Critical Perspectives on Accounting 15 (2004) 303323

The true nature of the World Bank

Marcia Annisette
Department of Business Administration, University of Carlos III de Madrid,
Madrid, Spain
Received 29 August 2001; received in revised form 14 January 2002; accepted 5 February 2002

Abstract
In Saravanamuthus article, What Is Measured Counts, the World Banks dismal record in
promoting sustainable economic development is used to illustrate accountings role in privileging the economic over the social. Saravanamuthu argues that the accounting standards used to
evaluate the overall performance of the World Bank are the cause of the Banks failure. She further argues that if a socially responsible institution such as the World Bank cannot get the balance between the economic and the social right how can lesser organizationssuch as commercial
corporationsbe expected to behave in a socially responsible manner. In this commentary, I argue that Saravanamuthus choice of the World Bank as a test case of accountings role in this
tension is misguided because of a nave interpretation of the nature of the Bank and its role in
the management of todays global capitalist economy. I will reveal the financial and institutional
pressures that drive the Bank to pursue the interest of private international capital and will show
how these pressures, coupled with operational factors ensure that the Banks socio-environmental
goals remain at best marginal to its overall agenda. Further I will explore the role of accounting
in the nexus of relationships within which the World Bank is situated and will consider critical
accountings potential contribution to research on the role of accounting and accountants in Third
World Development.
2003 Elsevier Science Ltd. All rights reserved.
Keywords: World Bank; Third World Development; Accounting

Present address: Department of Accounting, Business School, Howard University, Suite 352, 2600 Sixth Street,
Washington, DC, USA. Tel.: +1-202-806-1566; fax: +1-202-986-4160.
E-mail address: mannisette@howard.edu (M. Annisette).

1045-2354/$ see front matter 2003 Elsevier Science Ltd. All rights reserved.
doi:10.1016/S1045-2354(03)00064-9

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M. Annisette / Critical Perspectives on Accounting 15 (2004) 303323

1. Introduction
Any research that exposes the workings of multilateral institutions such as the World Bank
is a welcomed addition to the accounting literature. For while accountings partisanship in
settling social conflict along class, gender, and to a lesser extent racial lines has been
successfully exposed, the nation state has constituted the prime unit of analysis. The World
Bank, along with its sister organization the IMF, stand at the centre of todays global
capitalist economy. They are the contemporary architects of a global order characterized by
a single ongoing international division of labour (Wallerstein, 1980) and a widening wealth
gap between North and South. Their interrogation necessarily places the world system at
the forefront of analysis and thus has the potential to expose accountings role in mediating
unequal relations between rich and poor nationsa subject so far scantily addressed by
accounting researchers.
Saravanamuthus paper however falls short of this potential. The World Bank is implicitly
portrayed as a most likely institution to behave in a socially responsible fashion in the
light of its country-funded financial structure, and its lofty social mission of reducing
poverty by promoting sustainable economic development (World Bank Annual Report
2000). Drawing on the extensive research on the World Bank, I argue that such a depiction
is both incorrect and a-historical. Firstly, there is nothing in the Banks financial structure that
renders unto it a predisposition to pursuing policies beneficial to the developing countries
whose poverty it allegedly seeks to reduce. Secondly, I will argue that never in its history has
the World Bank appeared to take poverty reduction and sustainable development seriously.
Instead these themes could be seen as part of the Banks self-serving rhetoric designed to
legitimize its existence and to mask its unswerving commitment to private capital interests.
By demystifying the two assertions inherent in Saravanamuthus selection of the World
Bank as her test case, this commentary argues that the Bank is an inappropriate choice for
illustrating the tensions that managers face in reconciling socio-environmental objectives
with the drive for profit.
The remainder of this commentary will be organized as follows. The next section gives
a brief financial overview of the Bank setting the scene for the subsequent section, which
explores the basis of its financial and intellectual hegemony in the world of development
finance. Here I will show how financial, institutional and operational pressures reinforce
each other compelling the Bank to pursue a capitalist agenda whilst peripheralizing its
well-touted socio-environmental goals. In the final section this commentary will explore
the role of accounting in the nexus of relationships within which the World Bank is situated
and will consider critical accountings potential contribution to research on the World Bank
and the role of accounting and accountants in Third World Development.

2. A world-class institution
The International Bank for Reconstruction and Development (IBRD) generally referred
to as the World Bank, was established in 1944 and is the core institution within the larger
World Bank Group constituted by three other specialized developmental agenciesthe International Finance Corporation (IFC); the International Development Association (IDA);

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305

and the Multilateral Investment Guarantee Agency (MIGA).1,2 The IBRDs principal activity is the provision of loans, guarantees and technical assistance for development projects
to its borrowing country members. From its inception to 30 June 2000 it had disbursed some
$310 billion of such loans to 129 countries (World Bank Annual Report 2000).
In the field of development lending, the World Bank is both financial and intellectual
hegemon (Payer, 1982). It is by far the largest and the richest development-finance institution in the world. Currently its shareholders equity stands at $29 billion of which $11
billion represents paid-up capital contributions from member states and $18 billion retained
earnings (World Bank Annual Report 2000). Members paid-in contributions are backed up
by an additional $177 billion of callable capital, which acts as a guaranteed sum to meet
the Banks obligations for funds borrowed or loans guaranteed by it (World Bank Annual
Report 2000). The Banks articles encourage a conservative lending policy which restricts
lending to a maximum of $1 of loans, loan participations and guarantees to $1 of subscribed
capital and retained earnings. Thus its current loan portfolio stands at $164 billion, of which
$120 billion represents actual disbursements. A signal of the Banks perceived financial stability is the highly coveted AAA rating conferred on its bonds by securities rating houses
such as Moodys and Standard and Poorsa rating which the Banks bonds have enjoyed
consistently since 1959 (http://www.worldbank.org).
The Bank has been overwhelmingly profitable, recording healthy profits every year since
1947 with profits exceeding $1 billion per year for the past fifteen years (http://www.
worldbank.org), hitting close to $2 billion for the current year. From current years profits,
revenues amounted to $9.7 billion of which 85% was in the form of interest and commitment
charges earned on loans to developing countries. Out of this, some $7.1 billion in interest
was paid out to its bondholders resident in the developed capitalist world (World Bank
Annual Report 2000). Overall for the year, the Banks net gain on development-lending
activities amounted to $2.5 billion. These are revealing statistics for an institution which
not only promotes itself as one whose aim is not to maximize profit (World Bank Annual
Report 2000, p. 3), but has also explicitly singled-out poverty reduction as its main goal.
The Banks ability to make such substantial profits rests on three factors. First, is its
ability to obtain loanable funds at a low cost. The articles of the Bank prohibit the payment
of dividends to its shareholders thereby providing it with permanent cost free equity. More
importantly however is its low cost of debtthe principal source of its loanable funds. The
guarantee of its uncalled capital allows the Bank to issue its bonds as a quasi-sovereign
bond issuer in the major financial centres of the world. World Bank bonds are therefore
1

