Since its inception in 1944, the purpose of the World Bank has been to create “a world free of poverty

The World Bank and the Global Environmental Problem

Brandon J. Clark

October 6, 2000

“The fight against poverty is not a fight for glory. It is about equity and social justice, about the environment and the resources we all share, and about peace and security. It is a fight for a better life for all of us and for our children who will live in this very interconnected world.”

-James D. Wolfensohn President of the World Bank

Solving global problems requires global solutions, and, clearly, the problem of environmental degradation is a global problem. The air we breathe and the water we drink have circled the globe countless times. Rivers cross national borders without pause, and global trade winds deposit toxins far from their source. In this interconnected world, there are no isolated environmental problems. However, nations have been able to profit from the destruction of their environment through the outmoded idea of national sovereignty, which has prevented the international community from taking any direct action to solve this global problem. With a lack of consensus that divides developed and developing nations along a hard line and with nations such as China willing to result to extreme measures over issues of national sovereignty, solutions to the global environmental problem must be able to circumvent this strong and potentially deadly value conflict. Solutions must come from ideas of positive reinforcement, not punishment; nations must reach a voluntary consensus that can be beneficial for all in order to create a sustainable solution. One of the leaders in the global community that is successfully striving toward this goal is the World Bank. Through the use of conditionality on development loans and grants, the World Bank has been able to persuade developing countries to agree to a set of international environmental standards in order to receive funding. This provides a multifaceted benefit to the international community in that the consumer of the loan is able to develop, thus eliminating one of the key factors of pollution, and do so in an environmentally friendly and sustainable way. The World Bank serves as a model for international success not only through its use positive reinforcement but also through its use of multilateral cooperation with other international organizations, which have greatly increased efficiency and effectiveness by adding expertise and credibility to the multilateral financial institution.

In the latter half of the 1960s, the environmental movement experienced a shift towards internationalism. One of the first intergovernmental conferences on the environment took place in 1968. Known as Biosphere,[1] the meeting provided policy recommendations for more effective resource management. Seeing the success of the Biosphere conference, Sweden introduced a UN resolution to create an international environmental conference later that year. The result was the UN Conference on the Human Environment, which took place in Stockholm four years later, in 1972. The Stockholm conference was attended by 114 countries and numerous non-governmental organizations, or NGOs, marking the first time the UN provided a parallel forum for NGOs. The conference was highly politicized with most of the debate between industrialized and developing nations over the nature of future development and its impact upon the environment. The developed nations were split over the causal relationship between development and environmental degradation, with some countries, such as Sweden, supporting the causal link and others, such as the United States, stating that countries can become industrialized without jeopardizing the integrity of the environment. In contrast, the argument of the third-world nations was unified, stating that poverty was the great polluter and that development was its only solution. Indira Gandhi best stated the case of the developing nations by asking: “How can we speak to those who live in villages or slums about keeping the oceans, the rivers and the air clean when their own lives are polluted at the source?”[2] Despite the conflict, the Stockholm conference was a great catalyst for the environmental movement, creating the UN Environmental Program (UNEP) and encouraging dialogue between the participants. Also, the friction between the nations created an opportunity for the NGOs to create credibility through action.

NGOs and environmental advocacy networks continued to expand and organize throughout the 1970s and early 1980s as a result of increasing awareness, increasing private and public funding, new communication technologies, and the political entrepreneurship of concerned individuals. During this time, many new environmentally based NGOs were created and previously established environmental organizations saw dramatic increases in membership, allowing many NGOs to become more international. Although large numbers of these NGOs were based in and drew resources and membership from developed nations, NGO activity was also highly prevalent in the developing nations. In fact, the environmental group Sahabat Alam Malaysia noted over 162 environmentally based NGOs in the Asia-Pacific region in 1983. With all these increases in NGO prevalence and power, it was only a matter of time before a major joint campaign would be undertaken by these concerned environmental organizations. That opportunity came with a major campaign to make multilateral development banks more responsive to the needs of the environment.

Since its inception in 1944, the purpose of the World Bank has been to create “a world free of poverty” by facilitating development projects throughout the world.[3] In the beginning, the Bank was much more of a traditional-role financial institution, being run by economists who based the success of the organization on the bottom line and little else, but this was soon to change. Pressure on the World Bank to become a more environmentally friendly organization came from several different sources: member states, NGOs, the media, private citizens, and from within the Bank itself. One of the most notable influences from inside the Bank was Robert McNamara, the former secretary of defense, who served as president of the World Bank from 1968 to 1981.[4] Under McNamara’s leadership the Bank created an environmental unit in 1971 and adopted a principle of environmental lending three years later. Under the environmental lending principle, the Bank required an environmental assessment of projects before approval and adopted certain safeguard policies, such as conditionality, to avoid environmental degradation. Although these normative commitments to environment did not have a major impact on the policy or practices of the Bank, they did provide a precedence and opportunity for environmental NGOs who were hoping to capture policy control of the multilateral development organization.

