In another week, on June 2, Ajay Banga will take over as the 14th president of the World Bank Group, the all-men’s club, except for Kristalina Georgieva, who had become World Bank’s acting president briefly for a few weeks in 2019.
Banga’s nomination (not democratically elected) by the US administration, who otherwise is keen on promoting democracies around the world, and appointment by the Bank’s board of directors under the gentleman’s agreement comes at a time when the institution is facing a credibility crisis.
Its leadership to tackle the climate emergency is under question with findings revealing that the Group has financed over $15 bn to fossil fuel projects since the Paris deal. The Bank’s lack of transparency in the climate finance flows, amounting to $17 bn in FY20, must be “hiding discrepancies and allowing for dubious claims.”
A champion of the ‘shared prosperity’ theory since a decade back, the Bank has witnessed the inequality levels soaring, with the richest 1 per cent capturing around half of all new wealth during this period. The self-appointed anti-poverty lender’s own admission shows an increase in global poverty rates, that in 2021, 828 million people lived in hunger, making the nearly 8-decade-old ambitious agenda to “reduce poverty and expand prosperity” a bit too tardy.
The fraud exposed in the Ease of Doing Business rankings, where countries were arm-twisted to dilute their environmental and forest protection laws as well as labour standards drastically to jump up the ladder of rankings and usher in private corporations, resulted in the Bank junking the rankings. The then chief economist had to apologise to Chile and later resign. The Bank is currently repackaging this fraudulent practice in the name of B-Ready.
Tall talks of accountability fell flat with the Group refusing to own up to the findings of its accountability mechanism, the Compliance Advisor Ombudsman in the Tata Mundra case, even after a decade, making a mockery of the policies and mechanisms, put in place ostensibly to protect people and planet from any harm.
In a case filed by a bunch of fishworkers from Gujarat, India, when the Bank wanted to hide behind the veil of immunity to deny the people their rightful demands, the Supreme Court of the United States ruled out absolute immunity to the World Bank Group, allowing communities around the world to legally challenge the World Bank Group in any court.
It’s against this background that Banga is taking the reins of the Bank.
Despite several powerful groupings of different countries in the Global South, be it BRICS, ASEAN, SAARC, BIMSTEC and many others, allowing the United States to unilaterally nominate the Bank President (and allowing Europe to nominate the IMF Chief) is an insult to the democratic process nearly all of these southern countries are subscribed to, at least on paper, and some of them even call themselves the Mother of Democracies. Without a transparent, merit-based and democratic process of selection, the President is bound to prioritise the interests of the powers that have installed him on the throne.
“Neither private equity, nor MasterCard, nor Citigroup, nor PepsiCo, nor Nestlé, nor Dow promote shared prosperity. They all do vastly more to exacerbate inequality than to fight it,” Jeff Hauser, of the Revolving Door Project said in a statement.
A champion of private capital, having no previous experience in public banking and having been associated with some of the corporations responsible for heinous corporate crimes, the Bank will find it difficult to find a redeemer in Banga to restore its credibility.
His past associations make Banga believe that “there is not enough money without the private sector,” and Bank should involve in “sharing of risk (of) mobilizing private capital.” As a beneficiary of tax holidays, corporate tax waivers, tax evasions, free or subsidised access to natural resources and public banks taking risks of their business expansion, all at the cost of welfare measures for common people, depriving them of affordable public health facilities, education, housing, food security etc, Banga will find it hard to reckon that the private entities amassed their wealth at the cost of people and planet, that they are part of the problem and not the solution.
With a perspective and outlook representing the ones who caused and aggravated the crisis that countries like India are facing, he certainly does not represent India or her concerns.
Looking at the crises the world is staring at – whether it is the climate emergency is here and now, and the threat of global warming likely to breach 1.5C threshold is a reality, where inequality has touched unprecedented levels, poverty levels have reached newer heights, unemployment rates are high in many countries in the Global South, price rise has pushed the poor to the brink, food scarcity is a reality staring at us – the Bank needs a visionary who can pioneer a radical change in the way Bank functions, humble enough to accept the past mistake and learn from it, and sensitive enough to listen and understand the concerns of the poor and the marginalised.
World Bank has a different legacy in India, from where Banga originally hails from. The infamous Narmada dam project, which the Bank approved a loan in 1985, two years before India’s environment ministry approved it, says a lot about how much the Bank cares about domestic laws. Findings of the Morse Commission, which led to the formation of the Inspection Panel at the Bank, led to Bank quitting the project ignominiously.
The communities at the IFC-funded Tata Mundra project, which we discussed briefly earlier, successfully challenged Bank’s immunity and they continue to fight for their rights.
World Bank, along with its co-financier Asian Infrastructure Investment Bank, had to withdraw from the Amravati Capital City Project over the grave violations of social and environmental laws, financial nonviability and massive land-grabbing of fertile land, which the people were fighting against.
A decade after communities filed the first complaint on a Financial Intermediary (FI) project of the IFC, a few months back the IFC announced it will stop FI clients from funding new coal projects.
The above instances reiterate that people will never give up their fight when their livelihoods are snatched and they are deprived of their natural resources. That, people will not wait for the Bank to reform and reinvent itself, but will force the change, together with other communities fighting similar fights from around the world. A neo-liberal developmental pathway, favouring private capital and profits, and not people and planet, will lead to more disasters as evident from the climate change induced major catastrophes witnessing around.
Banga has the option to learn lessons from these as he is readying himself to step into the H Street building.
This article was originally published in World Bank President and can be read here.
Centre for Financial Accountability is now on Telegram. Click here to join our Telegram channel and stay tuned to the latest updates and insights on the economy and finance.