Although reference to the World Bank often relates to the activities of the IBRD and the IDA, in this paper
such references will refer to the activities of the IBRD alone.
2 The IFC, the IDA and the MIGA were established in 1956, 1960 and 1988, respectively. The IDA was
established to make soft loans to the worlds poorest countries unable to afford the IBRDs terms. Although
it has a different source of funds, and country eligibility for its loans are not the same as the IBRD it is not a
separate institution, but rather, a separate account managed by the officers of the IBRD. The IFC on the other hand
makes loans exclusively for private enterprise in Bank borrowing countries. In addition to providing credit to local
companies the IFC has helped many transnational corporations to establish themselves in developing countries.
Finally the MIGA was established for the purpose of encouraging direct foreign investment in developing countries.
It provides insurance guaranteeing investments against non-commercial risks and gives policy advice to developing
country governments concerning foreign investment (George and Sabelli, 1994, p. 12).

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M. Annisette / Critical Perspectives on Accounting 15 (2004) 303323

Table 1
Borrowing and lending rates by the World Bank
Loan/borrowing by product

Loans
Volume

Multi-currency pool
Single currency pools
Variable spread single currency loan
Fixed rate single currency loan
Non-standard variable spread single currency loan
Fixed spread loans
Other fixed rate
Other
Total

37654
38824
20791
11822
9676
383
2272
121455

Borrowings
Return
5.51
8.00
5.72
6.26
7.99
6.00
8.76
6.71

Volume

Cost

26475
28598
16828
10162
8909
423

4.42
7.74
5.38
5.79
5.62
4.26

29060

5.96

120455

5.92

Source: Adapted from Tables 8 and 9 World Bank Annual Report (2000, p. 23).

issued at rates close to or identical with the favourable rates obtained on the securities of
governments. Secondly, as illustrated in Table 1, the Bank then lends these funds to its
borrowers at rates marginally higher than that which it pays to its bondholders. Like a
discount retailer, the Banks strategy therefore is one of low margins and high volume. The
latter imposes on the Bank an enormous pressure to lend, which impacts on its espoused goal
of reducing poverty by promoting sustainable developmentan issue to which I shall return.
The third plank of the Banks profitability relates to the low default risk associated
with its loans. The Banks loan loss provision currently stands at less than 3% of its total
loan portfolio. The borrowing governments with whom the Bank contracts have powerful
reasons not to default on its loans for such action would promote an immediate lending
drought, not only from the World Bank itself but (as will be explained below) from all
other sources of bilateral, developmental and commercial finance and aid. Consequently
over its fifty-five-year life, the Bank has never experienced a default on any of its loans,
nor has it ever had cause to make a call on its callable capital.3 It is this aspect of the
Banks profitabilityits financial hegemony over borrowing nationsthat makes it the
most powerful institution in the management of the contemporary global capitalist system.

3. A lending hegemon for capitalistic causes

The World Banks dominance in development lending can be illustrated by a comparison
with the worlds four other Multilateral Development Banks (MDBs).4 As revealed in
3 The classic example of the restraint governments exercise in defaulting on its World Bank commitments is
demonstrated by the case of the Ghanaian government which in 1972 repudiated most of its international debt but
agreed to honour its World Bank commitment (see Payer, 1982, p. 47).
4 Multilateral Development Banks are institutions established to provide financial support and professional
advice for economic and social development activities in developing countries. The term Multilateral Development
Banks typically refers to the World Bank and four Regional Development Banksthe African Development
Bank, the Asian Development Bank, the Inter-American Development Bank Group and the European Bank for
Reconstruction and Development.

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307

Table 2, up to their respective 2000 year-ends, these banks have collectively disbursed
a total $235 billion in loans, whilst for the year 2000 they lent a combined total of $16
billionfigures that are seriously dwarfed by the Banks corresponding figures of $310
billion to date and $30 billion per annum. In addition, given the Banks traditional emphasis
on co-financing, even this casual comparison significantly understates its true financial
leverage.5
But the World Bank does not merely lend more than the combined total of its developmentlending rivals. It also co-ordinates and subordinates the activities of these institutions, providing them with intellectual and technical leadership in the areas of project identification,
management and evaluation. In reality therefore the Bank stands at the centre of a web of
cooperative and co-financing lending arrangements such that its influence over development
lending far exceeds that portrayed by its already significant financial contribution (Payer,
1982).
The Banks lending hegemony is further strengthened by is its well-established
reputation as a country-rating agency. Acting as a kind of international Standards and
Poors (Wade, 1996) that signals to potential donors, lenders and investors in which
countries they should invest their money, the World Bank has emerged as the key arbiter in determining which countries receive international finance/aid and which countries do not. For the poor countries of the world therefore, World Bank funding acts
as a seal of approval that opens up the sluice gates to other sources of international
capital.
The Banks intellectual hegemony bolsters and derives from its financial hegemony.
Employing more development economists and operating with a research budget far larger
than that of any university department or research institution working in the area (Stern
and Ferriera, 1997, p. 524) the Bank occupies an unmatched position as intellectual leader
on economic development thought.6 In addition, the sheer size of its lending programmes
has allowed it to exert considerable influence on the policy choices of developing countries. The combined impact of its financial and intellectual hegemony means that the
Banks influence on the theory and practice of economic development is profound. In
this vein therefore, the World Bank cannot be seen as just one of a number of equal
actors in the world of development economics(Stern and Ferriera, 1997, p. 524). The
following sub-sections provide a glimpse of how this lending gargantuan has fixed the
field of development such that it consistently benefits the interests of private international
capital and why given its history and structure, the Banks actions cannot but be biased
against the interests of the poor. It would therefore explain why Saravanamuthu cannot seriously expect this central institution to be genuinely concerned with poverty reduction and
sustainability.

5 For instance during the year ended June 1992 the Bank directly financed $15 billion in loans whilst
half of its projects attracted another $13 million from co-financiers (George and Sabelli, 1994, p. 12).
In addition, at the same June 1992 year-end, the Banks total portfolio of 1800 projects was collectively worth $360 billion of which it had provided $138 billion in finance (The Whirled Bank Group,
2000).
6 In 1995, the Bank employed approximately 800 development economists and operated with a research budget
of $25 million per annum (Stern and Ferriera, 1997, p. 524).

308

Institution

Year
formed

Loans since
inception
($ million)

Annual
lending 2000
($ million)

Current year
profit
($ million)

Equitya
($ million)

Number of
member
countries

Staff size

World Bank
Inter-American Development
Bank Group
African Development Bank
Asian Development Bank
European Bank for
Reconstruction and
Developmentb

1946
1959

310000
106000

30000
5266

1991
846

29289
12443

183
46

8000
1700

1964
1966
1991

23000
88000
18000

1700
5800
3276

152
626
137

4
10834
4726

77
59
59

1000
2000
1100

Source: Web sites and year-end 2000 annual reports of the various institutions.
a Excluding callable capital.
b Using rate 1 Euro = $0.90.