One of the key factors of success for the NGOs in creating a more environmentally friendly World Bank was their ability to influence the legislative and bureaucratic processes within the United States government. One can see the influence of the US government over the World Bank in several areas. The headquarters of the World Bank are only a few blocks from the White House in Washington, DC. Also, the US holds a disproportionate amount of voting shares within the World Bank because of funding ratios, and the US government is the biggest contributor to the International Development Agency, the soft loan facility of the Bank. Using what political scientists call “the power of the purse,” many NGOs attempted to build political relationships within Congress and the White House, with a focus on the congressional committees that controlled appropriations for the Bank.

One example of the NGOs successfully influencing the policies of the World Bank occurred with the Brazilian Polonoroeste development program that began in 1981. The privatization of large sections of land in the northwestern state of Rondonia created a vacuum for colonization, and the Brazilian government called upon the World Bank to help finance the Polonoroeste development project that included paving the main highway through Rondonia and building social infrastructure in the developing area. While the Bank knew the project would likely lead to increased deforestation, they also knew the project could be more damaging to the environment without Bank participation. To keep damage to a minimum, the Bank insisted that the project make certain steps to prevent damage to the environment and the indigenous areas. However, the Bank had few means of recourse if these provisions were broken, which indeed turned out to be the case. As a result of the Polonoroeste case, NGOs sought structural reforms of the World Bank, including more environmental impact assessments in the project approval process. To achieve this goal, they lobbied key members of the congressional committees that dealt with appropriations to the World Bank, and they lobbied the US Treasury Department because of its connection to the executive directors of the development organization. The efforts of these NGOs were also magnified by the press coverage received by the failed Polonoroeste project. As a result of these efforts, Congress held a formal inquiry on the project before the elections in 1984. The following year, the World Bank succumbed to the NGO pressure and made Polonoroeste the first project suspended by the Bank due to violations of environmental loan conditions.

Environmental NGOs were able to produce large amounts of interest group pressure upon the political process in the United States with their large numbers of devoted members and their united message. These groups also served other traditional interest group roles, providing information to members of congress, testifying before committee hearings, setting the issue agenda, educating voters, and contributing to strategic political campaigns. The members of the press who support the environmental movement also magnified all of these efforts through their coverage of the topic. The press has served as a catalyst and sponsor of all of the NGOs’ activities by increasing awareness, membership, and monetary contributions to the environmental organizations. This activity within the United States government resulted in continued victories for the supporters of the campaign to make the World Bank more environmentally friendly. Direct political pressure within the US government led to several structural changes within the Bank. In the three-year span between 1983 and 1986, the environmental impact of multilateral development banks was the subject of seventeen congressional hearings, and three times during that time period Congress presented formal recommendations to the World Bank on improving its environmental policies, with most of the recommendations coming directly from the NGOs.[5] As a result of this outside pressure, the World Bank created a “top-level environmental department” in 1987 that would prevent problems like Polonoroeste from damaging the Bank’s mission.[6]

Once the environmental NGOs were able to make the desired structural changes to the World Bank, which included project cycles, environmental oversight departments, and organizational permeability, many of the other advancements in the World Bank’s environmental policy were able to take place without much outside pressure from the NGOs.[7] Instead, the Bank absorbed the costs of environmental oversight and was able to regulate and advance its own environmental policies from within the organization. Freed from much of these costs, this allowed the environmental NGOs to shift much of their focus from advocating change of the multilateral banking system to actively cooperating with the Bank in its environmental activities.

According to World Bank figures, over half of all of the Bank’s projects now take place in cooperation with one or more NGO. Working with NGOs, instead of against them, provides the Bank with additional resources that would not be available outside the relationship, such as specialized information that helps to fill the information asymmetry. Currently, the World Bank has working partnerships with many operational and advocacy NGOs, including Nature Conservancy, World Wildlife Fund, Friends of the Earth, and the Worldwide Fund for Nature, all of which add scope and efficiency to the mission of the World Bank. For example, the World Bank/WWF Forest Alliance project is targeting to protect over 750 million acres of forestland by 2005, with the Bank providing the majority of the funds and the WWF serving as the primary administrator of the project.[8] In 1998, the World Bank’s Operations Evaluation Department conducted an extensive analysis of the Bank’s past cooperation with the NGOs. This study found that “strong [NGO] involvement significantly contributes to project success, especially to providing benefits and opportunities for participation by the poor and marginalized.”[9] Further Bank evaluations have also noted that projects with NGO cooperation held much greater probability of achieving high performance than projects done by the Bank alone. As a result of these findings, certain types of development projects and all environmental assessments now require collaboration with appropriate NGOs. Due to the increasing amount of cooperation between the World Bank and NGOs, client states of the Bank are finding a higher degree of success with their development programs.

