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Anthropology and the Environment

May 1998

Ed Liebow, Contributing Editor

I invited Ted Downing, Research Professor of Social Development (U Arizona), to briefly summarize a rapidly developing story with implications for global environmental policy. Downing was a consultant to the World Bank for over a decade and was one of the first social science consultants to the Bank's private sector arm, the International Finance Corporation (IFC). Subsequent events resulted in the IFC censoring his work on the Pehuenche Indians of Chile and his filing a formal complaint against members of the IFC staff. While dismissed by the IFC, the AAA Human Rights Committee has conducted its own investigation (see pp. XX). This story is far from over. You may contact Downing (520/621-2025; downing@u.arizona.edu) and follow further developments on the Development Policy Kiosk.

The World Bank Group's New Social And Environmental Policies For The Private Sector

By Theodore E. Downing (U Arizona)

Over the past few months, the IFC has requested public comment on its new environmental and social policies, review procedures, and its policy on public disclosure. From Mexico to Malaysia to Madagascar these new policies will define the environmental and social responsibilities of its private sector borrowers. IFC is the world's largest multilateral lender, and its new policies will define the rights of many people. For the next few months, anthropologists have a chance to nudge these policies. Consider this note as primer for policy action.

Increasing Private Sector Impacts

In a crowded, resource-hungry world, land-based development projects hold out the hope of providing needed energy, water, transportation, and of improving livelihoods. Yet the same projects threaten local populations and environments that stand in their path. The threat has dramatically increased as direct foreign investment in developing countries has quadrupled since 1991. Private investment capital is flowing into new projects at unprecedented levels, over $200 billion annually.

Some of the most dramatic counter-developments are occurring in involuntary resettlement. A 1994 World Bank review discovered 10 million people each year were displaced by development. Globally, development refugees now far outnumber political refugees. If measured coldly in cost-benefit terms, most development projects show positive returns at the national level. But if one looks more closely at local peoples and environments, one finds that local groups routinely suffer impoverishment.

Marginalized Governments And Affected Peoples

Governments in developing countries are often unable - and sometimes unwilling - to protect the rights of powerless local populations. With rare exception, new environmental institutions are too weak to enforce standards. Also, fledgling non-governmental environmental and human rights organizations are marginal players on an unleveled playing field whose boundaries and rules are rapidly changing. All face utilitarian logic that ranks national development and growth interests above that of local populations.

With privatization and structural adjustment, the role of governments in infrastructure development has decreased dramatically. But as governments have downsized, the private sector has not stepped forward to address social welfare issues. Organizations dedicated to peaceful development, such as the Oscar Arias Foundation, point to this trend with concern.

Multilateral lenders, like the World Bank Group and regional development banks, finance some of these private sector projects. They claim to show increased sensitivity to environmental concerns. To avoid harm, a cluster of social and environmental policies has been approved by their Boards to guide their loan officers throughout the project cycle. Indeed, with diminished government involvement, the lenders' environmental and social policies have become, by default, the first-level protection for the human and environmental rights of local affected groups. These policies, in effect, are international standards against which investors and project owners may be compared. Until recently, lenders have also linked broader national policy reform goals to specific project loans. Many of the developing world's nascent environmental protection agencies can trace their origins to lender leverage, which was supported by relatively weak, endogenous, environmental movements.

The International Finance Corporation

The IFC is a member of the World Bank Group. It finances private companies and provides advice for private sector projects in developing countries. Today IFC is the largest multilateral lender for private sector projects in the developing world. Since its founding in 1956, the IFC has committed more than $21.2 billion in financing from its own funds and arranged another $15 billion in syndication and underwriting for 1,852 companies in 129 developing countries. Its syndicating partners include global financial institutions that are household names, including the retirement funds of many academics (TIAA-CREF). ICF loans underwrite some of the largest development schemes and companies in the developing world. It has as yet unrealized potential for setting environmental standards for private sector investment to assure sustainable, equitable private sector-led development.

Although legally and financially independent, the IFC coordinates its activities with the other members of the World Bank Group. Its actions and mistakes reflect on the collective reputations of more than 50 anthropologists and allied social scientists in the World Bank who make up what is known internally as the "social family."

Secret Agreements On Social And Environmental Impacts

The IFC has only recently recognized the extensive social and environmental impacts of its borrowers ("sponsors"). At present, the IFC staff, in close consultation with its sponsors, select which World Bank policies are applicable to a particular investment. Although limited consultation may occur with affected local populations and national governments, only IFC management and its sponsor draft the environmental covenants of the final Investment Agreements. Out of a concern to protect "the legitimate business interests" of its clients, it is IFC policy to keep these agreements secret from the affected peoples. These agreements, which may also include clauses related to the future of ethnic and indigenous groups, are also kept secret from the IFC's own Board of Directors. If approved by the Sponsor, IFC may release a summary of this agreement. It is understandable that private sector trade secrets, pricing assumptions, and other internal data should not be made public as a condition of a loan. However, the IFC has been unable to muster an argument as to why social and environmental arrangements that directly affect the viability of local populations cannot be disclosed. Moreover, the IFC has no policies or procedures requiring the disclosure of information on environmental and social problems that might harm the local populations after a project is funded.