M. Annisette / Critical Perspectives on Accounting 15 (2004) 303323

Table 2
The World Bank in the context of other Multilateral Development Banks

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309

3.1. Financing by capitalist agents

An understanding of the Banks financing structure provides two important insights
into why its policies are necessarily loaded in favour of interests other than those of its
espoused beneficiaries. The first relates to the Banks ownership structure. The IBRD is
formally owned by 183 national governments and, although registered as a United Nations specialized-agency, its structure of control differs quite markedly from that of the
UN. Instead of the judicial model of equality of member states, the Bank is constituted
on the basis of $1: one vote. That is, capital subscriptions determine a countrys voting
strength. As at April 2001 (in the IRDB) the US controlled 16.4% of the voting stock,
Japan 7.9%, Germany 4.5%, the UK 4.3% and France 4.3%. By way of contrast, 42
sub-Saharan African countries collectively controlled less than 5% of the voting power
(see http:/www.worldbank.org/html/extdr/about/voting/kibrd/htm). The Bank classifies its
183 member governments into two groups: those who borrowreferred to as Part II
countriesand those who do notreferred to as Part I countries. Overall its 26 Part
I member countries control 60% of the Banks voting power whilst its remaining 157 Part II
member countriescountries whose development the Banks activities are targeted to serve,
control the remainder (see http:/www.worldbank.org/html/extdr/about/voting/kibrd/htm).
Therefore, despite its broad country membership, and its stated objectives, the constitution
of the Bank is designed so as to ensure that its policies reflect the desires of the richest
countries of the world.7 This bias is made even more profound when one considers that its
retained earningsderived mainly from profitable lending operations with its borrowing
memberscontributes more than 60% of the Banks equity capital base. And whilst such
high earnings retentions has contributed to the widely recognized autonomy of Bank management vis a vis the institutions formal owners (Fox and David-Brown, 1998, p. 13), as
will be revealed later, such managerial leverage has not been deployed to the advantage of
the poor countries of the world. Instead it has served to realize managements own agendas
for unrestrained institutional expansion and growth.
The other and perhaps more compelling reason why the Banks financial structure ensures
that its policies necessarily coincide with interests other than those of the poor relates to the
fact that over 80% of its loanable funds derive from the sale of bonds on the international
capital markets. As pointed out earlier, an important plank of the Banks profitability is
its ability to issue these bonds at the lowest cost. But as noted by Wade (1996, p. 15) its
ability to borrow cheaply depends on its reputation among financial capitalists, which in
turn depends on its manifest commitment to their version of sound public policies. This
means that the development programs that the Bank espouses are unlikely to coincide with
the policy choices of development oriented governments. It also suggests that the kinds
of projects it pursues in the cause of poverty reduction are not projects sanctioned and
7 Several authors however argue that the Bank can be better viewed as a projection of US foreign policy (Amin,
1995; Payer, 1982; Wade, 1996). For instance they have pointed out that throughout its history, the US has been its
largest shareholder and most influential member shaping and directing more than any other country the institutional
evolution, policies and activities of the Bank (Gwin, 1997, p. 273; Payer, 1982). In addition, it has been observed
that the president of the Bank has always been an American; whilst Americans have always been over-represented
at professional levels relative to the US shareholdingcurrently some two-thirds of World Bank economists being
certified by US Universities (Wade, 1996, p. 15).

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M. Annisette / Critical Perspectives on Accounting 15 (2004) 303323

approved by their espoused beneficiaries. Instead these are projects and programs, considered appropriate and desirable by capital market agents operating at sites distant from
the object of their investments and using decision criteria which exclude any consideration
of their investments impact on the lives of the poor. Thus:
In 1982 [. . . ] The village of Rio Negro stood in the way of the Banks plans to construct a
hydroelectric dam. After villages refused to relocate from their ancestral lands, the Bank
averted its eyes when the army massacred some 400 Maya, mostly women and children.
Despite sending numerous missions to oversee the project during construction, the Bank
kept silent about the massacre until 1996, when human rights groups forced the issue.
The Banks own internal investigation then absolved it of responsibility. Further, Bank
officials claim that a program providing inferior lands more than a decade after such
massacres sufficiently mitigated the survivors trauma, on the grounds that their 1980
standard of living has been restored. (False Profits: Who wins, who loses when the IMF,
World Bank and WTO come to town, http://www.50years.org)
Approved by the World Bank in 1985 with a loan of $US 450 million, the Sardar Sarovar
(Narmada) project was fraught with environmental and resettlement problems from the
outset. Although the project was slated to forcibly displace more than 150,000 people
from their homes and villages, most of those people did not have access to the most basic
information about their impending resettlementsuch as basic entitlements, timetables,
or locations where they would be settled. Many were not even informed that they had to
move . . . . (Udall, 1998, p. 394)
3.2. Instituted for capitalist purpose
The pro-capitalist bias imposed on the Bank by its financial structure is reinforced by
an institutional structure that compels it to support a pro-capitalist development ideology.
Recall, the Bank, along with its twin, the International Monetary Fund (IMF), were founded
by leading industrial nations with the single objective to prevent the recurrence of the
economic crises that dogged the capitalist world during the inter-war period. From inception,
the World Bank was a conspicuously capitalist institution, which, with the IMF was designed
to secure capitalist growth and monetary stability in the post-war international capitalist
system.
From birth, the IMF was considered the greater of the Bretton Woods twins. Its mandate
was to prevent countries temporarily in a balance of payments crisis from imposing trade
restrictions and curtailing imports when they were short of liquidity. Thus when a country
is experiencing a shortage of foreign exchange and unable to pay its foreign debts, the IMF
grants it short term loans for balance of payments support. The Fund however does so with
conditions attached: borrower countries must change their policies to fit with its prescribed
monetary and economic reforms (called conditionalities). The Bank then steps in to
provide the country with longer-term funding for specific projects that would supposedly
contribute to development (e.g. dams, schools and other infrastructure projects). Importantly
in the design of this lending regime is the requirement that access to World Bank fundsand
by extension those of the full panoply of development-lending institutionsis contingent
on membership of the IMF and adherence to its policies. This arrangement was part of

