Inside this building the officials are deciding what's best for Africa: Kenya has refused the World Bank's economic medicine. Richard Dowden explains why the Third World thinks the prescription is poisonous

IF YOU stand in Pennsylvania Avenue about half way between Washington Circle and the White House, you are as close to the centre of power in the world as anyone can get. Down the road is the White House, and Congress beyond. Up the road are the World Bank and the International Monetary Fund.

Everyone knows that power resides in the classical elegance of the White House and in the imposing grandeur of Congress, but the Bank and the Fund live in bleak, anonymous, functional office blocks. There are no plaques to heroic moments or past presidents, and few people know the names of the present incumbents. They are grey drab institutions, filled with grey-suited people, who take decisions that change the lives of millions. They are the world's bankers. In Africa, mention the Bank and the Fund and tempers rise, faces harden, voices are raised. They are the twin faces of an evil empire.

In Washington, it is hard to see evil in these bland offices, and among their inhabitants you cannot find even a hint of malice. Indeed, the Bank in particular has a reputation for absorbing its critics and giving them jobs.

Some people rail against the World Bank as a conspiracy of the First World against the Third World, but it looks more like a conspiracy of the Third World against itself. Thozamile Botha used to be a firebrand radical of the South African trade union movement, preaching against capitalism and its alliance with apartheid. He is now a consultant with the World Bank.

On my way to Kampala recently, I met a young Kenyan woman who worked for Coopers and Lybrand. She was contracted to the World Bank to sort out Uganda's Ministry of Labour. She described herself as a consultant. 'But there won't be much consultation,' she said. She was to cut the ministry by half.

Wherever they come from, the sober-suited occupants of the grey open-plan offices in Washington profess two tenets of faith: first, that there is no alternative to their policies, and second, that things are getting better. No matter how the policies have changed over the years and how bad things become, these remain self-evident truths for the bank staff. In Africa, the Bank sees itself as a doctor. The patient is sick and needs drastic surgery, but they resent being blamed for the pain.

Over the road at the IMF, the atmosphere is harsher. There is less self-questioning. If the Bank workers are the doctors, the Fund workers are the hospital administrators. When I asked a Fund official if it was too dictatorial, he replied that it should have been more dictatorial sooner.

The Bank was originally a development fund, but has become the West's policeman for economic policy in developing countries, particularly Africa. The Fund is a bank for governments to exchange currencies and draw credit. Since 1986 it has set aside funds to help African countries to change their economic policies.

Since they were founded with other United Nations agencies after the Second World War, the Bank and, to a lesser extent, the Fund have been driven by the breezes of economic fashion. Edward Jaycox, vice-president of the World Bank, admits mistakes: 'Yes, we would have done things differently,' he said. 'We are doing things differently. It's a constant state of evolution'.

Over the years in Africa it tried industrialisation and economic pump-priming. It backed large, prestigious projects, funded white elephants and is responsible for several ecological disasters. It tried 'poverty alleviation', and finally in 1980 the Bank was given the task of correcting economic policies on behalf of Western aid donors. The rule was simple. Western countries said: 'No aid until you do a deal with the IMF and the Bank.' It worked. Most Third World countries had borrowed heavily in the 1970s (on World Bank advice) and were facing low commodity prices, rising interest rates and no new investment. There was no alternative.

The belief in Washington at that time was that if imports were slashed, currencies floated, subsidies removed, state companies sold off and government spending cut, the economies would be back on track within four or five years. The doctors arrived in their light- weight suits, took up residence in their air-conditioned offices and applied the prescription. The patients nearly died.

What the Fund and the Bank in Washington called 'adjustment' felt more like an earthquake in Africa. Thousands were turned out of jobs with no social security systems and no alternative sources of employment. Prices rocketed and wages fell.

The unforeseen side-effects of adjustment were so severe that the Bank was forced to set up special programmes to save the poorest groups from starvation. But it still believed that this would only last a year or two. That time span for recovery has been revised until now no one dares predict when things will get better.

Other side-effects raised doubts about uncontrolled liberalisation. A cut in imports in the short term affected longer-term development plans, so that the very engines of recovery were starved of input and spares. Professionals in Africa, faced with choices such as earning pounds 20 a month as a doctor in Tanzania or making pounds 60 a day driving a taxi in south London, chose the latter. Africa's expensively trained, skilled workers headed to Europe and America. Worst of all, by its own standards the Bank's investments were failing.

A recent report by a task force on the Bank's lending policy noted that the number of projects with 'major problems' leapt from 11 per cent in 1981 to 20 per cent in 1991; projects unsatisfactory at completion rose from 15 per cent in 1981 to 37 per cent in 1991; and cancellations rose by 50 per cent in the past three years.

The Bank was not seen in poor countries as a 'listening bank'. 'It should be a matter of grave concern,' the report continued, 'that borrowers see our priorities . . . as being driven by our concerns rather than their realities.'

The Bank argues that the 'patient' must believe in the medicine it prescribes if the prescription is to work. But like most doctors, the Bank does not like to give the patient too much information. World Bank reports on countries are not published. In Washington, one Bank official said he had some new figures on the Ethiopian economy that the government there did not have. The new economic plan for Mozambique has been written by the Bank with no Mozambican input.

Armando Guebuza, Mozambique's Transport Minister, typifies the response of many Africans: 'We should be considered as mature people. Let us have a dialogue. Let us discuss the ways the West can help us, but considering us as ourselves. We are Africans and we are proud of it, with all our problems.'

Until last week most African governments took the same polite line. Then Kenya bit back. Until recently, Kenya was the West's favourite country, and was unashamedly pro-capitalist. It is the least likely candidate to take on Western donors. President Daniel arap Moi used language in public that few other African ministers have dared whisper. He called the Bank and the Fund 'unilateralist, unrealistic, harsh and dictatorial'. The battle is on. If Kenya dies - or, as the Bank and the Fund say, commits suicide - the donors will still have to step in to pick up the pieces. But if it manages to cut a softer deal with the Bank and the Fund and get aid, many others will be queuing up to follow it.

The Bank and the Fund stand for anti-bureacratic, free-market values, yet they are two of the largest bureaucracies in the world, employing 6,000 staff and 3,000 consultants, and churning out millions of tons of paper and memos. When I left Washington after a visit to the Bank and the Fund, my luggage weighed 24lb more than when I arrived. The pile of literature, mostly glossy pamphlets, was 18in deep.

One old Bank hand explained: 'There is no reward for success, no punishment for failure. Everything is done by consensus, no one takes risks. They are so well paid, hardly anyone ever leaves. You know what employees use the Bank's computer for most? Checking on their pensions.'

(Photograph omitted)