Joel Oestreich, a business ethics consultant at PricewaterhouseCoopers who holds a doctorate in international relations from Brown University, wrote his dissertation on the moral obligations of the World Bank and other international financial institutions.

As the guest speaker at a seminar Oct. 23 held by Wharton’s Zicklin Center for Business Ethics Research, Oestreich had planned to first explain why the criticisms most commonly leveled against the World Bank are “seriously flawed” and then move on to outlining the kind of criticisms he feels are valid.

Instead, Oestreich found himself engaged in a particularly lively discussion with several Wharton faculty who challenged his criticism of the critics. Not that Ostreich feels the Bank is above reproach. Indeed, he described the organization’s record of assisting development in Third World nations as replete with “dismal failures.” And he acknowledged that criticism has come not only from those who mount street demonstrations at World Bank and International Monetary Fund meetings but also from a congressional commission whose Republican majority was picked by House Majority leader Richard Armey. But he said much of the “abuse” the World Bank has been taking is misguided.

“On one hand,” Oestreich said, “the Bank is condemned because it interferes with the internal affairs of the countries to which it lends by insisting upon drastic cuts in social spending and demanding that the governments stop propping up uncompetitive industry. This approach, the critics say, creates a great deal of hardship and ignores the plight of millions in the developing world.

“On the other hand,” he continued, “when the Bank agrees to fund development sought by a government even when that development will displace tens of thousands of people, promote corruption and hurt the very people it is supposed to help, it is condemned by the same critics for failing to interfere in the internal affairs of these countries.”

The critics thus fail, said Oestreich, because their arguments are a contradiction. They want the World Bank both to not interfere and to interfere more.

One of the seminar participants, however, didn’t see this as a contradiction. “If your doctor says eat more good food and less bad food, that is not a contradiction.” After additional, disputed attempts to define “contradiction,” Oestreich said that wasn’t the only problem.

Critics, he pointed out, commonly view the World Bank as a government agency which somehow is supposed to deal with citizens it represents in choosing between economic and social goals. But it is more accurate, he said, to see the World Bank as a business that must make decisions that ultimately keep it in business.

The World Bank was founded after World War II, Oestreich noted, “to help countries with short-term balance of payment deficiencies. The Bank made it possible to move capital across European borders. And when that mission was accomplished, it evolved a new mission of lending money at low interest rates to developing nations.

“The Bank lends money only to governments and only to countries that could not raise it on international capital markets,” he said. “It lends at the same rate of interest that is available to developed nations like the U.S., France, and Germany. For that, the country must pledge to do what is necessary to pay off its World Bank debt before any other.

“The professional managers who implement World Bank policy,” said Oestreich, “have limited resources and so their allocations must follow economic logic. They can’t lend more money unless current debtors pay back their loans. A default would collapse the whole house of cards.

“I have spent time with World Bank and International Monetary Fund managers,” he continued, “and they claim they do have the welfare of the people in developing nations at heart. But the economic markets are not people-centered. [These managers] don’t believe they have the authority to impose social goals; that is the government’s business. So they can say: ’If you want our money, you play by our rules.’ But they are not supposed to say: ’We know a better way for you to spend it.’”

“Why not?” was the question from a seminar participant. “I give my child a credit card and I say: ’If you think you are free to use this for rock concerts instead of going to school, think again.’” Added another colleague: “If you think a bank doesn’t have power [over what borrowed money is used for] you haven’t filled out 15 surveys to get a mortgage refinanced.”

Oestreich said he isn’t against imposing morality [on the borrower] but “we need to do it in a neutral way that doesn’t impose [the lender’s] view of morality, which may not be the view of others.”

A seminar participant also raised the question of “empirical evidence … If the Bank can say: If more people make $5 a day who made $1 a day 10 years ago, if more females have an eighth grade education, then what we have done is right.” The problem there, said Oestreich, “is that opponents provide empirical evidence that contradicts what the professionals say. They interpret changes differently: A way of life or the environment destroyed.”

Time ran out before Oestreich could fully develop his views on what would be valid ways to find fault with the World Bank. He did say he felt the Bank has made changes in the right direction by adopting “transparency” rules that require governments to make plans public and allow open discussion, although he noted that some governments meet that requirement by holding a hearing “1,000 miles away from the project site and announcing the hearing the day before.”

And he lauded the creation of a World Bank “Inspection Panel” to which people who would be displaced or otherwise affected by a project can appeal. But there, too, he said, the record is mixed. The Panel can only judge whether the project follows World Bank policy, not whether other things were done that are immoral.”