WHAT'S AHEAD FOR THE WORLD BANK? THE BIG PICTURE

An Interview with David C. Korten.

By Robert Wright.

David Korten is one of the NGO world's toughest critics of official development assistance. His systemic critique comes from more than 30 years of experience working for the US. Agency for International Development (USAID), the Ford Foundation, the World Bank and others. The upshot-from that work: a conclusion that the official foreign aid system is based an the wrong premises, most of what it does is inherently damaging and most of its institutions are not worth fixing.

Korten believes that, on, balance, the aid-system contributes to increasing social. inequalities in low-income countries and hinders their progress at achieving economic justice and sustainability. In his view, no institution more fully embodies the dysfunctions of the official aid system than the World Bank. He believes that attempts to reform the Bank are misplaced, and that the focus should be on dismantling it as part of the process of lifting the international debt burden of low-income countries. Today Korten leads the People-Centered Development Forum, an all-volunteer international network engaged in creating and actualizing an alternative vision of development through citizen action.

Q: David, do you see any way at all of changing the World Bank in order to make it have a more positive impact on sustainable development in the coming years?

A: No I see no meaningful way to reform the World Bank. The appropriate action is to close it. Those who seek to reform the Bank miss the basic point that there really is no constructive role in the creation of just and sustainable societies for an organization that by its basic nature is in the business of getting low-income countries ever more deeply into international. debt. You could staff every position in the Bank with people who are totally committed to social justice and environmental. sustainability and it would only make a marginal difference so long as the Bank's primary function is to put out new international loans faster than the old ones are being repaid. To make real difference. Bank staff would need to permanently eliminate the long-term international debts of low income countries and dismantle their own institution and the other multilateral development banks that continuously compound the debt problem.

Q: Why do you feel this way?

A: I came to this position from very conservative origins. I have an M.B.A. and Ph.D. in business from Stanford and was on the, faculty of Harvard Business School for several year. My main interest there was in organizations as behavioral systems.. While working with the Ford Foundation, I was involved in developing powerful approaches of proven effectiveness by which grant making foundations can help large, dependency creating government development bureaucracies transform them. selves. We proved that the can be turned into national support systems that strengthen local control and management, in just and sustainable ways, of local productive resources such as forests and irrigation. I subsequently spent eight years with USAID in an effort to apply these methods within its missions in Asia. Unfortunately, we. were ultimately forced to conclude that the large official donor bureaucracies are by their nature inherently unable to perform this kind of institutional change catalytic role. The Ford Foundation was successful because it could make small, flexible grants in the range of. $5,000 to $200,000, whereas a lot of World Bank loans are $200 million. $300 million or more.

Q: Would you say, then, that the whole premise of the aid system is wrong?

A: Definitely. The official a id system is based. on the premise that, transferring large amount of foreign exchange to low income countries is the key to their development. Foreign exchange transfers simply allow countries to buy more things from abroad than they could do solely with their export earnings. Rather than building self-reliance, this builds dependence on the global external economy. If the assistance is loan-funded, the country is forced to orient its national economy to foreign needs to repay the loan. This enriches, a small local elite, the transnational corporations and the financial institutions that are the major players in the global economy; but experience demonstrates it generally does great violence to the poor and the environment.

Q: So what kind of work, have you been since you started to feel this way?

A: I don't spend much time trying to close the World Bank. Though I think that would be a' very positive step, the Bank is only one of a number of dangerously dysfunctional institutions. Most of my time is devoted to broadening public awareness that the dominant neoliberal economic model of economic growth, free markets and free trade is the cause of, not the solution to, the problems of deepening poverty, environmental destruction and social disintegration. Of course the failed Marxist model is not an answer either. Thousands of groups around the world are working to develop new alternatives.

Many of us who are rethinking development from the perspective of equity and sustainability believe we need to concentrate on localizing economic power and increasing self-reliance in meeting local needs within the limits of ecosystem capacities. We further believe that those of us in high-income countries can best help those in low-income countries by changing our unsustainable ways of living so we no longer depend on expropriating the resources and productive output of low-income countries to maintain our own profligacy. We have to face up to the fact that in the aggregate we are already placing greater demands on. the planet's ecosystem capacity than can be sustained.

Q: It sounds like you are rejecting the whole idea of development?

A: In terms of the way we have come to think of development, that is correct. We have no choice but to rethink our approach to dealing with poverty and environmental issues. The term "development" conveys the idea that the people who consume the most are the most developed. Thus some of us feel more comfortable talking about creating just and sustainable societies. These issues are examined. in depth in my new book, When Corporations Rule the World, which will be released in September 1995.

Q: Do you believe there are any official development assistance donors worth working with?

A: Certainly not the multilateral lending institutions. The best you can say about most of the official bilateral agencies is that they do less damage. The best results among official agencies come from the public development foundations. The better ones have demonstrated the ability to function as social change catalysts, which means working from a very different premise than that of agencies built around the idea that development is about money.

Q: Can you cite examples?

A: Oh yes. The-Inter-American Foundation in Washington, D.C., has done some excellent work, as has the Asia Foundation in San Francisco. Appropriate Technology International in Washington has an especially well developed and effective strategic perspective and is doing phenomenal things with its limited. funding. All three of these agencies make strategic use of small grants to catalyze significant social and institutional changes.

Q: Wouldn't poverty be worse in developing countries without our history of foreign assistance?

A: Obviously it is an impossible question to answer with any certainty. I believe a case can be made that without official aid low-income countries would have far fewer people living under conditions of dehumanizing deprivation, because the control of real resources like the land and water on which people depend for their livelihoods would in many instances be. more equitably distributed. Bear in mind also that a major part of official aid has been military assistance to support corrupt regimes.

Q: Why exactly do you see the World Bank as such an impediment to sustainable development?

A: First, it is committed to a flawed development model that is inherently unsustainable. Second, it is far too big and bureaucratic to work in the catalytic change mode appropriate to the task of creating just and sustainable societies. Third, it is a bank in the primary business of making foreign currency loans to low-income countries. Increasing international indebtedness is not a path of sustainability.

Q: If the Bank were to change direction and become a positive force, what fundamental changes would it have to make?

A: For starters, it would have to become a "non-bank" that works to reduce, not increase, international indebtedness.

Q: Why do you think that is impossible?

A: Perhaps not impossible, but highly improbable. Say we were to decide we need a number of small multilateral development foundations committed to facilitating the creation of just and sustainable societies through catalytic interventions. It would be easier and probably more fruitful to create such institutions anew rather than attempt to transform the World Bank into the antithesis of what it is now.

Excerpted from What's Ahead for the World Bank: Interviews on the Bank's Role in Promoting Sustainable Development published by the Charles Stewart Mott Foundation, 1200 Mott Foundation Building, Flint, Michigan 48502-1851, U.S.A. Phone (810) 238-5651; Publications Hot Line: (810) 766-1766; Fax (810) 766-1753.

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