Insanity Reigns at the World Bank

by Brent Blackwelder

BlackwelderThe finance ministers of the world convened in Washington for the annual meeting of the World Bank. Their goal: high risk/high reward mega-infrastructure projects (big dams, power plants, pipelines, grids, etc.). The two big questions: aren’t there better approaches to infrastructure today? And won’t the ministers’ plans put a sustainable economy further out of reach? The happy answer to the first question is “yes,” but “yes” is also the sad answer to the second question.

The World Bank’s plan to build such gigantic projects contradicts its stated objective to end poverty. This plan resurrects nightmarish approaches that have increased poverty, disempowered women, devastated life-sustaining ecosystems, and created massive debt burdens.

That is why International Rivers, Amazon Watch, and many other groups gathered outside the World Bank on October 12th to protest the plan for high risk/high reward projects and promote “Power 4 People.” In a true-cost economy the objective for infrastructure would be low risk/high reward projects. Such an economy would avoid casino-style investments and embrace infrastructure that leapfrogs the costly, destructive, and outdated approaches favored by the World Bank.

Despite serious mining and health issues, construction of cell phone infrastructure has been more environmentally sound than the old standard of installing high-cost telephone lines in remote areas. Today over 400 million people have cell phones but lack access to electricity. Taking a cue from the cell phone revolution, there’s an opportunity to construct a low risk/high reward energy infrastructure consisting of dispersed solar and wind projects. These renewable technologies can reduce the need for long and expensive transmission lines, and they don’t require water to generate electricity. Furthermore, with the cost of rooftop panels having rapidly dropped, solar energy has clear cost advantages for supplying electricity to rural communities.

In Africa about 600 million people lack access to electricity, and most are unlikely to be served by the dams and coal power plants proposed by the world powers because the transmission lines from central power stations would cost too much. That’s why the International Energy Agency reports that 70% of the world’s un-electrified areas are best served through mini-grids or off-grid solutions.

The advantages of a dispersed energy infrastructure include ability to reach the poor, reduced cost, less risk, and fewer socially and environmentally harmful impacts. Bangladesh, where something like 35,000 rooftop solar systems are being installed each month, is demonstrating these advantages.

The release of Bruce Rich’s book, Foreclosing the Future, comes at a critical moment, for it provides an insightful, well-written history of the World Bank’s inability Bank to learn from its past failures. Rich exposes the shocking first year of Jim Yong Kim’s term as Bank President, even though Kim came to the job with knowledge of the harmful impacts of past Bank projects.

Solar array at a Gambian hospital

This solar array at a Gambian hospital demonstrates a better way to generate electricity (photo credit: Daltoris).

In September of 2012 Kim extolled the work of the Bank’s International Finance Corporation (IFC) in South Africa where only three weeks earlier, the worst massacre since the apartheid era occurred as 34 workers on strike were shot to death at the IFC-supported Marikana platinum mine.  On his Africa trip Kim lauded the Bank’s $3 billion loan to South Africa for the dirty Medupi coal project, the fourth largest new coal plant in the world with annual greenhouse gas emissions greater than 100 of the world’s countries.

Kim also promoted the gigantic Inga III dam in the Democratic Republic of the Congo (DRC), even though the Inga I and II dams have been operating for decades with poor results for the citizens of the DRC. 85% of the electricity from these two previous World Bank projects has flowed to the mining industry. At the same time, less than 10% of the population has access to electricity.

The good news is that promising, low risk solutions are available to construct a sustainable energy infrastructure, achieve humanitarian goals, and move the world toward a true-cost economy. But the clear message is to forget about the G-20, the World Bank, the Chinese, the U.S. export-import banks, and the finance ministers to support these solutions.

Power politics drives the decisions of these power players. Big construction companies scheme with governmental ministries to develop larger and larger projects where lots of money can be skimmed. Under such corrupting conditions, the risk that mega projects could have disastrous consequences for life-support systems on earth doesn’t seem to matter to the people in charge.

