The 'World Versus Bank' Seen from South Africa

By Patrick Bond · 9 Oct 2014

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Picture: World Bank protest in Jakarta courtesy Jonathan McIntosh/Wikipedia
Picture: World Bank protest in Jakarta courtesy Jonathan McIntosh/Wikipedia

Is age 70 a dignified time for retirement, especially for policies and practices long considered destructive but now back in official favour at the World Bank?

Founded in 1944 to finance war-torn Europe’s reconstruction, the Bank is now suffering one of its most severe credibility crises. A new civil society campaign, ‘WorldVsBank’, features protests and teach-ins on Friday, October 10, at the Bank’s Annual Meeting in Washington and ten other countries, including South Africa’s three largest cities.

This country, after all, was the model ‘Knowledge Bank’ pilot after 1990, adopting policy advice but, before 2007, contracting only a dozen relatively small World Bank loans and investments. Experiences here, reminiscent of the Bank’s support for apartheid, help explain the upsurge in anger.

To illustrate, powerful South Africans Trevor Manuel and Leonard McCarthy have, in very different ways, become responsible for scandals now hot-brewing in Washington.

New excerpts from the ‘Zuma Spy Tapes’ put into the public domain last week prove McCarthy’s malfeasance as the government’s Scorpions anti-corruption unit leader in Pretoria. City Press editor Ferial Haffajee explained in a column this week, “McCarthy was impaled by the seductions of power. He ruined our criminal justice system. I find it breath-taking that he is vice president of integrity at the World Bank.”

The Bank’s on-going defence of McCarthy’s ‘integrity’ looks suspicious in the wake of the cancelled April 2009 prosecution of SA President Jacob Zuma on 783 corruption charges. This was a direct result of McCarthy’s anti-Zuma conspiracy and the spy-versus-spy culture he fostered.

The new transcripts reveal Manuel’s apparent endorsement of McCarthy’s job application, even though his Machiavellian manipulation of SA politics and law should have disqualified him. Because of prolific corruption at the Bank, the job required a ‘squeaky-clean’ candidate, McCarthy is heard to remark, so he needed someone to fib in an April 2008 job reference.

A year later, as a loyal ally of Washington, Manuel helped the International Monetary Fund raise $750 billion during its last crisis. An oft-mentioned candidate to run the Bank or IMF, Manuel recently retired from SA politics and was hired by Rothschilds bank early this month.

To his credit, in 2013, Manuel formally reviewed the Bank’s controversial Doing Business report and recommended it halt its biased, indefensible country-ranking system. But the Bank has just rejected his advice to drop the ranking system and, worse, is now also in the process of trashing its operational eco-social safeguard protections which were introduced after years of civil society lobbying due to unmitigated Bank project disasters.

Bank loans to the apartheid regime date to 1951, when Eskom’s generators provided electricity only to white businesses and people (blacks got none). The Bank never apologized or paid reparations for empowering apartheid, but instead kept lending until SA achieved middle-income status in 1967, in spite of economic sanctions calls by Albert Luthuli and Martin Luther King in 1962.

The IMF also lent billions to the Pretoria regime during financial crises that were in part caused by pro-democracy activism in 1976 and 1982. After financial sanctions hit Pretoria hard in 1985, the destructive, corrupt Lesotho dam was another route the Bank used to fund apartheid, resulting in long-lasting problems for displacees.

As South Africa finally democratised during the 1990s, the Bank played a crucial role in many areas of public policy. Worsening inequality, poverty and unemployment followed directly from Knowledge Bank advice, such as the GEAR macroeconomic policy and neoliberal water pricing that was ‘instrumental’ in causing mass disconnections of water to poor people and, in turn, KwaZulu-Natal’s cholera epidemic. Yet President Nelson Mandela, facing severe pressure from big business, adopted numerous ineffectual Bank strategies.

In the same vein, more recent Bank activity includes funding Lonmin’s notorious Marikana operation, including the supposed construction of 5000 houses for workers. As the Bank bragged without apparent irony, “The company has embarked on a multi-stakeholder effort to help bring prosperity and sustainable development to the local communities in which it operates. Alongside Lonmin, there are three key stakeholder groups – the traditional authority, local government, and local mining companies – that share the same vision for socioeconomic development.”

Cyril Ramaphosa admitted to the Farlam Commission in August that only three of the promised houses were built. The day after the 2012 massacre, the Center for International Environmental Law recommended that the Bank reconsider further extractive industries investment given such conditions - but to no avail. Two weeks later, Bank president Jim Yong Kim visited Johannesburg but neither visited nor even mentioned Marikana.

Kim, an anthropologist-medic, had co-founded the path-breaking NGO Partners in Health and ran World Health Organisation AIDS programmes. As a Harvard academic, the book Kim co-edited in 2000, Dying for Growth, demolished neoliberal Bank policies.

But in South Africa, Kim praised the Bank’s biggest-ever project loan – $3.75 billion for Eskom’s Medupi power plant – as ‘clean coal,’ all evidence to the contrary notwithstanding. Instead of restructuring BHP Billiton’s Special Pricing Agreement, which over the last 22 years has provided the world’s largest mining house up to 10 percent of SA’s electricity at US$0.01/kWh (a tenth what we pay), the Bank allowed Eskom to start repaying the loan by hiking prices by more than 100 percent. Government’s most recent survey of energy use predicts that price hikes will force 37 percent of low-income people to return to dirty household energy.

The coal-fired fiasco is a symbol of the Bank’s mega-project bias. In February 2010, the South Durban Community Environmental Alliance (SDCEA) launched a global campaign to halt the Bank’s Medupi funding, because of its climate-wrecking, poverty-creating corruption. SDCEA coordinator Desmond D’Sa, winner of the 2014 Goldman Environmental Prize for Africa, played a leadership role in the 400 000-strong People’s Climate March in New York last month. He asks, “Should we again launch a World Bank Bonds Boycott, to get investors to run on the Bank?”

Writing in the Guardian, Archbishop Emeritus Desmond Tutu last month repeated his call for climate to be the basis for financial divestment. The World Bank is a logical target, since it continues fossil financing (with a major shift now to fracking), carbon trading and other ‘false solutions’ to the climate crisis – a crisis for which it is inordinately responsible as the world’s largest historic fossil fuel lender.

The last time the Bank faced such hostility was when 30 000 global-justice activists gathered at their April 2000 Washington meeting. At the time, independent Johannesburg city councillor Trevor Ngwane – who subsequently co-founded the Soweto Electricity Crisis Committee – taught the crowd ‘toyi-toyi’ protesting. Inside, Bank board chair Manuel attempted to cover up (not fix) the flaws, as revealed in the SABC Special Assignment documentary Two Trevors go to Washington.

What, then, should be done about this institution, especially given its surreal links to South Africa? The Bank has made the world a worse place: socially, politically, economically and environmentally. Since elites don’t have a clue how to reform the Bank, it’s time again for civil society to debate options and then hit the streets. In Washington and other cities on Friday, people will learn more, and many will join the WorldVsBank.

Prof. Bond directs the UKZN Centre for Civil Society, one of the teach-in locales.

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13 Oct

Fiat Currency

This type of corruption will continue as long as we use our current currencies. Trading with gold and silver is the only cure for the banking disease

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