The World Bank as the New Evangelist

Rhetoric and Reality behind Bank’s New Concern for the Poor

By Kavaljit Singh

After lending billions of dollars for the big infrastructure development projects (e.g., dams, power plants, ports and highways) and supporting neo-liberal adjustment programs in over 100 countries, the World Bank is nowadays reinventing itself as an anti-poverty crusader. By suddenly espousing the cause of the poor, the Bank has not just shocked the global financial community but also its die-hard critics who had never anticipated that much of their lexicon such as “empowerment,” “governance,” “decentralization,” “microcredit” and “transparency” would soon become buzzwords at the Bank.

In the past, much of the criticism of the World Bank’s lending in India and elsewhere has been focussed on its financing of big developmental projects or its sectoral and policy lending. Examples include Sardar Sarovar dam project and power sector reforms in Andhra Pradesh in India. But very little has been done to grasp the Bank’s new concern for the poor. At its annual meeting held at Prague recently, the Bank proposed to further extend its arena of work to “global public goods,” which include disease control, environmental protection and knowledge sharing.

In some ways, the World Bank’s new rhetoric about poverty reduction echoes that of Robert McNamara in the 1970s under whose leadership the Bank brought out glossy reports like Assault on Poverty. But the fact remains that poverty has increased on a world scale in the last three decades and has been admitted by none other than Mr. James Wolfensohn who noted that “we are no better off than we were in the 70s.”

In reality, the Bank’s concern for the poverty has little to do with its sudden change of heart for the world poor. To a large extent, this rhetoric has more to do with increasing private sector financing of infrastructure projects since the Bank with its meager financial resources cannot compete such capital flows. In addition, there is a growing pressure from Bank’s influential donor-member countries (particularly the US) as well as the Development Committee to reform the Bank whose legitimacy is under severe attack from both the left and the right.

Despite the new rhetoric, there has been no major shift in the Bank’s commitment to neo-liberal thinking. Except financial liberalization where the Bank has done some rethinking in the aftermath of Southeast Asian financial crisis, it remains committed to the rest of the components of the “Washington Consensus” which includes trade liberalization, privatization, cut backs in social sector spending and deregulation.

In a neo-liberal framework, poverty is not an outcome of the economic system and therefore, it isolates poverty from the wider processes of economic development and aims at reducing poverty through special programs targeted at the poor. As witnessed in several Latin American countries, such targeted programs, no doubt, provide temporary relief to the poor as well as help in containing social and political conflicts arising out of economic deprivation. But, these programs do not make a dent at the structural problems that perpetuate and reinforce poverty on a mass scale.

By discovering microcredit as the new panacea for poverty eradication, the World Bank has rather adopted a simplistic solution to the complex issue of poverty. Poor people are trapped in the webs of poverty not only due to lack of credit but due to unequal distribution of wealth and power, low wages, low prices for agricultural and raw materials, lack of access to education and health, along with declining terms of trade, growing debts and adjustment policies that further put unequal burden on the poor.

Through its micro-lending arm, CGAP, the Bank has been paying more attention on policy reforms such as privatization of micro-lending institutions, removal of subsidies for banks that service the poor, and stronger debt collection laws that may benefit lenders but end up hurting poor borrowers, particularly women. Keeping the CGAP framework in view, the Bank launched a project in India titled Rural Women’s Development and Empowerment Project with the sole focus on the establishment of self-help groups. It is unfortunate that rural women’s empowerment is only seen in terms of economic development and that too with a narrow focus on credit and income-generation programs. Further, it is not realized that self-employment is the last resort for poor rural women in India.

In the rural context, women’s control and ownership over land and natural resources can play a very positive role in not only economic empowerment but also in terms of social and political empowerment. What can Indian women do with credit if they do not have childcare, education, training, and health services? Any strategy that views microcredit as a substitute for social sector spending and anti-poverty programs is unlikely to succeed even in reducing poverty, what to talk about total eradication of poverty.

The other important component of the Bank’s recipe for social sector is privatization of education, health and other welfare systems. By imposing user fees and running social programs on commercial basis, new inequalities are created because bulk of the poor don’t possess purchasing power to access such services.

Even the decentralization agenda of the World Bank, which in principle everyone will welcome, has largely turned out to be a public relation exercise because there are very few instances where decentralization has led to genuine democratization of decision-making processes. In the name of decentralization, essential developmental tasks and responsibilities are handed over to cash-starved, non-transparent, unaccountable, NGOs and local bodies without looking at their capacity and performance. Furthermore, the Bank only encourages those NGOs that are considered “reasonable NGOs” and are mild in their criticism of the Bank’s policies. Needless to add, some NGOs are more “Bank” than the Bank itself.

Before preaching transparency and good governance to the world, it is high time that the World Bank should begin debating these matters at the Bank itself. Despite pressures from activists and groups, there has been only marginal changes in the Bank’s own disclosure policy. Still a number of important documents including Country Assistance Strategies are not available to the public. Finally, had Wolfensohn not given up his Australian citizenship to become an American citizen, he would not have become the President of the World Bank, an archaic tradition still practiced at the Bank.