The ESG Initiative at the Wharton School
Projects funded by the World Bank Group’s private sector arm fuel violent conflict – it’s time to reform the system
Outlet: The Conversation
Witold J. Henisz, Vice Dean and Faculty Director at the ESG Initiative at the Wharton School; Anne Jamison, Assistant Professor of International Economics, Government, and Business, Copenhagen Business School; and Brian Ganson, Professor and Head, Centre on Conflict & Collaboration, Stellenbosch University discuss the findings of their comprehensive study of thousands of projects of the International Finance Corporation (IFC), the private sector arm of the World Bank Group.
The results establish that IFC projects cause significant increases in armed conflict around the world. A single project, on average, causes 7.6 additional armed conflict events in the year after it is introduced. These findings are consistent with other large quantitative studies that question the relationship between foreign direct investment and development. Foreign direct investment that increases violent conflict and makes development nearly impossible appears the rule, not the exception.
We conclude that current approaches to foreign investment need urgent reconsideration, with particular focus on the risk of violent conflict.