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311

a conscious plan by the institutions founders to force countries to agree to standards in

the monetary field as a condition to get the benefits of the Bank (Ansel Luxford quoted
in Payer, 1982, p. 22).8 World Bank funds were therefore intended to be a reward to
borrowers for obeying the economic and monetary policy dictates of the IMF.
But the Funds policy solutions are not value free. Whilst there exists a range of alternative means for solving a balance of payments crisis, the IMF has consistently imposed on
its borrowing countries the solutions of private international capital. Its lending conditionalities impose economic and monetary reforms explicitly aimed at making the economies
of borrowing countries more attractive to foreign investment. This however must be so, as
the promotion of international trade and investment is enshrined in the founding Articles of
the Fund (Payer, 1974).
In this carrot and stick approach to development lending, the World Bank might be
viewed as the passive sibling in the advancement of capitalist expansion into the Third
World. However, in 1979 it took on a more active role with the introduction of its Structural
Adjustment Loans (SALs). Currently SALs account for 41% of the Banks lending (World
Bank Annual Report 2000, p. 5) and impose on borrowing countries the same policy reforms
as the IMF conditionalities. These include: reducing government spending, eliminating subsidies from basic goods and services, removing taxes on exports and imports, eliminating
barriers to foreign ownership and repatriation of profits, privatizing public services, adjusting domestic prices, invoking currency devaluations and increasing interest rates. The net
effect of the Bank-Fund policy prescriptions has been to transform the economies of borrower countries into open and free competitive market economies, giving the widest possible
freedom to market forcesforces whose invisible hand has had devastating consequences
on the poor. Thus:
[In Mozambique] workers there used to process the cashews grown in their own country.
To protect the thriving nut processing industry, the government put a tax on the export
of raw, unprocessed cashews. In the interest of removing trade barriers, the World Bank
and the IMF ordered the export tax removed. As a result, processing shifted to India,
where children working at home shell the nuts. In Mozambique, 10,000 adults (mostly
women) lost their factory jobs . . . . (False Profits: Who wins, who loses when the IMF,
World Bank and WTO come to town, http://www.50years.org)
[In the Case of Haiti]: the IMF and World Bank blocked the government from raising
the minimum wage and then demanded the privatization of profitable public companies
which generated revenue for desperately needed services. The IMF insisted that Haiti
should cut government services by half, in spite of a national shortage of teachers and
health care workers, a life expectancy of 49 years for men and 53 years for women, 45%
literacy and infant mortality running at nearly 10%. (False Profits: Who wins, who loses
when the IMF, World Bank and WTO come to town, http://www.50years.org)
8 As Polak (1997, pp. 473474) points out this provision is due to two considerations. On the one hand, membership to the Fund entailed rights (access to credit) and obligations (observance of the agreed rules on exchange rates
and currency restrictions). On the other hand, membership to the Bank only involved the benefit of Bank loans.
Linking the two memberships therefore served to reduce the risk of free ridership. Secondly, it was recognized
that stable monetary conditions were essential to the success of the Banks lending and the precondition of IMF
membership was thus seen as enhancing the quality of the Banks loans.

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M. Annisette / Critical Perspectives on Accounting 15 (2004) 303323

The World Bank will subsidize development of oil fields in southern Chad, a politically
unstable country which already has been the scene of horrific human rights abuses at the
hands of government officials. Then Bank funding will help Exxonmobil and its partners,
Chevron and Petronass, develop a 600-mile pipeline from Chad through Cameroon. The
project is supposed to promote development and alleviate poverty, but revenues are much
more likely to end up in oil companies coffers and the pockets of corrupt Chad and
Cameroon officials than any local communities. The pipeline will run through or near
environmentally sensitive forests, watersheds and coastal areas of Cameroon, threatening
the Baka and Bakola (often incorrectly referred to as Pygmies) indigenous people who
reside there, as well as endangered species, including chimpanzees, gorillas and forest
elephants. (False Profits: Who wins, who loses when the IMF, World Bank and WTO come
to town, http://www.50years.org)
Like its sister organization, the promotion of private foreign investment is one of the
founding articles of the Bank (article ii, IADB, 1991). To this extent, its support for measures
which privilege transnational capitals expansion into the developing world is to be expected.
However, its founding articles also require the Bank to assist in raising productivity, the
standard of living and conditions of labour in their territories (article iii, IADB, 1991).
In this respect, evidence suggests that it has failed. The following section identifies the
operational pressures that serve to ensure a continued marginalization of the Banks role as
benevolent patron of the poor.
3.3. Marginalizing the socio-environmental goals
To fully appreciate the contemporary failure of the World Bank in fulfilling its espoused
mission to help the poor, it is important to recognize that nowhere in its initial conception
was there the notion that the Bank would be concerned with Third World Development,
much less the plight of its poor. The Banks founding mandate was merely to provide
loan funds and technical assistance to secure the reconstruction of war-torn Europe along
non-statist and free trade lines. Indeed, there was little expectation that the Bank would
continue to exist after the fulfilment of this task.9 Third World Development only emerged
as the Banks central focus during the 1950s after the US Marshall Plan took over the role
of European reconstruction.10 The Banks transformation into a developmental agency
can therefore be seen as an attempt at institutional survivala refashioning of itself so as
to prolong and legitimize its existence after its primary mandate had been accomplished or
adopted by other agencies.
The poverty reduction centerpiece emerged much later, entering into the Banks discourse
with the April 1968 installation of its fifth President Robert McNamara. Even though some
attribute the lending bonanza he conducted in its name to a genuine concern for the poor
(coupled with his well-known megalomaniac personality) (Shapely, 1993), the mission of
poverty reduction can be seen as a furtherance of the Banks ongoing self-legitimating
process. The crisis of legitimacy emerged in the 1960s when some of the Banks borrowers
9

For more on the birth of the World Bank see George and Sabelli (1994, Chapter 1).
In all, the Bank only made four loans for European reconstruction totaling $497 million. On the other hand,
by 1953 the Marshall Plan had disbursed $41.3 billion in loans (Rich, 1994a, p. 6).
10

