IPS Correspondents
WASHINGTON, Dec 7 2006 (IPS) – The World Bank s own auditing arm has confirmed what many anti-poverty campaigners have long been saying: the Bank s projects did not adequately reduce poverty levels in borrowing nations over the past five years.
In a report Thursday, the Independent Evaluation Group (IEG) said that the Bank has focused too narrowly on economic growth, leaving unemployment and poverty rates to stagnate or worsen.
The Bank has helped many countries to get onto a growth path through improved economic management, but the growth strategies have not always helped enough to improve job opportunities and living conditions of the poor, the IEG said in its study, titled the Annual Review of Development Effectiveness 2006: Getting Results .
Vinod Thomas, the IEG s director-general, said that at the current pace, There is a long way to go in reducing the number of people living in poverty and the magnitude of their deprivation.
Discernable progress depends on actions to sustain growth, as well as to improve income distribution through better service delivery and more opportunities for the poor, said Thomas. The challenge is to see far more numbers of poor benefit from broad-based growth.
The report says that only two in five borrowing countries have recorded continuous per capita income growth over the five years ending in 2005, and just one in five did so for a full 10 years.
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Although the report does not call for a change of course at the Bank, it does implicitly acknowledge the failure of the institution, the IMF and other official lenders and donors to contribute in a meaningful way to poverty reduction over the past quarter century, Doug Hellinger of the Washington-based Development Group for Alternative Policies told IPS.
Language is couched carefully so as not to directly address the failures of the now much discredited poverty-creating Washington Consensus structural adjustment policies, as liberalisation, privatisation and other adjustment measures are still being placed on loans by these institutions, he said.
Hellinger said it was good that the report calls for a better understanding of the political economy of countries, and particularly of the nature of growth and its projected impact on income distribution, before loans are made. However, he added that no mention is made of the need to directly engage [the poor] in the policy dialogue that the Bank has used to control national economies and which this report still supports.
The report was particularly critical of the income distribution model the Bank has offered in its projects and lending. It said that high and sometimes worsening income inequality has dampened the poverty-reducing effect of growth in a number of countries..
It also found that the strongest growers have better economic management, as well as better policies for social inclusion, than do moderate or slow growers.
In Madagascar, for example, the Bank focused on sectors with high growth potential that would allow for relatively quick payoffs, but their impact on poverty was limited.
In Georgia, the oil transport sector in which the Bank invested was a major driver of growth, but it created few jobs.
The study says that where growth did not result in poverty reduction, it was concentrated in subsectors with low labour intensity and where few of the poor could work.
Thomas told reporters Thursday that the answer to reconciling the Bank s emphasis on economic growth and the fight against poverty is to work on both issues at the same time.
Anti-poverty campaigners who have long called attention to what they say is a failed economic model promoted by the World Bank and its sister institution the International Monetary Fund greeted the report as vindication of their positions.
They noted that the report pointed to how export-oriented and privatisation-dependent economies tend to suffer when growth does occur because the gains go to very few people.
Bolivia is an interesting example. It was forced to privatise its natural gas and other resources in what was essentially a gift to a number of oil companies, said Sameer Dossani of the 50 Years is Enough Network in Washington in an email message.
Did that cause growth? Yes, it did. But the growth didn t benefit the people, as Bolivia continues to be the poorest country in South America.
The IEG report recommended that the Washington-based lender adopt new strategies to promote both greater productivity in poorer areas, and a greater mobility of the poor to higher-paying sectors and areas.
Linking health and education or infrastructure and the environment are a powerful means for getting improved results, the report noted.
One can have a focus on a few selected areas, but, for heaven s sake, link them (across sectors) for greater effect, Thomas said.
The study says the Bank should also come up with a more realistic assessment of political economy and governance-related reforms, and should work to guarantee sincere political support from local governments.
Hellinger told IPS that, Yes, it is important that national anti-corruption measures are accompanied by effective and accountable enforcement mechanisms, as the report argues, but, more importantly, how is the Bank to be held accountable when it conditions its loans on national privatisation and related measures that open Southern economies up to Northern companies looking for assets, resources and labour on the cheap?
The Bank s management said it accepts the findings of the report.
We very much accept the points raised by the respect. We intend to learn from this, said Vikram Nehru, director of Economic Policy and Debt at the Bank.
