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Environmental policies of the World Bank for the Third World.

We have seen that the environmental policies of the World Bank for the Third World have left a lot to be desired. It is rather unfortunate that it has not learnt from the mistakes that it made during the implementation of the infamous Structural Adjustment Programmes.

The catastrophic implications of unchecked pollution have only hit home to the people in general in the last decade. It has taken us approximately 200 years since the industrial revolution to realize that we cannot treat the earth as an infinitely large dumping ground. However, in those 200 years a lot of technological and economic progress has been made in the western industrialized world. The growth of large scale organizations and the resulting economies of scale, division of labour and costing of commodities at the production cost rather than at the social cost have all contributed to this progress.

There were some countries, however, that were not so fortunate. These countries shared two common characteristics. Firstly, mostly they were colonized by the western world. Secondly, they were predominantly in the south. This gave rise to the so called 'North South divide' which to a large extent still persists today.

This neat division of the first and the Third World has now been challenged by the realization by all that we cannot subdivide the world into compartments and that life on earth depends on both north and south. Furthermore, the debt ridden Third World also realized that it holds the key environmental areas. It has the rain forests, the majority of so called bio-diverse species etc. According to the third world environmental leaders, it is currently running down these ecologically sensitive resources just to pay the debt back to the north.

One of the major player in this debate is the World Bank which provided aid and assistance to the Third World through the Structural Adjustment Programmes. Backed by international financial institutions, these programmes had become a requirement for the countries seeking further financial assistance. These programmes, which were heavy on free market in general and export oriented industrialization in particular, were not so much concerned about the environmental impact of these policies. This led the Third World to increase its output and compromising on the environmental issues that could have come up. However, the recent realization by the developed countries that the Third World could harm the environment through overexploitation of its resources has led the World Bank to try and persuade the Third World to take some environmentally correct steps. In this article I would like to look at the policies that the World Bank has implemented and how those have been received by the Third World.

Historical Perspective of the Policies

The World Bank was set up at the end of World War II under the leadership of United States and Britain to help rebuild the devastated economies of the war-torn Europe. Since 1950's the Bank has emerged, along with the International Monetary Fund, as the major source of financing for the poor countries of Africa, Latin America and Asia.

Early in the last decade, as developing countries experienced depending economic crises, reform plans called Structural Adjustment Programmes (SAPs) were imposed. The reforms included exchange rate adjustment, constraints on government spending, deficit reduction, the removal of subsidies and price control and reducing the government's role in the economy and moves towards a free market. Until 1991 SAPs accounted for $ 41 billion in aid to the Third World.

The Bank argues that the SAPs have increased the efficiency and competitiveness of the economies it served, but many non-governmental organization (NGOs) from both North and South charge that these programmes have generally ignored the plight of the poor and wrought major damage to the environment, especially in the forested and the rural regions.

According to Martin Khor, Malaysian representative to Third World Network, a NGO, a direct effect of these SAPs was that they have put pressure on the countries of the South to increase their production and exports, leading to surplus production, falling prices and indebtness, as well as over exploitation of natural resources. The Bank's policies have encouraged both poverty and degradation according to Mr. Khor.

Another point is that as mentioned before, these SAPs were prerequisites for the Third World countries to getting additional aid. This strong arm tactics from the outsiders led to a lot of discontent from the poor countries. These programmes were thought to be extremely harsh by the Third World countries, but they felt that they had no choice but to comply with the reforms to keep their heads above water. When the World Bank tried to paint a rosy picture of these programmes these attempts were seen as "cynical in the extreme" by Adebayo Adedeji, Executive Secretary of the Economic Commission for Africa. Even the Canadian Ambassador to the UN, Stephen Lewis, who saw the results of the report personally, called it, "a lousy document, prepared from a questionable data base."

So, from the point of view of the South, which thinks that it is the North that is responsible for the environmental problems in their countries, it is understandable that when the World Bank talks of environmental reforms in the Third World, the ideas are not that readily accepted.

The situation as it stands now is that the Third World is still under the influence of these widely unpopular SAPs. The South is also very sensitive to the issue of an outsider telling them how to be more environmentally friendly. This has to do with the fact that the Third World considers the environment disaster to wholly be the responsibility of the North; a fact that the experts find hard to dispute. The developed world has 30 per cent of the population yet consumes 70 per cent of the resources. Additionally, it produces 80 per cent of the air pollution. According to these critics the rich nations should get their own house in order before asking the Third World to curb its pollution. They believe that the North needs some sort of structural adjustment as well in order not to expand a totally unsustainable consumption pattern.

The Future Direction of World Bank's Policies

As we have seen, the policies of the World Bank have been highly biased towards pleasing its own masters rather than genuinely helping the Third World. This has led to alienation of the people that it set out to serve in the first place. As we have seen that even now with the new Global Environmental Facility (GEF) there seem to be a lot of barriers that have to be overcome before it can really help the poor nations.

Firstly, it needs to be more democratic. In the words of the Mexican Ambassador Juan Mateos, "The GEF operates under World Bank rules, not on the principle of one country one vote. We have to look for other financial models which have an equitable basis for decision making. The way GEF is working is so far from the new kind of international cooperation that we have been looking for."

Secondly, it has to look at the stark reality of the Third World economic situation. As the world slipped into an economic recession the industrialized countries imposed tariff barriers to counter the Third World exports. This was ironic as it was the leaders of these countries that, via SAPs, encouraged the Third World to export. The World Bank itself estimated that the Third World was losing twice the amount it pays in annual interest on its foreign debt to western tariff barriers. The message that it seems to be giving out to the Third World is 'what is yours is ours but what is ours is not yours.' This will have to change if the North wants any cooperation from the South.

Finally, the Third World should not be forced into paying for environmental pollution that is caused. As we have seen, historically, it has been the industrialized world that has polluted the earth, and now it wants the Third World to jump on the band wagon of cleaning up the environment. It has been estimated by the United Nations Conference on Environment and Development that the developing countries need 625 billion dollars annually to meet the environmental targets. The Third World cannot afford to do that nor can it afford to pay the social cost of production. If these countries are forced to implement the environmental policies then it is quite possible that they may never come out of poverty.


We have seen that the environmental policies of the World Bank for the Third World have left a lot to be desired. It is rather unfortunate that it has not learnt from the mistakes that it made during the implementation of the infamous Structural Adjustment Programmes. It is true that the Third World is polluting the planet, but the amount of this pollution is substantially less than that being produced by the industrialized world. The answer I believe, lies in more cooperation and help from the North which the South needs. This help may be different to different country and the World Bank has to tailor its programme to meet each country's requirements. If it does not do that then the consequences could be disastrous for all of us.
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Author:Farooqi, Masroor A.
Publication:Economic Review
Date:Jan 1, 1993
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