International Monetary Fund and World Bank - World bank critics on the right and left

The World Bank and its lending practices have come under increasing scrutiny. The critique from the right contends that the World Bank has shifted from being a "lender of last resort" to an international welfare organization. In doing so the World Bank has become, according to critics, bloated, incompetent, and even corrupt. Worse, the bank's lending policies often reward macro-economic inefficiency in the underdeveloped world, allowing inefficient kleptocracies to avoid the types of fundamental reforms that would in the long run end poverty in their countries. These critics like to compare the fantastic growth in East Asia to the deplorable economic conditions of Africa. In 1950 the regions were alike—South Korea had a lower per capita GDP than Nigeria. But by pursuing macroeconomic reforms, high savings, investing in education and basic social services, and opening their economies to the global trading order, the "Pacific Tigers" have been able to lift themselves out of poverty and into wealth with very little help from the World Bank. Many countries in Africa, however, have relied primarily on multilateral assistance from organizations like the World Bank while avoiding fundamental macroeconomic reforms, with deplorable but predictable results.

Conservatives point out that the World Bank has lent more than $350 billion over a half-century, mostly to the underdeveloped world, with little to show for it. One study argued that of the sixty-six countries that received funding from the bank from 1975 to 2000, well over half were no better off than before, and twenty were actually worse off. The study pointed out that Niger received $637 million between 1965 and 1995, yet its per capita GNP had fallen, in real terms, more than 50 percent during that time. In the same period Singapore, which received one-seventh as much World Bank aid, had seen its per capita GNP increase by more than 6 percent a year.

The left has been no less harsh in its criticisms of the World Bank. They claim that World Bank loans privilege large infrastructure projects like building dams and electric plants over projects that would benefit the poor, such as education and basic health care. Worse, these projects often have wreaked havoc on the local environment. Forests, rivers, and fisheries have been devastated by World Bank–financed projects. Some projects even have led to the forced resettlement of indigenous communities. One estimate holds that more than two and a half million people have been displaced by projects made possible through World Bank loans.

Environmentalist and anti-globalization groups point to specific failed projects. The Sardar Sarovar dam on the Narmada River in India was expected to displace almost a quarter of a million people into squalid resettlement sites. The Polonoroeste Frontier Development scheme has led to large-scale deforestation in the Brazilian rain forest. In Thailand, the Pak Mun dam has destroyed the fisheries of the Mun River, impoverishing thousands who had made their living fishing and forever altering the diet of the region.

In response to these accusations, the World Bank has attempted reforms, appointing its own inspection panel in 1993. But critics point out that the bank needs to be more responsive to outside forces and criticisms. The World Bank has never rejected a single project since 1944. The bank staff is very highly paid—the average compensation of a World Bank employee in 1994 was $134,000. The bank can't even properly manage the construction of its own headquarters: the 1993–1994 project came in almost $100 million over budget. Perhaps most damning, the bank's lax lending standards have led to a rapidly deteriorating loan portfolio.