Since the creation of the environmental department in 1987, the World Bank has greatly increased its range of environmental programs. This is illustrated by the annual report for fiscal year 1999, which includes a major section discussing the environmental efforts of the Bank, highlighting its major collaborative programs with the UNDP, UNEP, IUCN, and other multilateral organizations. The most notable of these programs is the Global Environment Facility. GEF was created in 1991 as a partnership between the World Bank, UN Development Program, and UN Environmental Program, and the program deals with protecting four critical areas of the environment: biodiversity, climate change, the ozone layer, and international waters. The primary benefit of the GEF program is that the dispersed funds are grants, meaning that the recipient is under no obligation to repay, thus, making the programs much more attractive to undertake.[10] In fiscal year 1999 alone, GEF approved 29 NGO-implemented projects that total over $235 million. Most notable among the large-sized grants is a $35 million grant to China to expand its renewable energy resources and a $31 million grant to Russia to reduce its emissions of ozone-depleting gases. Also on the list are $11 million grants for the preservation of the Mekong River Basin and a $10 million grant to Peru to protect rainforest biodiversity. In the capacity of the GEF, the World Bank is facilitating important environmental projects that would have little chance of fruition without the support of the multilateral development bank, and advancing the cause of the environmental movement.

In the five decades since its inception in 1944, the World Bank has seen a dramatic transformation from being viewed as one of the biggest obstacles of the environmental movement to being its leading international advocate. Ironically, the major contributing factor to this dramatic transformation has been the very environmental NGOs that used to lobby against the organization. In order to create a more environmentally friendly World Bank, environmental advocacy NGOs used their interest group power to lobby strategic members of the US Congress, putting pressure on the appropriations process for the World Bank. As a result, the Bank created an environmental department with administrative power in order to prevent future interest group pressure upon the organization. The environmental department soon became a powerful catalyst for change in the policies of the Bank. With the Bank more self-regulating, environmental NGOs were able to focus their efforts on cooperation with the organization. Successful cooperation reproduced itself, increasing the symbiotic relationship between the NGOs and the World Bank. The Bank’s participation with and funding for environmental projects gradually increased each fiscal year, and in 1991 the environmental department of the World Bank helped create the Global Environment Facility, which clearly established the Bank as the multilateral leader in the environmental field. If Sir Isaac Newton is correct, the inertia of this transition should lead to continued advancement for the environmental policies of the Bank, creating an increased prevalence of global civil society. Clearly, the World Bank’s use of organizational cooperation and positive reinforcement techniques should exist as a model for future international efforts as the international community attempts to make positive steps toward the solution of international problems while avoiding the perilous conflicts of national sovereignty.

Sources

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<http://www.worldbank.org> 06 October 2000.

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“Factsheet: The World Bank’s Latest Environmental Initiatives” via email from Kristyn Ebro, media contact of the World Bank.

“For Nongovernmental Organizations/Civil Society FAQs-The Small Grants Program” World Bank homepage. <http://wbln0018.worldbank.org/essd ess…/3fcaee31805c07968 52567ed0 04c48e8?OpenDocumen> 07 October 2000.

“International Bank for Reconstruction and Development.” Encyclopedia Britannica Online. <http://www.britannica.com/bcom/eb/article/

“IUCN’s Strategic Partnerships with the World Bank” World Bank homepage.

<http://wbln0018.worldbank.org…> 06 October 2000.

Keck , Margaret E. and Kathryn Sikkink. Activists Beyond Borders: Advocacy Networks in International Politics. Ithaca: Cornell University Press, 1998.

“Key Documents/ Bank’s Relations with NGOs.” World Bank Homepage.

<http://wbln0018.worldbank.org…> 07 October 2000.

Le Presre, Philippe. The World Bank and the Environmental Challenge. Selingrove: Susquehanna University Press, 1989.

“McNamara, Robert S(trange).” Encyclopaedia Britannica Online. <http://www.britannica.com/bcom/eb/article/0/0,5716,51041+1+49831,00.html> 05 October 2000.

Muuka, Gerry Nkombo. “In Defense of World Bank and IMF Conditionality in Structural Adjustment Programs.” Journal of Business in Developing Nations. Vol.2 1998. <http://internet.ggu.edu/jbdn/jbdnv202.htm> 06 October 2000.

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<http://www.worldbank.org/html/extdr/pb/pbenv.htm> 05 October 2000.

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Young, Oran R. ed. Global Governance: Drawing Insights from the Environmental Experience. Cambridge: MIT Press, 1997

[1] Officially: the Intergovernmental Conference of Experts on a Scientific Basis for a Rational Use and Conservation of Resources of the Biosphere.

[2] Keck , Margaret E. and Kathryn Sikkink. Activiists Beyond Borders: Advocacy Networks in International Politics. Ithaca: Cornell University Press, 1998.

[3] The World Bank theme, http://www.worldbank.org

[4] “McNamara, Robert S(trange).” Encyclopaedia Britannica Online. <http://www.britannica.com/bcom/eb/article/0/0,5716,51041+1+49831,00.html> 05 October 2000.

[5] Le Presre, Philippe. The World Bank and the Environmental Challenge. Selingrove: Susquehanna University Press, 1989. & Keck and Sikkink

[8] “Factsheet: The World Bank’s Latest Environmental Initiatives” via email from Kristyn Ebro, media contact of the World Bank.

[9] Clark, John. “The Role of Non-Profit Organizations in Development: the experience of the World Bank” July 1999. <http://www.worldbank.org> 06 October 2000.

[10] “Factsheet: The World Bank and the Environment” via email from Kristyn Ebro, media contact of the World Bank. <http://www.worldbank.org>