Upon the recommendation of Dennis Brutus, MIM reviewed Masters of Illusion. We recommend this book as if it were an extended and thorough journalistic account of the World Bank from its beginning. Learning about the World Bank from this bourgeois source should be eye-opening to anyone considering communism.

The World Bank is an institution funded by the industrial countries to lend money for large projects in the Third World that no commercial bank would loan money for. The plurality of its staff is Amerikan economists.

Environment not counted Catherine Caufield correctly points out that bankers and economists by training and predisposition naturally incline to giving the environment short shrift. If there is no price on polluting or even killing, then economists do not usually take pollution or premature death into account. As a result with is large capital for large projects, the World Bank is behind some of the world's most destructive economic projects.

Throughout the Third World, bourgeois ideas of development have come along with environmental catastrophes sponsored by industrial country "experts" and bankers. Caufield provides the details and shows how difficult it is for the World Bank to change.

Agency of neo-colonialism The World Bank is to neo- colonialism what the missionary was to colonialism. Unwilling to work with local experts and government officials in the Third World, the World Bank provides the funding to establish entirely new agencies that fill the role that governments usually do in industrial countries. "By the early 1970s, more than half of all its loans went to autonomous agencies it had helped to establish in scores of countries."(p. 60) For this reason, some have seen the UN as a competitor of the World Bank, because both organizations set up their own branches in the Third World and both have pretensions of being world governments.

Theoretical Problems

While we recommend this book sheerly on a journalistic level, it has numerous theoretical flaws. The most grating flaw is to read this book as an indictment of the intelligence of bourgeois economists and Third World government officials, as if becoming a wealthy country the way these economists want is just a matter of applying the expertise of a handful of people.

MIM has to agree with Caufield that the Harvard, MIT and Oxford trained economists at the World Bank are especially stupid, because they tend to have little creativity and confuse their theories with the scientific and mathematical methods they learned in graduate schools. However, the ultimate underlying problem is the system arranging economic education and rewarding it to be removed from practical reality. Otherwise, these economists would notice that capitalism has a far bigger record of failure than socialism.

Based on the reports of World Bank staff, Caufield's report never rises to the level of thinking of systems that influence the behavior of large numbers of people. Hence, she lightly reports that bank insiders believe they undercut themselves by having quotas of loans to make. These quotas reduce their bargaining power with regard to the strings attached when it comes to working with government officials in the Third World. We are asked to be concerned that the "true rate of erosion in the Bank's bargaining power was more like from 50 to 35 percent [of what they want-- ed.]."(p. 103) This is despite the fact that no systematic evidence comes forth to show that increasing the Bank's power would be good for anyone but the Bank.

Even more neo-colonial in outlook is her comment that the Peruvian people were victims of demagoguery when some protested ceding control of the economy to the World Bank. (p. 136) Here the obsession with intelligence applied to rational policy merges with neo-colonialism of the sort that says the Peruvian people should just accept the supposedly more intellectually sound leadership at the World Bank.

Elsewhere Caufield sides with the bankers wondering if investments in education, housing and health pay off.(p. 125)

Typical of her whole atheoretical approach to development is her statement quoting one World Bank officer on why education projects fail : "'The best and the brightest' in government end up in the finance ministries and not in the education ministry." (p. 295)

Lenin Vindicated

If the reader reads Lenin's Imperialism before reading this book, the reader will see Lenin's theory vindicated by the facts throughout the book. Most interesting is the picture of commercial banks in the Third World, begging to make a loan, so that they can collect interest, and then having multi- lateral agencies like the World Bank clean up after them. According to Lenin, the capitalist system develops into finance capitalism and the finance capitalists must find some outlet for their surplus capital. It turns out that the World Bank annual meeting is a great chance for commercial bankers to meet Third World clients.(pp. 136-7) Observing one such meeting gives the reader the sense that Lenin had about what imperialists with surplus capital lying around have to do.

Even the World Bank itself feels pressure to release capital to the Third World, and its top leaders have adopted a sham planning system to reach their goals of loans made. Seeing this, the far right has labelled the World Bank a socialist plot. Caufield caters to this militia-type rightist throughout the book.

In reality, the World Bank is not just an "adjustor" for Third World economies: it is a central actor in rationalizing the flow of capital from the industrial countries (imperialist) to the Third World. According to one Kidder Peabody executive, the World Bank "earned its keep" during crises of the private sector.(p. 143)

While some right-wing militia types may not like being involved in multi-nation organizations like the World Bank, the truth is that Amerikan corporations are even more involved abroad than the World Bank and they are the ones requiring the World Bank to go on. In this way, taxpayers of the imperialist country middle-classes subsidize the failures of the bankers. After all in 1977, the top nine U.$. banks received more than half their profits from loans to the Third World.(p. 128) Moreover, "By 1982 Citibank's loans to just five of its Latin American clients amounted to twice its net corporate assets."(p. 129) On account of these profits sometimes the private bankers complain about the World Bank's stealing business, but on the other hand, the World Bank is bailing out the commercial banks and spurring economic infrastructure projects that the commercial banks would be afraid to undertake. Nor is it just U.$. capital at stake. The Bank of Tokyo has the equivalent of 80 percent of its net assets at stake in Mexico. (p. 138) From the point of view of these banks, the World Bank may be a failure, but not relatively speaking. The bankers themselves know what it is like to have to find large profitable outlets for their capital or accept losses, and they cannot think of any better way to do what the World Bank does within the existing system. If the World Bank is eventually replaced, it will be by an institution that is very similar.

The World Bank is also a means of outlet for the overproduction of capital goods in the imperialist countries: "Most of our money doesn't go to the South, it goes straight from Washington to Pennsylvania, where they manufacture the turbines, or Frankfurt, where they produce the dredging equipment."(p. 242) For this reason, the World Bank has its patrons in the super-elite.

Despite all the efforts of the bankers both multi- lateral and private, the capitalists fail to export away their crisis. "In 1994, for example, the developing world received $167.8 billion in foreign loans and paid out $169.5 billion in debt service - - a net transfer from the poor to the rich nations of $1.7 billion."(p. 335) This is a small token of the imperialists' worst nightmare -- surplus capital lying around with no profitable place to invest it. This sort of mechanism is typical of why imperialism is always in crisis.

Adjustment Failure

Caufield has the facts showing that World Bank economic policies imposed on Third World countries do not work. So-called adjustment loans have failed. Such loans go to countries willing to change their economic policies to the likings of the World Bank.

In Mexico where the money has been dumped by the international banking community, economic growth is only keeping pace with population growth. Thus Mexico has stabilized for now to the likings of the banking community, but it has not accomplished anything worthwhile to the proletariat by following the imperialist-dictated course: "In 1992, average wages were - in real term - half what they had been ten years earlier. . . Investment in health, education, and basic physical infrastructure was cut roughly in half, with predictable results. Between 1980 and 1992, infant deaths due to malnutrition almost tripled."(p. 153) The poorest 20 percent of Mexico receives less than 5 percent of the income. "The country's richest man, Carlos Sim, had more money than the country's 17 million poorest people combined."(p. 153)

In conclusion, we do not agree that hiring more staff at the World Bank or increasing the number of ecologists there is going to help the systematic problems underlying the World Bank. It should be abolished like many other imperialist entities that block the initiatives of the toiling classes for their own economic well-being.

(from MIM Notes 146, Sep. 15, 1997)

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