Non-disclosure of environmental and social agreements between the IFC and its corporate clients has serious, global economic consequences. Non-disclosure gives a competitive advantage to potentially unscrupulous companies. Sponsoring companies are free to hide behind the undisclosed environmental and social agreements when they seek capital claiming that their project is meeting World Bank environmental guidelines, even if they do not. Governments and affected people are kept in the dark. Internally, non-disclosure substantial increased the burden of staff supervision.

Compared to the Bank and most governments, the IFC is understaffed and relatively inexperienced in environmental affairs. Its environmental division was established in 1992. The first social scientist was hired in 1996. A second social scientist, an anthropologist, was drafted from the World Bank social family this year. Save for this single individual, the staff has no experience in social impact assessment, cross-cultural communication, social audits, participatory methodologies and other tools commonly associated with a mature environmental staff.

Given this lack of experience and the IFC's growing importance as a global player, it is not surprising that its environmental performance is being critically challenged from many directions. NGO's are very displeased that the IFC is immune from investigation by the independent Inspection Panel, originally set up to examine external complaints against the World Bank. And the AAA Human Rights Committee recently completed an investigation of the IFC's social and human rights impacts of an IFC-financed Pangue project on the Pehuenche Indians of Chile (see AN, this issue). Copies of both reports can be obtained in Spanish or English by contacting the IFC's Mark Constantine (mconstantine@ifc.org).

Draft Policies

Looking to improve its environmental performance and harmonize its policies and procedures with other World Bank Group organizations, the IFC released draft environmental and social policies, procedures and supporting documents. It asked for public comment by April 17, 1998. The draft statements cover environmental assessment, natural habitat protection, pest management, involuntary resettlement, forestry, dam safety, and projects on international waterways. A procedure for environmental and social review of projects was also released.

The Development Policy Kiosk

I created the Development Policy Kiosk as a way to encourage interested parties to evaluate proposed policies and recommend changes. The KIOSK is more than a web site. It embodies a strategy for increasing the profile of professional associations and academics in the policy process. It is not limited to the IFC or even environmental issues. In the past, as international organizations and governments released policies and procedures for public comment, responses were sent directly to their officers. Stakeholders, including NGO, businesses, academics, individuals, and local populations were often unaware of the comments of other stakeholders. The KIOSK provides a public place for communication AMONG the parties likely to be affected. Organizations and individuals are invited to post and read comments sent to the policy maker. The cross-stakeholder sharing of information increases the public accountability of those who make policy.

The draft IFC policies have been placed at the KIOSK, along with links to IFC Board members and their alternates via email and fax. The IFC Policy Review Project is taking place under the auspices of the Society for Applied Anthropology's International Standards Committee, which I chair. Its members include Billie R Dewalt (Pittsburgh), Patricia Feeney (Oxford), Jerry Moles (Global Renaissance) , Scott S. Robinson (Mexico-UNAM), Thayer Scudder (Cal Tech), Miguel Vasquez (NAU), and Robert Winthrop (Cultural Solutions), along with student members, Carla Maria Guerron-Montero (Oregon) and Eloit Lee (NAU). Lee kindly volunteered his talents to maintain the site. The critiques of the seven policies and their associated procedures are continuing to roll in, policy by policy. Readers concerned with a specific policy are encouraged to obtain copies of the draft policy and review the critiques at the KIOSK.

What Remains To Be Done?

Thanks to the work of a number of insightful observers, there is hope that the final policies will be enhanced and the IFC will become a standard-setting institution for socially and environmentally sustainable private sector development. But it is imprudent to assume that the limited IFC staff will require no further guidance concerning the literature on developmental anthropology.

By the time AN reaches your desk, it will be too late to comment directly on the draft policies. The policies will be presented to the Board for approval, probably in May. But there are still options. A prompt review of the KIOSK would be helpful, especially if accompanied by comments sent directly to the US representative, Jan Piercy (jpiercy@ifc.org) - who holds about one quarter of the votes in this decision - with copies to key US politicians.

The World Bank and IFC are also re-drafting the indigenous and cultural resource management policies, which should be of substantial interest to anthropologists. It is appropriate to mobilize legislators and their staffs who are in a position to demand accountability from multilateral lenders. They might not be fully aware of the significance of these policies to building workable standards to assure sustainable developments that respect the human rights and the integrity of local environments. One phone call or a letter may, like the proverbial Lorenzian butterfly in the Amazon jungle be responsible for a tornado in Kansas or it may not. But the consequences of inaction are known.

Section Elections Reminder

Section members should have received their ballots in mid-April, along with full statements by the candidates. This is just a reminder for you to send your ballots back to the AAA Office. The candidates for Section offices, again, include:

PRESIDENT-ELECT (2-year term, then a 2-year term as President)
J Peter Brosius (U Georgia)
Allyn M Stearman (U Central Florida)

EXECUTIVE COMMITTEE MEMBER AT LARGE (2-year term) Vote for two.
Ann A Forbes (Harvard)
Andrea Kaus (U California-Riverside)
Thomas E Sheridan (U Arizona)