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313

had begun to pay back more annually than it disbursed to them in new loans (Rich, 1994a,
p. 8). By 1970, its overall net transfer of funds was negative (Payer, 1982, p. 50)thereby
calling into question the World Banks legitimacy as a development institution (cf. Rich,
1994a, p. 8). These events intensified the Banks relentless drive to lend. The pressure to
lend is not only critical to the Banks profitability (as previously explained) it is crucial to
its very viability. It is a logical imperative since in order to protect its considerable powers
of leverage and its strong record of no defaultsfactors central to its ability to obtain low
cost fundsthe Bank must constantly expand its volume of loans (cf. Payer, 1982, p. 50).
Thus, McNamara promoting a principle that equated more and costlier Bank projects
with the greatest welfare gains to the poor (George and Sabelli, 1994, p. 45), set in motion an institutional expansion process that would transform the Bank into the lending and
intellectual hegemon that it is today.11 This expansion process, driven by the Banks unyielding pressure to lend, would also lay the foundation for an operational style that at worst
subverted (and continues to subvert) any genuine attempt at poverty reduction, or at best
ensured its enduring marginalization. Firstly, it led to a complete reversal of the Banks
place in the development-lending sequence. Rather than finance projects specified and targeted by potential borrowers as development-enabling, the Bank would instead identify and
design bankable projects and sell them to respective Third World governments (George
and Sabelli, 1994; Payer, 1982; Rich, 1994a). This in turn increased borrower debtthe
single most important factor in the continued impoverishment of the Third World and its
people.12 By the mid-1990s therefore the Third World was adjudged 20% poorer than it
was prior to the Banks post-1960s lending spree (George and Sabelli, 1994). Currently 49
Third World countries record a per capita income lower than they did in the mid-1970s with
the poor countries of sub-Saharan Africa being the hardest hit. These countries now owe
more than $200 billion in foreign debt a figure three times more than their export earnings,
20% of which goes into making interest payments on the debt (False Profits: Who wins,
who loses when the IMF, World Bank and WTO come to town, http://www.50years.org).
McNamaras lending drive also prompted the introduction of an incentive structure in
which the more massive and expensive a project an officer could get approved by the Board,
the more brilliant his/her career prospects (George and Sabelli, 1994, p. 43). Thus, according
to a past US Executive Director of the Bank, in the ensuing years, lending volume invariably emerged as the single measure for performance evaluation at the Bank (Burnham,
1994, p. 85). By 1992, a leaked internal Bank report (World Bank, 1992) now known as the
Wapenhans Report attributed the high failure rate of its projects to a deep-rooted approval
culture inside the Bank. Project appraisals the report revealed, were not sober evaluations
11 For instance during the twenty-two years before his arrival, the Bank had lent a total of $10.7 billion on 708
projects. By the end of his first five-year term McNamara had increased Bank lending in real terms by 100%
disbursing an additional $13.4 billion on 760 new projects. During this same five-year period, staff size witnessed
an increase by 120% (George and Sabelli, 1994, p. 43).
12 Indeed following immediately on the heels of McNamaras departure of the Bank, the Third World debt crisis
broke with Mexicos 1982 repudiation of all its foreign debt commitments. An overall picture of the impact of
World Bank lending on developing countries is provided by George and Sabelli (1994, p. 43) who point out that
as of 1992 MDB debt amounted to $272 billion most of which was owing to the World Bank. This represented
almost one-quarter of the total outstanding long-term debt burden of all developing countries. They argue that a
decade earlier these same countries had owed the MDBs only 12% of a much smaller debt burden.

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but were instead marketing devices for securing loan approval (and achieving personal
recognition) (World Bank, 1992, p. 14). By 1992, the overall corporate culture of the
Bank could therefore be widely characterized as one in which the quantitative commitment
of resources took precedence over qualitative considerations (George and Sabelli, 1994;
Gerster, 1994). More recent reports suggest that despite its post-1992 pledges to move from
a culture of approval to a culture of development effectiveness (World Bank, 1995), the
Banks emphasis on lending volume has remained unchanged (Rich, 2000). Once result of
this deeply embedded loan approval culture has been to reify those techniques grounded
in the calculative, which, in keeping with Bank ethos privilege the quantitative over the
qualitative. Another has been to marginalize the objectives of poverty reduction and sustainable development since fulfilling these objectives involve using a range of (softer; less
legitimate) techniques13 all of which slow down the lending process.
The marginalization of poverty reduction and sustainable development which the Banks
pressure to lend engenders must be also set against its overarching development paradigm
derived from neo-classical economics. This paradigm, which informs the policy conditions
attached to all of its lending programmes, essentially calls for a shrinking of the state and
an opening-up of economies to international transactionspolicies which we have already
seen have had devastating consequences on the poor and the environments of borrowing
countries. These consequences arise since the core models treat social and environmental
costs as externalitiesvariables peripheral to economic criteria such as the budget deficit,
importexport ratio, inflation, GNP growth, currency stability, and foreign debt.
In response to increasing external pressures to reform, the Banks task has therefore been
to reconcile its environmental protection and poverty reduction agendas with a paradigm inherently hostile to those objectives. Insider reports suggest that in doing so, the neo-classical
economic model continues to prevail. With respect to the environment, the Banks Director
of the Environment points out that the basic conceptual changes have been limited to grafting environmental concerns onto business as usual (quoted in Fox and David-Brown, 1998,
p. 9). And amongst its operational staff the use of world-class environmental standards and
procedures are seen as being imposed by the Board and NGOs and as interfering in the
task for which they are most rewarded: getting projects to the Board in time (Wade, 1997,
p. 731). On the poverty front, the same view persists. Staff consider Poverty Assessments as
exercises that must be performed to satisfy the Banks Board and external constituencies
(Alexander, 1996 in Jordan, 2000). Overall therefore, both environmental protection and
poverty reduction objectives continue to be seen as add-ons that often have little bearing
on the Banks operations (Jordan, 2000).
The neo-classical economic meta-policy and the pressure to lend constitute two organizational pressures that serve to limit any genuine attempt by the Bank to pursue its social
and environmental causes. When one considers these pressures in the context of financial
and institutional pressures that encourage the Bank to pursue the interest of private international capital one must question to what extent is the World Bank truly committed to its
socio-environmental development agenda?
With respect to its socio-environmental mission, the Banks current skills mix provides
an interesting clue. Currently it employs 17 economists for every one social scientist;
13

Techniques such as: environmental impact, participatory techniques and social assessment evaluations.

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315

economists run the environmental department and many other departments are currently
staffed entirely by economists (Jordan, 2000). This coupled with the fact that 80% of the
Banks economists are certified by US and UK Universities (Wade, 1996)the gatekeepers
of the neo-classical development paradigmreflects a staffing mix consistent with an underlying philosophy that sees economic goals as prevailing over social objectives.14 With
respect to its developmental agenda, the Banks dogged adherence to the neo-liberal market
friendly approach to development is particularly illuminating. Although no industrialized
country has ever developed using this approach, the Bank has consistently imposed policies
based on this model on its borrowing members.15 Evidence suggests that even evaluating its performance by the narrow economic criteria inherent in the model (such as GDP
growth) the World Banks structural adjustment lending policy has failed (Harrigan and
Mosley, 1992). Yet the Bank continues to support the model and vigorously rejects alternative development approaches that involve an interference with the free flow of capital.16
These insights must be viewed in light of the fact that the major beneficiaries of the market
friendly approach that the Bank promulgates have been transnational corporations whose
Third World penetration it has helped facilitate. Bank projects have for instance opened
large markets to materials and equipment suppliers, and consultants operating in the major
capitalist centres.17 Transnationals operating in the mining sector, have been particularly
favored receiving in addition, insurance against the risk of nationalization and indirect subsidies in the form of Bank-financed infrastructure projects (Amin, 1995, p. 24). Meanwhile
for its borrowing members the model serves to freeze their economies, preventing them
from transcending patterns of production set during the colonial era (George and Sabelli,
1994, Chapter III), thereby solidifying the system of unequal exchange (Wallerstein, 1980)
which is inherently biased against their advancement.
14