The ecological concerns of proposed infrastructure projects are substantial. Sediments from the Congo River have created a 300,000 square-kilometer fan on the floor of the Atlantic Ocean. The high sediment load and oxygen content produce huge amounts of phytoplankton — phytoplankton that sequesters carbon and is a key factor in enabling the Atlantic Ocean to act as a carbon sink. The Inga III dam would damage the sediment fan. Do we want finance ministers ignorantly proposing plans to interrupt the crucial climate-regulating dynamics of the lower Congo River with a mega-dam project?

Hopefully the finance ministers heard our answer of “no” on October 12th, but now is not the time for self-satisfied silence. In fact, it’s a good time to continue protesting the insane ideas emanating from the World Bank and promoting alternatives from organizations that value people and places above profits.

Making Sense of the Protests through a Post-Growth Lens

by James Johnston

The world has recently seen protests on Wall Street, rioting in London, and tension in other parts of Europe as it deals with insolvent debtor nations. Mass confusion is in the air.

In New York, as the protesters try to explain why they feel exploited, critics and observers can’t seem to figure out what they’re crying about. Protesters have been labeled a bunch of entitled, rambling, half-naked young hipster eccentrics. In London, the world witnessed a similar process of bewilderment, where observers couldn’t initially put their fingers on why impoverished “working class” rioters were out causing a fearful stir (after all, most of the critics were motivated and had decent jobs, thank you very much). Meanwhile, stocks around the world continue to rally and tumble with unprecedented volatility. Growth forecasts and economic orthodoxy are proven wrong again and again. Job and wealth creation strategies don’t help the people who need it most.

If the protesters are rambling eccentrics, then traders, mainstream economists and policymakers must be lunatics because they continue to make the same mistakes and expect better results each time!

Frankly, neither side of the debate has a particularly firm handle on the reality of the problem, and hoping that the movement will simply fade away will prove to be wishful thinking. Among all the mass confusion, steady-state theory might help us account for not only the the economic problems, but also the ideological divide. Using the Wall Street occupation as our example, let’s assess the two sides of the debate and hypothesize how the two groups have come to inhabit such different planets.

First, the two sides of the debate are divided primarily along generational lines, not just ideological ones. The protesters might be characterized as a group of well-educated, disenchanted and heavily indebted young people who were raised to be grossly unprepared for the situation they find themselves in. They were told that when they completed their degrees, a growing economy would enable them to pay back their hyper-inflated loans and put a down payment on a massively overpriced home (relative to historical norms). Not only are these young people seriously indebted and underemployed, but they know the planet’s ecological line of credit is also maxed out, causing them to question what they should be working so hard for in the first place. They’re expressing legitimate frustration with a set of real, serious problems that go unaddressed in the U.S.

What about the other side? While some lucky or ambitious younger folks may also fall into this category, it can more generally be characterized as an older, more comfortable cohort on auto-pilot that has grown accustomed to the illusion of perpetual growth. They’ve witnessed it their whole lives: growth in asset values (including home values), growth in the economy’s energy use (more stuff, more suburbs, more oil), growth in levels of indebtedness (to afford it all), and growth in the supply of money.  They are perpetuating a system that is structurally engineered to collapse without feeding its addiction to growth (mainly by exploiting future generations).

Unfortunately, those advocating the status quo are firmly entrenched in their beliefs, and they have in their midst traders, economists and policymakers who can articulate those beliefs well.  Meanwhile the protesters have yet to present a unified and coherent set of theoretical principles to rebut conventional arguments and explain their worldview. They come off as disoriented, lost, and a little incoherent. But stupid they are not.

While the nuanced reasons for protest vary around the world, young people have a visceral grasp of something that the most comfortable in our global society are simply too sheltered to acknowledge — big problems in an economy that has been engineered for ecological and financial ruin.

It’s only a matter of time before confusion gives way to clarity, when we’ll have to come to terms with our post growth reality. It will begin with a set of pragmatic banking reforms: a gradual increase in the fractional reserve requirement, the reconnection of investment banking to the real economy, and the regulation of derivatives.

That’s just the beginning.

After Wall Street — or whatever comes next — we will all have to make an effort to inhabit the same finite planet and bridge the divide. We will have to find common purpose in the realignment of our overarching social and economic goals — not toward yesterday’s notions of solidarity or neoliberalism — but toward meaningful capital maintenance for prosperity without irresponsible growth.