World Bank fighting poverty in the dark

by Abid Aslam

Washington, Jun 3 -- The World Bank is calling for renewed efforts to fight poverty even while admitting that the agency does not know what impact it has had on the problem.

"We do not have any direct estimate of how many of the poor have been lifted out of poverty as a result of World Bank loans," says Michael Walton, the Bank's Director of Poverty Reduction and Economic Management.

He further concedes that poverty has deepened even in countries with robust economic growth. Examples include Latin America, where the poorest 20% of people share less than three percent of national income.

In good times, he says, inequality impedes development by ensuring that the poor receive only meagre benefits from economic growth. When trouble strikes, the poor often are the first to be thrown in harm's way.

Still, the Bank's latest 'Poverty Update' says that urgent efforts are needed to salvage the international community's goal of halving absolute poverty by the year 2015.

That objective appeared attainable even as recently as 1993, when 1.3 billion people lived below the international, rock-bottom poverty line of one dollar per day, the Bank says. Instead, another 200 million joined their ranks over the next four years.

The 'Asian financial crisis' broke out in mid-1997 and, by the following year, 20 million people had been pushed into abject poverty in Indonesia alone, according to the Bank report - released in advance of the June 18-20 summit in Cologne, German of the 'Group of Seven' (G-7) industrial powers plus Russia.

Officially, the main theme of this month's G-7 summit will be how to manage economic globalisation and the agenda includes debt relief, 'social safety nets' and means to regulate 'hedge funds' and other financial speculators.

Political analysts, however, expect the Kosovo war to dominate discussions.

"The East Asia crisis and its spillover into other emerging markets offers the world an opportunity to devise a new approach to crisis - one that rightly puts concern for the poor and the vulnerable right at the centre of its response," says Bank economist Giovanna Prennushi.

Specifically, 'social safety nets' - unemployment insurance, health coverage and education programmes - need to be strengthened so countries are better equipped should crises occur, she argues in a working paper released Wednesday. Once trouble starts, the safety nets must be protected against budget cuts so they can effectively cushion workers as they fall, she adds.

The Bank's own efforts to darn Asia's frayed safety nets have met sometimes violent opposition, especially in Indonesia. There, slum-dwellers have complained of insufficient consultation with the intended beneficiaries.

Charges that the Bank is insensitive to the very groups it seeks to champion also have emerged from early experiments with a 'Comprehensive Development Framework' (CDF) aimed at rallying donors, creditors, governments and citizens to the fight against poverty.

Bolivian citizens' groups have complained that the Bank allowed insufficient time to consult them during the 'Bolivia National Dialogue', the crucial first step in drawing up the Andean country's CDF. The lending agency nevertheless has said that the 1997 Bolivian talks were a model success. In addition to the CDF, Bank President James Wolfensohn is promoting new 'social principles' in agency lending.

Despite such moves, the creditor remains dogged by borrowers' complaints that it has become a 'second-tier IMF', providing policy loans in support of international bailouts assembled by the International Monetary Fund (IMF) in exchange for macro- economic reforms.

These have been roundly criticised as overly stringent and deflationary - including by the Bank's own chief economist, Joseph Stiglitz.

In addition, some of the Bank's largest clients have complained bitterly that the agency is pushing economic programmes favoured by its wealthiest shareholders while expecting borrowing countries to foot the bill.

China - which the Bank says likely can halve poverty by 2015 - and India, which the lender says probably cannot, have noted that countries with bailouts must incur debt in exchange for 'reforms' which U.S. officials have describe as more effective in opening Asian markets to U.S. capital than a decade of trade talks.

In turn, the Asian giants have noted repeatedly, they and other middle-income borrowers have been hit with increased charges on Bank loans.

Bank officials say the agency's latest push against poverty seeks to restore some "balance" to ongoing and future bailouts. Nevertheless, Walton cautions, "you've always got to assess what's needed for macroeconomic stability." And because of that, the Bank finds itself caught in a "classic conflict" over how best to dispense resources to the poor.

Walton acknowledges research showing that countries with broad and generous social programmes have less poverty and inequality than those providing market-based services or using such tools as means-testing to ration public benefits. However, "limited fiscal resources need to be targeted," he says. "Many programmes designed for the poor are primarily consumed by the non-poor."

Examples include India, where Bank officials say only one rupee out of every seven meant for the poor actually reached them in the mid-90s. By 1997, 340 million Indians were living in poverty, an increase of about 40 million in ten years. Indian anti-poverty efforts have "stagnated", says Walton, but neighbouring China seems positioned to halve its poverty rate by 2015. (IPS)

The above article by the Inter Press Service appeared in the South-North Development Monitor (SUNS).