An example of the dangers of the kind of thinking encouraged by this paradigm is the celebrated case of the
Dirty Industries internal memo written by the World Bank chief economistLarry Summerson 12 December
1991. In the memo (that was leaked to the public and reproduced in The Economist and the Financial Times),
Summers informed subordinates Just between you and me . . . shouldnt the World Bank be encouraging more
migration of dirty industries to LDCs? Summers thinking showed impeccable neo-classical economic logic: (i)
loss of income caused by premature death and illness due to pollution was lesser in LDCs; (ii) the incremental cost
of pollution was higher in the heavily polluted industrialized world, than in the relatively uncontaminated Third
World; and (iii) the demand for a clean environment has a high income elasticity (cf. Rich, 1994b, pp. 246249).
15 Indeed the resilience of this approach in the face of its continued failure has caused some to liken it to a religious
faith (cf. Mihevic, 1995) whilst others liken the Bank to a church for its dogged adherence and proselytization of
the faith (cf. George and Sabelli, 1994).
16 Wade (1996) provides a powerful and interesting analysis of how the World Bank came to reconcileboth
intellectually and publiclythe recent East Asian state-led economic success story with its anti-statist neo-classical
model, and at the same time ward off Japans challenge to the Bank to consider more interventionist developmental
approaches.
17 The major winners being companies from the US, Japan, Germany and the United Kingdom who for the period
19861993 collectively received IBRD procurement disbursements amounting to USA companies: $9.9 billion;
Japanese companies: $6.6 billion; German companies: $5.4 billion; and UK companies: $3.5 billion. These figures
can be compared with IBRD contributions made by the respective Governments over the same period (USA $0.555
billion; Japan $1 billion; Germany $0.183 billion; and UK $ 0.154 billion) to reveal the substantial returns on
contribution reaped by industrialized countries. They are as follows: USA $17.78 per dollar contributed; Japan
$6.6 per dollar contributed; Germany $29.22 per dollar contributed and UK $22.83 per dollar contributed (cf.
Thibodeau, 1996).

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The World Bank therefore must be seen as an institution deeply embedded in the structures of capitalisman explicitly capitalistic institution designed by capitalist states for the
advancement of capitalist causes. At the same time it has become increasingly clear that
objectives of poverty reduction and sustainable development cannot be successfully tackled
within a capitalist framework. Amin (1992) for instance has convincingly argued that, for
any social order to genuinely achieve sustainable development it must: (a) base production
decisions on consumer needs, (b) recognize the multidimensionality of human beings, and
(c) operate on the basis of a system integrated into the world at largeconditions which
would necessitate an abandonment of the rationales that define capitalism.18 To the extent
therefore that pursuing objectives of poverty reduction and sustainable development are
inherently adverse to the logic of capitalist development, these aims can only be but peripheral to the Banks wider purpose. The Banks failure in meeting these objectives, rather
than being viewed as driven by its form of external reporting, can be better understood as
a natural consequence of the inherent conflict between a socio-environmental agenda and
the capitalist agenda.

4. What then about accounting?

The space for critical accounting research in interrogating the World Bank must therefore
be forged in the light of the Banks wider capitalist purpose. Contrary to Saravanamuthus
depiction, the accounting standards to which the World Bank subscribes are not the driving
force in the nexus of relationships between the Bank and its wider constituencies. It merely
gives financial coherence to a system of relationships inherently opposed to the interest of
the non-industrialized world, its people and the environment. This however does not limit
opportunities for critical accountants to examine the social functioning of accounting in the
context of the World Bank, other development institutions and Third World Development
more generally.
In advancing its New Right neo-liberal agenda into the Third World, the World Bank
has forced many developing countries to liberalize trade, deregulate capital markets, privatize state companies, dismantle social programs and provide national treatment to foreign
investors in a number of activities (e.g. services, banking, and procurement). The developmental benefits of many of these measures are predicated on the assumption that they
would bring about concrete changes in the way accounting is practiced in LDCs which in
turn would promote enhanced market efficiency. Whilst many of these measures have indeed brought about significant accounting change in the Third World, as Uddin and Hopper
(2001) have shown the resultant changes can be quite different from those envisaged. Their
study of accounting systems after the (forced) privatization of the state owned Bangladesh
Soap Company revealed that rather than becoming a vehicle for external accountability and
transparency, the financial accounting system degenerated into a private system of book
keeping (ibid., p. 661). Given the nature of the society in which privatization was inserted,
18 According to Amin (1992), the rules of capitalism imply: (a) that production determines consumption; (b) the
reduction of the worker to merely the status of seller of labour, thereby rendering the rights of the citizen to the
realm of political management as opposed to economic management; and (c) inequality between nations.

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317

the private owners were able to treat external accounting regulation with impunity (ibid.,
p. 670). Thus, statutory rules on auditing, annual reports, shareholder accountability and
taxation were simply ignored (ibid., 669). Financial accounting numbers were thus rendered private and secret knowledge that took on a mystical nature. Moreover, the expected
market based management accounting controls did not emerge in the newly privatized
company. What instead developed was a management accounting system that facilitated
a harsh regime of coercive controls reminiscent of unbridled nineteenth century Western
capitalism (ibid., p. 662). Budgets for instance, they noted, emerged as a powerful weapon
to keep managers in check and shop floor workers subservient. In short, privatization ushered in a regime of accountability and accounting controls that strengthened the power and
prerogative of an entrepreneurial elite and promoted a harsher, less democratic, more servile
work environment for the labour force. Studies such as these help explain why the move to
open market based economies has not produced in LDCs the developmental benefits predicted by the World Bank and other agents of the neo-liberal paradigm. They reinforce the
idea now well-established in critical accounting literature but seemingly lost to development
theorists of the social and institutional embeddedness of accounting. More case studies are
therefore needed to illustrate the diverse ways in which local specificities make mockery
of development predictions producing accounting changes which, rather than contributing
to real structural improvement in developing countries, serve instead to exacerbate some of
their undesirable structural characteristics.19
The imposition of the New Right agenda on the Third World has also brought about
concrete change in financial reporting regulation. In their bid to facilitate the international
mobility of capital, the Brettons Woods institutions have made the reform of local capital
markets an important centerpiece of their lending conditions. Through the imposition of
internationally recognized accounting standards on the functioning of capital markets in
borrower countries, the World Bank and IMF may represent the most significant actors
in promoting accounting harmonization within the non-industrialized world. Today therefore, developing countries are the major subscribers to the IASBs International Accounting
Standards (IAS) (Wallace, 1990, p. 27). There is therefore an urgent need for critical inquiry
into the social functioning of such international accounting standards in a development
context. Whilst it is well accepted that it is the developing world which had led the way
in adopting IAS as national standards, little is known about the actual processes of implementation. Were there local resistances to the implementation of IAS? And how did the
WB/IMF-pressurized-State respond to such opposition? Who have been the winners and
losers in the process of accounting change? In addition, little is known about the manner
in which IAS are actually applied in LDC contexts. It is now becoming increasingly clear
that there can be sharp differences between formal standards and actual company practices
(Hopwood, 2000). Already there is evidence that in some LDCs although IAS have been officially adopted as national standards, there is a high incidence of national non-compliance
and selective implementation (cf. Conover et al., 2001). This suggest that the widespread
adoption of IAS by LDCs rather than being seen as a signal of IAS relevance to the importing countries (cf. Cairns, 1990) might be better conceived as a legitimizing act by LDC
governments. Critical studies aimed at exposing some of the underlying social roles of IAS
19

Such as extreme concentration of wealth and power and extremely skewed class structures.

