Masters of Illusion: the World Bank and the Poverty of Nations

Masters of Illusion: the World Bank and the Poverty of Nations – Book Review

Bryane Michael

By Catherine Caufield (New York: Henry Holt and Co., 1997. 384 pp.).

The International Bank for Reconstruction and Development (World Bank) has been increasingly at the centre of international development since the end of World War II. Charged with reducing poverty and promoting economic development world-wide, its mandate and achievements have been hotly debated. Defenders of the Bank point to the Bank’s role in the East Asian Miracle and in much project level industrialisation. Opponents of the Bank cite the social, economic and political damage caused by the Bank in the Third World. Yet, almost all commentators (including the World Bank itself) agree that the Bank’s achievements have not lived up to the Bank’s mandate–given in the words of economist Lant Pritchett “divergence big time” between the First World and Third World. Despite the gap between the Bank’s mandate and achievements, the Bank has still grown to become by far the largest development agency (with a staff of over 6,000 and a lending portfolio of over $100 billion in disbursed and outstanding loans in the early to mid 1990s). It also exercises “moral suasion” on both policy and research.

If the World Bank has not been achieving its objectives of promoting international development–leading to many calls for Bank reform–why does the World Bank continue to grow in size and power? Catherine Caufield’s Masters of Illusion: The World Bank and the Poverty of Nations attempts to address this question. Her basic premise is that the Bank has “survived more than half a century of dramatic global and economic change … [through] its ability to redefine itself” (p. 2). The Bank has skilfully shifted its identity from “friend of business” to a “voice for social justice” by engaging in constant identity shifting … thus being a “master of illusion.” What role has this adaptability played in the history of the Bank and the history of international development?

A History of the Masters of Illusion

The history of the Bank, according to Caufield has both caused and reflected large-scale social change during the 20th century given that “its view of development prevails both in discussion and in action” due to the influence of its publications and lending portfolio (p. 2). To understand the nature of that change requires historical analysis. And such historical analysis centres on one of the greatest men of the Bank’s “great men”–Eugene Black.

In some ways, Eugene Black’s presidency (1949-1963) set the tenor for the Bank and represented its golden period. Under his charismatic and able leadership, the Bank’s president came to consolidate power from the Board of Directors, emphasise the role of experts and technology in development assistance, and increase the role of the Bank in international diplomacy. Later presidents such as George Woods (1963-1968) and Robert McNamara further increased the Bank’s technocratic focus while pushing for expansion in both lending and political influence. By Barbar Conable’s time (1986-1991), the same expansionary bias which proved invaluable earlier had turned into a liability in a changing world. Under Conable, the Bank had seen a large-scale “reorganisation” (read massive staff lay-offs) and increased focus on environmental and social issues as, “under Conable, the Bank became more aggressive in ‘advertising’ its environmental activities” (p. 185). James Wolfensohn’s reign (1995-present) has seen perhaps the most reactive policy, with large scale “partnership” with non-governmental organisations, and a tackling of some of the difficult issues of development–such as debt forgiveness.

As a social history, Masters of Illusion offers many insights into 20th century globalisation for to really understand the history of the Bank requires an understanding of the dynamics of early versus late capitalism. Since the opening of the 20th century (and before), developing countries have been reliant on international debt finance–often relying on infamous international financiers such as Ivan Kruegar. As the post-war period saw increasing need for capital investment to finance industrialisation, self-interested and binge lending of the international investment banks would not take the borrowers’ best interests into account. So public institutional lending was required. Yet, as Caufield clearly shows–in the example of the Sardar Sarovar dam project and other lending–the Bank has not represented the borrowers’ interests, but has insulated itself from social pressures.

In her examples, the forces of globalisation are palpable. In her examples of the environmental impacts of the Bank, the reader can almost see the ghost of Gramci or Foucault frown as the discourse of development winds its way from Colombia to Brazil to China. The borrowers who view large-scale industrial projects as “talismans of change” and the Bank staff who engage in “cheap theatrics” are both locked in a logic makes the representation of development almost more important than the development itself. Caufield ably shows how “traditional” social forces such as government, financial interests and lower class voters push for or against the extending global influence of the Bank.

The Masters of History?

Has the World Bank impacted history as much as Caufield claims? Probably not. Behind Masters of Illusion lies the same social forces that are discussed in the globalisation literature: namely the redrawing of institutional boundaries between business and government. The Bank exists in what a Marxian might call a “contradictory position” because it must both uphold the interests of its bondholders and influential contractors while at the same time addressing the needs of politics to demonstrably show improvements in the quality of life. The result has been to push more debt through the international system. All the elements of this story are in Masters of Illusion–yet the anecdotes of the antics of groups within the Bank, such as the “EDI mafia” (the purported Bank-indoctrinated group of trainers within the Economic Development Institute of the World Bank) miss the overall picture.

Was the Bank slavish in cultivating an image or was it responsive to changing social circumstances? Society has changed greatly in the last 50 years and to expect the Bank to represent the same stakeholders that it did in the 1950s would be surprising. The role of the Bank and the day-to-day operational work of the Bank have shifted greatly in 40 years. Bank environmental policies have changed enormously since the 1960s–a fact the book recognises. The Bank has been learning about international development just like everyone else. Issues such the environment or gender were not just overlooked by the Bank, they were overlooked by society at large. Thus, judging the Bank by today’s values is a very perilous exercise–visits in history are often visits to a foreign land.

The Final Result

Caufield’s Masters of Illusion makes an important contribution, not only methodologically for understanding the international organisation’s role in social history; it also provides one of the few truly critical book-size assessments of the Bank. Development practitioners will benefit from the important insight that much that is wrong with the international system is not due to poorly designed institutional arrangements, but to historically contingent political and ideological interests. Academics will benefit from a critical, well balanced and well researched account of an organisation which has made a large impact on the 20th century society world-wide.

Bryane Michael

Linacre College

COPYRIGHT 2003 Journal of Social History

COPYRIGHT 2004 Gale Group