World Bank Fighting Poverty in the Dark

[Robert Weissman <rob@essential.org>]

Title: ECONOMY: World Bank Fighting Poverty in the Dark

By Abid Aslam

WASHINGTON, Jun 3 (IPS) - 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 percent 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.''

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.

       [c] 1999, InterPress Third World News Agency (IPS)
                     All rights reserved