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in LDCs would reveal for instance the extent to which their adoption/importation serves as
a symbolic resource to LDC governments seeking external (e.g. World Bank) legitimacy.20
Additionally is the notable absence of critical commentary from earlier academic debates
concerning whether and if so, how, the use of IAS subvert developmental goals (cf. Briston,
1978, 1984; Hove, 1982, 1986; Samuels and Oliga, 1982). The current dearth of such
debate in the accounting literature suggests a growing acceptance by accounting academics
that such standards are truly development enabling. It now seems appropriate for critical
researchers to re-problemitize some of the taken for granted assumptions inherent in the
view that accounting (and in particular the trappings of Anglo-American accounting) and
economic development are positively linked.21
The accounting industry has also benefited enormously from World Bank activities and
this in turn can have an effect on the social organization of accountancy in the Third World.
The Big 5s expansion into a number of these countries can be indirectly or directly attributed to the benevolence of the Bank. Either they have ridden on the backs of their clients
whose international expansion the World Bank has helped facilitate. Or, their entry into
overseas markets has been facilitated by World Bank loan conditions, which often require
that Bank-financed projects be certified by internationally reputable firms of accountants.
How has this affected the structure of the local audit markets and what effect has this had
on indigenous firms are questions that remain to be tackled by critical researchers.22 In
addition, whilst there is still a need for more detailed studies aimed at exposing the manner
in which the accounting industry has benefited from the activities of World Bank, there
is also a need for greater illumination on how accountants and accounting have served the
Banks capitalist causes. As Catchpowle and Coopers study of South Africas privatization
program has revealed (Catchpowle and Cooper, 1999), accountants as consultants can play
major roles in advancing the World Banks New Right agenda in emerging markets and the
developing world. Meanwhile its calculative techniques can serve important roles in disciplining LDC borrowers and advancing the interest of international capital. For example
Shiraz-Rahaman and Lawrence (2002a) in their study of Volta River Authority (VRA) in
Ghana have shown how sophisticated accounting techniques are currently being used by the
VRA to justify and legitimise historic agreements made between the Ghanaian State and
the World Bank. The end result of these prior agreements is an electricity pricing structure
in which the rate paid by the Ghanaian population is five times the rate charged by the VRA
20 I have also argued elsewhere (see Annisette, 2000) that in the case of Trinidad and Tobago the importation of
IAS served to undermine nationalist goals of developing a local knowledge base in accounting and have shown
how their continued use has ensured the maintenance of colonial patterns of relationships and reinforces the
existing power-knowledge framework of contemporary imperialism (p. 654). I also argued that the imported IAS
nonetheless provided substantial status rewards to the emerging accounting profession.
21 In Annisette (2002, p. 8) I highlight three contestable assertions associated with this view (i) the notion of
accounting as a system of purposive rationality, which has the ability to achieve some pre-given end such as
relevant information, (ii) functionalist beliefs of professions as change agents which act in the public interest, and
(iii) an approach to development grounded in the mistaken belief that all societies follow a uni-linear path to the
same level of development. The key to development becomes a search for missing developmental linkssuch
as a well-developed accounting infrastructurewhich upon filling, would unleash a series of, processes which
would un-problematically lead to development.
22 In the case of Trinidad and Tobago this effectively drove small indigenous firms into extinction (Annisette,
1996, Chapter 7).

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to a World Bank sponsored aluminium transnational operating in Ghana. An analysis of the

project financing revealed that whereas the Ghanaian government had provided almost 70%
of the funding, the aluminium transnational was guaranteed 60% of the electricity output
at a fixed rate (fixed in the early 1960s) for fifty years. According to Neu (2001) The
entire funding structure of the project served to provide the aluminium transnational with a
cheap source of electricity, whilst the entire country bore the costs of the project. Likewise
Shiraz-Rahaman and Lawrence (2002b) conclude that, in their efforts to meet the requirements of the World Bank the VRA has become an institutionalised hindrance to economic
development . . . reproducing inequities and continuing poverty for the people that it was
set up to enrich (p. 16). The case of the Ghanaian VRA therefore represents an initial
start of a potentially fruitful critical accounting research agenda aimed at unmasking how
accounting and accountants have served to operationalize World Bank policies designed
to secure transnational capitals penetration into and exploitation of the Third World. By
exposing accountings role in masking, legitimising, justifying, rationalising arrangements
of unequal exchange, critical researchers can therefore contribute to an understanding of
the concrete mechanisms that perpetuate and support the growing wealth gap between rich
and poor nations.
As it is now well-established that the calculative practices of accounting have come to
serve a multiplicity of roles in organizational life, there is also an important need to understand how accounting has been mobilized within the World Bank. In this respect two
internal Bank reportsthe 1992 Wapenhans Report (World Bank, 1992) and the 1993 report of the Financial Reporting and Auditing Task Force (World Bank, 1993)provide
interesting insights into the ceremonial and symbolic function of accounting. Recall that
it was the Wapenhans report which drew widespread attention to the deeply embedded
loan approval culture within the Bank, characterizing project appraisals as marketing
devices. The same report reveals the crucial role played by accounting in the project
promotion effort. Project appraisals, the report noted, were characterized by a systematic
and growing bias towards excessively optimistic rate of return expectations (ibid., p. ii)
and the financial covenants linked to projects were often complex, frequently unrealistic and usually ignored (ibid., p. 7). Accounting was therefore called upon to embellish
project appraisals, thereby guaranteeing a 100% project acceptance rate with the Board.
Borrower non-compliance with loan financial covenants provided further testimony of the
symbolic use of accounting in project appraisal. According to the report the level of noncompliance was gross and overwhelming (ibid., p. 9). Moreover, non-compliance bore
no consequences (ibid.).23
More graphic details of the ritualistic use of accounting within the Bank were highlighted
in a 1993 follow-up review conducted by the Banks Financial Reporting and Auditing Task
Force.24 Amongst other things, the Task Forces report noted that over 60% of the audits
of projects were not received within the grace period of four to nine months after the fiscal year end of the entities audited. Audits, according to the report were thus rendered
23 The report revealed that only 22% of all Bank projects between 1967 and 1989 were in compliance with the
financial covenants in the loan agreements and (World Bank, 1992, p. 9).
24 The purpose of the Task Forces investigation was to determine what happens to project money once it is
handed over to countries to use.

