A recent report by the World Bank’s Independent Evaluation Group (IEG) sizes up the World Bank’s progress on development
What does IEG’s recent research tell us about poverty and inclusive growth, and how is the Bank performing in this regard?
Our work shows that sustained growth remains a high priority across countries – China and India are two dominant cases in recent growth. But it is not just how fast a country grows; crucially it is also how it grows. Widening gaps between the rich and the poor dampen the impact of growth on poverty. Countries such as Brazil or Mexico have historically had a much higher income inequality than China or Indonesia. But disparities have been rising in recent years in the large Asian countries, while falling in major Latin American nations.
The new poverty estimates from the World Bank build on the finding that living costs are actually higher than estimated before, thus giving a global poverty line of $1.25 a day compared to the $1.00 a day in the past. The calculations suggest that as of 2005 there were 1.4 billion people worldwide living in extreme poverty. The percentage of poor under the poverty line has declined but, given population growth, this progress was not enough to bring down the total number of poor outside China, which has stayed at about 1.2 billion.
Our two recent Annual evaluations highlight the need to couple growth polices with distribution policies. In this respect, generating opportunities and jobs for the poorer segments of the population is the best way forward. High on the agenda for greater inclusiveness would be actions to address disparities in education that contribute to large earning differentials. A second issue concerns rural-urban and regional differences in incomes, which can be influenced especially by expansion of agricultural productivity, complemented by infrastructure and institutional development. A third policy area for inclusion involves improved ways to provide income supports the poor, such as conditional cash transfer programs practiced in Brazil or Mexico.
Many countries have generated economic growth through better economic management: the WBG has had a supportive role in some of them. But only a few countries translated that growth into well-being for the poor in the past decade. For example, Bangladesh’s favorable development outcomes derived from the links made across programs in education, health and infrastructure. Burkina Faso’s emphasis on public financial management enabled more funds for poverty reduction. Vietnam had a good focus on rural development.
Your 2008 evaluation found that the Bank’s priority on global public goods can work at cross-purposes to reducing poverty in the poorest countries.
Public goods, such as environmental quality, by nature tend to be under-supplied and need special support. For fostering global public goods, the Bank’s country-based model has worked relatively well when national and global interests dovetail often with an agreed international framework for action (for example, controlling contagion)?and when grants support country investments (for example, GEF). Promoting international trade reform shows the Bank’s advocacy at its best, drawing on expertise and a willingness to engage in public debate. But the greatest challenges arise where local, national and global benefits diverge so that global benefits cannot be captured locally.
Does the newly created $6.1 be Climate Investment Funds address this issue, or must more be done to safeguard the interests of the poor countries?
Climate change is a key example, where the country model comes under considerable strain. But even here, the so-called global problem is increasingly manifesting itself in local ways. Consider the new danger that is affecting all: climate change and natural disasters wreaking havoc in the lives of people, especially the poor who are most likely to be in harm’s way. The Indian Ocean tsunami left more than 10,000 people dead and about 5,600 missing in India alone. The fury of the Kosi river affected 2.5 million people in 1,600 villages in Bihar, India and 70,000 people in the immediate shock in Nepal. If combating damage to the environment was once considered a diversion from growth, its neglect now represents a central threat to growth.
It is in this setting of global-country links that the WBG under Mr Zoellick is making a strong move to support and foster climate change efforts, for example with the newly created $6.1 be Climate Investment Fund. The follow up in mainstreaming and implementing such priority within the WBG’s country based model would be key, according to our evaluation – not only in climate change but also in environmental and biodiversity protection. The implied strategy should be to couple local development and global concerns partly through win-win solutions and partly through taking trade-offs and providing financing for new directions.
To be successful, WBG strategy in development and climate change needs to ensure strong links in poverty reduction and greater care for the environment and resource management, as an integral part of the strategy.
One long held criticism of the World Bank is that it has focused on too many things for too long. Has the Bank, under president Zoellick, clarified its priorities?
The World Bank Group’s emerging agenda is improved and sharpened to mean poverty reduction under conditions of inclusive globalization. With ups and downs of globalization dominating the development scene, this renewed focus on development priorities within the global setting is important. The six priority areas that Mr Zoellick has laid out speak to this overall objective and direction.
My view, drawing on evaluation, is that selectivity for an organization such as the WBG is important but also that it must not be seen in a narrow or mechanical way. The development landscape has changed; new issues have cropped up, be it in food, fuel, or climate change. In the midst of multiple issues and multiple players, the unique role of the WBG can be in helping to go beyond single-issue programs, and foster linkages across initiatives to offset the costs of splintering and to deliver impact.
This view of synergies and interactions leads to seeing a facilitator and connector role for the WBG beyond the specific areas. Note that good ratings of individual projects do not always translate into good results for their sectors or the economy. It is in the complementarity in related areas at country or global levels that we find strong results: the WBG is well placed to help draw on the links between projects and country level actions.