C. Rammanohar Reddy*

Madras 24 June 2000 —An economist leaving the World Bank is an unexceptional development. But the resignation of Prof. Ravi Kanbur as lead author for the 2000/01 edition of the World Development Report (WDR) is less about the return of an economist to academia and more about the continued battle over the policy agenda for development.

In setting the agenda for development policy, the World Bank occupies a unique position. It is the world’s single largest employer of economists. The volume of research on various aspects of development done at the Bank is far more than what is carried out anywhere else in the world. The Bank also commissions a large amount of research from its external ‘consultants’. Together it  adds up to a huge body of work, though a fair bit is often criticised as being of unexceptionable quality.

Among the innumerable studies that emerge from the Bank, the most influential is the annual WDR. With its focus every year on one particular aspect of policy this report has set the terms for public discourse, shaped the Bank’s own policies and arguably influenced many national governments as well. In the 1980s, for instance, the WDRs argued against state enterprises and in favour of trade liberalisation.  The 1991 WDR with its advocacy of a “market-friendly” approach to development subsequently became a cornerstone of the Bank policy. But the importance of the WDR has in recent years tended to wane, in part because the end-product of innumerable drafts and consultations has turned out to be both sanitised and predictable and in part because the newer Human Development Report of the UNDP has had the appeal of novelty.

However, the 2000/01 WDR was to be special. The theme was to be poverty and after the 1990 WDR this was to be the first one to directly address an issue which, after all, is the raison d’etre of the Bank. The making of the new WDR too was different. A draft put out early this year was in April, the subject of discussion on the Net in which over 1,500 people were involved. This edition of the WDR was also being prepared at a time when the Bank with its utterances and actions during the East Asian crisis had acquired an image of being more “caring” than its twin, the International Monetary Fund. All in all there was an expectation that the 2000/01 WDR might herald a major change in the Bank’s thinking. But the departure of Prof. Kanbur, close to two years into the preparation of the report and just three months before its publication in September, has ensured that the new WDR will be scrutinised for other reasons.

The precise circumstances under which he quit at the eleventh hour are not known. The official reason is that there was a difference over the “emphasis” given to the many arguments in the report. There has been talk on the Net of the U.S., through its Treasury Secretary, Mr.  Lawrence Summers (a former World Bank staffer himself who was in the middle of a controversy during the preparation of the 1992 edition of the WDR), taking exception to the substance of the report because it seemed to question what in India is occasionally referred to as the LPG - liberalisation, privatisation and globalisation - approach. Yet others claim that the importance given in the report to redistribution of assets in poverty reduction was not to the liking of senior officials of the Bank. None of this may be true, but the WDR as it was earlier formulated questioned many shibboleths that are normally associated with the Bretton Woods twins.

A January 2000 version that was the basis for a Net-based consultation was not for public quotation, but certain broad features of the draft WDR are now public knowledge. “Attacking Poverty” (which is also the sub-title of this year’s WDR) requires, according to the draft, empowerment, security and opportunity - three pillars of the new approach suggested by the WDR team. Empowerment to enable the poor to influence government decision-making, security against the shock of change and the opportunity to participate in the market with human and physical assets. This is unexceptional and Bank officials say this will remain the focus of the WDR when it is finally published. But it was the nuances that made a difference. The draft did not question the importance of the market or the need for reforms. The point was more that no universal prescription of liberalisation would work for poverty reduction. It argued that economic policy had to be attuned to the specific conditions in each country, region and even population group.  It demonstrated that while market reforms in the developing countries had had a positive impact on economic growth, the effect so far had been a very modest one. It argued as well that the costs of reform were often borne exclusively by the poor. It also brought back to the centre-stage the importance of asset equality (including the long-forgotten issue of land reform), one argument being that greater equality produces faster growth. (All this and much more can still be read on the Net where the January version is available at the World Bank’s site).

What will survive and in what form in the published WDR is a matter of conjecture, but different as these arguments or none of them can even remotely be interpreted as a call to man the barricades. In fact, some of them have on occasion been made by senior Bank officials including the President, Mr. James Wolfensohn, more famously in his speech “The Other Crisis” at the 1998 Annual Meetings of the IMF and the World Bank. Why then should the tenor of the draft WDR have caused so much consternation in Washington as to have persuaded Prof. Kanbur to walk out? The reasons suggest themselves. It is one thing to talk occasionally about the limits of market-driven growth or about the need for a greater equality in assets, and quite another to put all the arguments down within a coherent framework in a report that is usually considered a guide to the Bank’s thinking on development policy. The discomfort would have been greater since the shortcomings of the recent growth experience that the WDR was attempting to highlight were in part the outcome when countries followed the policy prescriptions of the IMF and the World Bank. And the policy recommendations that flow from the analysis contained in this “flagship” report would have gone against the grain of a good deal of current lending policies of the Bank, not to mention the blind faith of the U.S. that the market knows best.

This is not the first time that the preparation of a report has caused tremors at the Bank. The writing of The East Asian Miracle, a World Bank study published in 1993, was witness to intense pressures from shareholders and turf battles within the Bank about what should and should not go into the report. The importance of that tussle was that had the study been written in a certain manner it could have suggested that there was an alternative to the Anglo-Saxon model of market-led growth - one represented by more efficient state-led intervention as witnessed in post-World War II Japan and post-1960 South Korea. But in the event the pulls and pressures were so many that the study ended up saying nothing of consequence - in other words the dominant paradigm remained intact. (The preparation of the 1993 study has been carefully documented by an economist, Robert Wade, in “Japan, the World Bank and the Art of Paradigm Maintenance: ‘The East Asian Miracle’ in Political Perspective,’ New Left Review,217, May/June 1996.)

The furore about the WDR 2000/01 is then neither the first of its kind nor will it be the last one in the battle to set the agenda for development. The tussle about what the WDR should and should not emphasise demonstrates that there are forces inside and outside the World Bank hostile to even a modest modification of the dominant paradigm on development. The Bank may want to signal that it is turning into a caring organisation but, like a leopard and its spots, it cannot change even if it wants to.

(* Rammanohar Reddy is the Deputy Editor of The Hindu, India’s leading daily newspaper. This article first appeared in that paper, and is reproduced with acknowledgement and kind permission from the Hindu. This article appeared in SUNS 4695.)