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inconsequential for project management purposes (World Bank, 1993, p. 1). In addition, 20% of audit reports were qualified with adverse opinions or disclaimers. The report
attributed these dismal statistics to unduly burdensome reporting requirements that do
not reflect what is necessary(ibid.). Indeed according to Bank President Lewis Preston
Nobody was reading the auditing requirements because they were too complex (quoted
in The Whirled Bank Group, 2000). Meanwhile in an internal Bank memorandum it was
admitted that the [World Bank] auditing requirements have been allowed to deteriorate
into a superficial exercise; even an agency with overdue audits was not excluded from receiving new loans (World Bank, 1998 quoted in Rich, 2000, p. 19). Amidst all this was
a notable decline in accounting expertise in the Bank, such that in 1980 it employed 270
financial specialists of whom 29% were considered experienced, whereas in 1992 the figure
had fallen to 190, 22% of whom were considered experienced (World Bank, 1993). As a
result, project financial statements frequently were not reviewed and when reviewed were
not reviewed by staff with the necessary skills to identify significant problems and to take
appropriate action (ibid., p. 1). These are just a few insights into the many auditing and
financial reporting failings of the project administration process identified by the report
whose major conclusion was that As a general principle the World Bank should promote
the concept that accounting is the foundation of financial management (ibid., p. 2). Whilst
to World Bank observers this conclusion was seen as amazing . . . coming as it does from
the planets largest public international financial institution (Rich, 2000, p. 18), it is unsurprising to critical accounting researchers long aware of the ambiguous relationship between
accounting and decision making (Burchell et al., 1980).
In addition to highlighting the symbolic and ceremonial roles accounting has come to
play in the World Bank project lending and administrative process,25 these two reports
may be also be useful from another standpoint. They also represent an important platform
for launching future research concerned to understand the varied menu of contingent and
situation specific roles of accounting at multiple World Bank projects sites. Both reports
point to discernible patterns of compliance/non-compliance with project accounting and
auditing along geographic and project-type lines. In this respect new and important insights
on accounting in action can emerge by shifting our attention from examining accounting
25 By 1997 the systematic graft and corruption caused by the Banks approval culture and its ritualistic use of
accounting was brought to world attention with the cases of Indonesia and Russia. At a July 1997 Jakarta press
conference Northwestern University professor Jeffrey Winters alleged that shoddy accounting practices by the
World Bank had allowed corrupt Indonesian officials to steal as much as 30% of Bank loans over the past thirty
yearsa figure estimated at over $8 billion. (Jeffrey A. Winters, Down With the World Bank, Far Eastern
Economic Review, 13 February 1997, p. 29; Keith Loveard, The Dark Side of Prosperity: A World Bank critic
alleges waste and graft, Asia Week, 15 August 1997.) A few months later in its 8 September 1997 issue, Business
Week reported that at least $100 million of a $500 million Russian Coal Sector World Bank loan had been either
misspent or could not be accounted for. Business Week aware that the Bank was preparing a new half-billion
dollar loan for the Russian coal sector further observed World Bank officials seem surprisingly unperturbed by
the misspending. They contend offering loans to spur change is better than micromanaging expenditures. (Carol
Matlack, What Happened to the Coal Miners Dollars? At least $100 million from a World Bank loan is lost
Business Week, 8 September 1997, pp. 52, 54.) By October 1998 the Financial Times was to reveal that a more
realistic figure of the money stolen in the Russian coal sector loan was an estimated $250 million (John Lloyd,
A Country Where the Awful has Already Happened, Financial Times, Weekend 24 October25 October 1998,
XXVI). Reported in Rich (2000, pp. 1819).

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in its organizational setting, to studying accounting at the micro level of the World Bank
project.
Finally, but not exhaustively, is the wider issue of World Bank accountability. The history
of the World Bank reads as a dismal track record of public accountability. The existence of
multiple resource providing sponsors (Burnham, 1994, p. 77) coupled with high earnings
retentions have given Bank managers enormous freedom to operate autonomously of its
formal owners. Such managerial autonomy has for years rendered its shareholder governments and their taxpayers, ignorant of and powerless over how and where their funds have
been deployed (Udall, 1998, p. 392). Thus, public accountability has emerged as one of
the criticalif not the most criticalissue in recent calls for World Bank reform. Yet, to
date public accountability remains a complex and troubling concept. Accountants can contribute to the public debates over the appropriate standards and mechanisms for enhancing
accountability in the Bank by generating more critical studies aimed at strengthening extant
theorizing and practice of public accountability. There is also space for critical praxis, as
it has become increasingly clear that additional mechanisms are needed to enforce World
Banks accountability to the wider constituencies affected by its projects. Students of accountability have observed that where actors are not subject to a common hierarchical
authority, public accountability may be enhanced by two factorsexit and voice (Paul,
1992). Exit refers to the extent to which the public has access to alternative suppliers of a
given public service. Voice on the other hand refers to the degree to which the public can
influence the final outcome of a service thorough some form of participation or articulation
of protest/feedback (ibid., p. 1048). But since income, education and related attributes
affect the ability of a public to use voice, for the poor and illiterate voice is often a
costly if not unusable option (ibid., p. 1051). Through political activity critical accountants
can therefore contribute to a widening of the Banks ambit of accountability by providing a
surrogate voice for those constituencies deeply affected by World Bank activities but for
whom the cost of voice is too burdensome.

5. Concluding remark
Although the World Bank is considered the most powerful institution in the management
and organisation of the contemporary world capitalist economy, its interrogation has been
widely neglected by critical accounting researchers. Given the recently well publicised
accounting and accountability failings of the Bank, and the devastating impact these have
had on the lives of Third World people, Saravanamuthus paper therefore represents a brave
attempt to draw accounting scholarship into an arena where critical accounting voices need
desperately to be heard. I have however argued that the papers depiction of the World Bank
is fundamentally flawed and as a result, the nexus created between accounting and the Bank
is misconceived. I have therefore tried to expose the true nature of the World Bank so as to
reveal some of the ways in which accounting might be implicated in the social, economic
and environmental impoverishment of the Third World. Whilst the dearth of research on
the impact of transnational bodies upon management and accounting practices in LDC has
been recently recognised (Uddin and Hopper, 2001, p. 670), as this commentary has shown,
such dearth is not for want of research possibilities.

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Acknowledgements
The comments of Dean Neu and Penny Carballo-Smith are greatly appreciated. Financial
Support from SEC 98-0264 is gratefully acknowledged.

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