income of that region
would be five times greater than before. But the bank did not approve
the project right away. Technological advances can sometimes cause
environmental problems, hence, before approving the project, the Bank
assigned environmental consultants to prepare an environmental
impact report. The consultants found that the new irrigation system
would result in a serious health problem due to the snails that live in
the area. These snails carry a tropical disease called bilharzia, and the
new irrigation might spread the snails and the disease to a larger area.
The Bank then helped to find a solution to the problem by paying for
the studies of the river. Scientists and engineers worked together to
stop the breeding of the snails so that the irrigation system could be
used.
However this bank can only offer loans for the purchase of
imported goods. And to make sure that this rule is followed, the bank
pays the seller directly. This is good for the countries that want to sell
goods to developing countries but it discourages local production of
goods. In the long run this will do more harm than good to the
developing country's economy. People are also questioning the value
of a dam being built in India with the money from the World Bank.
That dam will displace more people than it will eventually serve with
electric power. It will also destroy scarce forestlands as well as
endangered animals and plants.
The second organization under the World Bank umbrella is the
International Development Association, or IDA. The IDA has
approximately 160 members and makes loans that are interest free.
This is good for needy countries. It allows even the poorest country to
begin projects immediately, without having to worry about interest
payments. On the other hand the IDA is very dependent on
contributions from member nations to support various projects. This
is where contributing nations could attach some strings to the loans.
This is also how the superpowers can begin to dictate what sort of
government policies must be in place before the loans will be given.
The third organization in the World Bank group is the
International Finance Corporation, or IFC. The IFC is different from
the International Bank of Reconstruction and Development or the IDA
because the IFC can invest in private business or industry, while the
other two organizations can only invest in government projects. This
is good for the country because the government does not have to
guarantee the loan and it encourages the growth of private business or
industry. IFC also has no control over how the company spends its
money. There seems to be no strings attached to this loan. However,
the member nations get voting rights based on the amount of money
they contribute to the Bank. Therefore the wealthier nations still have
the greatest influence on how and to whom the money will be given.
As of June 1993, the World Bank held $140 billion in loans to poor
nations. In theory, this huge sum of money should be helping the
world's poor. Since the establishment of the World Bank, most people Have
assumed that these loans could only do good things for a country. |
