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World Bank Blasts Rich Countries

GENERIC World Bank global economy
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The World Bank opened its annual meeting Tuesday with a blistering attack on rich countries for spending hundreds of billions more on their militaries and their farmers than they do on helping the poor.

"Our planet is not balanced," World Bank President James Wolfensohn told delegates from 184 countries. "Too few control too much, and too many have too little to hope for. Too much turmoil, too many wars. Too much suffering."

The failure of global trade talks this month in the Mexican resort of Cancun highlights the deep divide that must be overcome to create a stable future, Wolfensohn said in an opening address to the joint meeting of his bank and the International Monetary Fund.

He criticized rich countries for providing just $56 billion a year in development assistance to poor countries, compared with more than $300 billion they spend on agricultural subsidies and $600 billion spent on defense. Nations have committed an additional $16 billion in aid by 2006, but Wolfensohn said poor nations could easily use twice as much.

The U.S. House and Senate last week agreed on a $368 billion defense budget for next year. The federal budget for 2004 proposed by President Bush contains $17 billion in international aid programs, but $4 billion of that is foreign military assistance. The total federal budget is more than $2 trillion.

Rich nations balked at greater cuts in farm subsidies in the Cancun meeting and poor nations, who say their farmers suffer as a result, refused to proceed.

U.S. Treasury Secretary John Snow and other top finance leaders have been lobbying for a quick resumption of the World Trade Organization negotiations, arguing breaking down barriers to global commerce would benefit all.

But Wolfensohn said wealthy nations need to do what they say.

"It is inconsistent to preach the benefits of free trade and then maintain the highest subsidies and barriers for precisely those goods in which poor countries have a comparative advantage," he said.

Finance leaders are worried about the massive American budget deficit, approaching a record $500 billion, but Snow called the spending "understandable" and pledged Tuesday that Washington will bring it down through a combination of economic growth and responsible spending.

"It came about because of a recession and efforts to deal with a recession" Snow told delegates. Snow called it "Economics 101" that countries run a deficit to tackle a recession but said the United States plans to slash its red ink in half over the next five years, bringing it below 2 percent of GDP.

IMF Managing Director Horst Koehler said Tuesday the increased U.S. spending had provided a stimulus to the global economy but called on Washington "to establish a credible framework for a return to a balanced fiscal position."

Refusing to lay blame for global troubles entirely on the wealthy West, Wolfensohn said poor countries spend $200 billion on defense — more than they invest in education — which he called "another major imbalance."

The money summit, which wraps up here Wednesday, is the first such event held in an Arab country, and many delegates are calling that a good signal for the troubled region.

The host country, United Arab Emirates, opened Tuesday's session with a call on the international community to help rebuild Iraq and to help bring peace in the Palestinian-Israeli conflict.

"This part of the world will not be able to realize its full economic potential until a just and permanent solution to the regional conflict is found and the international community makes a serious effort," said Finance Minister Sheik Hamdan bin Rashid Al Maktoum.

He cited "rays of hope" in Iraq, which is hoping to recover from decades of economic mismanagement under Saddam Hussein and U.N. sanctions that held back its crucial oil industry. Iraq has just announced a plan to establish a market-based economy with access to foreign investors in all segments but oil.