Banking On Change

Last Tuesday, the Cambridge City Council explicitly pledged to continue to avoid doing something it has never done: buy World Bank bonds. Realizing that a deeper principle is at stake, the council unanimously approved a resolution to boycott the bonds “until the World Bank respects labor rights, stops promoting privatization, cancels 100% of debts owed to it by impoverished nations and stops the imposition of destructive economic policies.” In doing so, Cambridge joins a growing list of cities and institutions demanding change from the behemoth of globalization, including the usual suspects from California—San Francisco, Oakland and Berkeley—as well as Boulder, Colo., Takoma Park, Md., and Milwaukee, Wis.

The World Bank, established by the World War II victors in the Bretton Woods Agreement, began operating in the Third World in the 1950s and currently works in more than 100 countries. One of its primary purposes is to provide loans to nations with struggling economies—a seemingly benevolent function—but conditions those loans on economic reforms that often have damaging effects. For example, loans sometimes call for decreases in government spending, which results in cuts to social services, for wage cuts in order to reduce inflation, for liberalized tariff restrictions to encourage foreign investment, for currency devaluation and for industry privatization and deregulation.

Such policies provide incentives for companies to enter developing countries—usually to relocate manufacturing there—and thereby create jobs for residents and to bring in capital. What usually happens, however, is that the most needy residents fall victim to wage cuts, reductions in government benefits and exploitation in the workplace. In a “race to the bottom,” countries compete with one another by reducing restrictions on employers and cutting protections for workers and the environment.

A worldwide movement that aims to influence the bank’s decisions is gathering strength at the grassroots level. The World Bank insists on remaining unaccountable and inaccessible. Its board meetings are closed, its negotiations with governments are held secretly, and its votes are not recorded or released. But the World Bank is nonetheless vulnerable in that it reportedly depends on bond sales for 80 percent of its bankroll. Opponents of the World Bank are wise to lobby the Cambridge City Council to strike there, where it hurts most. The council’s boycott serves as a model for responsive government in that the council heeded the testimony and petitions of community members in setting its new policy.

Although Cambridge is just one small city standing up to a hulking international institution, its symbolic protest is itself a milestone in the struggle against the bank. By boycotting, Cambridge shows solidarity with those who have suffered from the bank’s policies. We should applaud the residents of this city for taking a principled stand, even when the positive repercussions of their actions may seem remote to their own lives.