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Money, money, money …

 

In this contribution, I want to highlight the long and tortuous way of official development thinking on social policies and poverty reduction. In the first part, I look at the early social thinking of the World Bank and the United Nations. In the second part, their parallel strategies to fight poverty in the 1990s is examined. Section three looks at the re-conceptualization of ‘social development’ and the new discourses on social protection. Section four points to the lack of reliable data on global poverty and the changing methodologies of the World Bank. Finally, section five highlights the new old ideas of the United Nations concerning economic and social development. Neoliberalism is far from dead, and the international community clearly is at a crossroads with, furthermore,  serious resistance from post-development social movements. The climate crisis, which has to be taken very seriously, may strengthen the neocolonial and military approaches to development.

 

 

 

Early social thinking

The World Bank proposals of 1990 to fight poverty (World Bank, 1990) were a positive surprise to many development workers and researchers. After almost ten years of ‘structural adjustments’ and their catastrophic social consequences, a ‘social dimension’ for the reform programs was more than welcome. Even if the proposals were not well developed yet and even if statistics on global poverty were missing, this first World Development Report on poverty was evidence of the U-turn the World Bank was said to be taking.

However, the World Bank itself did not see its focus on poverty as a fundamental change to its former policies. Beginning of the 1970s president McNamara already introduced the poverty issue (McNamara, 1970, 1973), and in 1980 the World Development Report had introduced the concept of ‘human development’  (World Bank, 1980). The World Bank slogan had become ‘Our dream is a world free of poverty’.

Nevertheless, 1990 did make a difference. The brief experience of the 1970s had not brought about a real change in policies and although the analysis of the poverty discourse in that period does teach us a lot on social development thinking, it also confirms the lack of any innovative approach at the World Bank. The focus on poverty in the 1970s was meant to shift the attention from inequality between countries to the inequality within countries, and from distribution of the results of growth to the distribution of growth itself. Interestingly, the Pearson Report, commissioned by the World Bank, noted that social security was very important in order to make people less dependent on their families and to help them to take risks more easily (Pearson, 1969). Social security was meant to help change the behavior of people.  

The second reason why this poverty approach did not really change the work of the World Bank, was the beginning of the economic crisis after the abandonment of the Bretton Woods agreements by US president Nixon and the rise of oil prices in the OPEC countries. It is this crisis that first led to higher lending to developing countries and, in the 1980s, to their inability to reimburse these debts. This major external debt crisis was the starting point of the ‘structural adjustment’ programs. Debts were rescheduled but countries were obliged to follow a strict program of fiscal discipline, re-prioritizing public expenditures, tax reform, market-based interest rates, competitive exchange rates, liberalization of trade, privatization, promoting foreign investments, deregulation and the protection of property rights. In 1989 Williamson called this the ‘Washington Consensus’ (Williamson, 1990).

The shift to poverty reduction in 1990 can be seen as a reaction of the World Bank to the severe criticism on its new programs. Unicef (Unicef, 1987, Cornia et al., 1987) published various reports on the consequences, mainly for women and children, of the dismantling of social services, of rising unemployment, of de-industrialization and of the growth of the informal labor markets. Civil society started to organize and mobilize against the World Bank and the IMF in Berlin in 1988, which can be seen as the early beginnings of the alter-globalization movement.

The ‘World free of poverty’ slogan was very misleading. The World Bank had not been set up as a provider of social development. According to its constitution, the objectives of the Bank are: a) to assist the reconstruction and development of its member states by facilitating the investment of capital for productive purposes, thereby promoting the long-range growth of international trade and the improvement of living standards; b) to promote private foreign investment (…), c) (…) to make loans for productive purposes (…) and d) to provide member countries with technical assistance on matters relating to their economic development (…). The reference to ‘living standards’ clearly is seen as an obvious consequence of ‘trade’ and ‘growth’, not as a separate purpose of the Bank’s activities. The Bretton Woods agreements that created the World Bank and the IMF were made in 1944, before the end of the second world war. Today’s ‘developing countries’ were not independent at that time and the first mission of the Bank was to help the rich countries recover from the war effort.

The emerging power of the Soviet Union however made way for a specific aid program for Western Europe, the Marshall Plan. ‘Developments in this connection cannot help but greatly affect the role of the Bank in the process of European reconstruction’( World Bank, 1947, p. 7). It did give some first loans to France, the Netherlands, Denmark and Luxemburg, but soon afterwards, it shifted to Chile, Mexico, Brazil, India and Yugoslavia (Lateef, 1995).

As Alacevich reminds us, at that time the World Bank was unwilling to lend for social programs like housing, ‘not because these projects were not sound – they were – but because they were geared toward achieving social welfare objectives’ (Alacevich, 2008). Only in the late 1960s did the bank begin to take social issues into consideration.  It was a strict rule of the Bank that loans in foreign currency should be used only to finance the cost of imported goods and services, not local expenditures’ (Alacevich, 2008). Consequently, the Bank did not respond to demands from countries like Cuba, Jamaica, Nicaragua or Colombia for social projects like drinking water. Only with the arrival of President McNamara did the World Bank shift to poverty, human resources and rural development.

At the United Nations (UN), created in 1945, development work began almost immediately. The first important documents on economic development and the necessary financing and technical assistance as well as on the importance of full employment were published as from the end of the 1940s and the beginning of the 1950s (United Nations, 1948, 1949, 1951). The first reports on the ‘world social situation’ were published as from 1952 (United Nations, 1952) and concerned the standard of living in ‘insufficiently developed countries’ in general and health, education, nutrition and housing in particular. The objective of these reports was less to see what could be done than to make an inventory of the needs. The documents contained many references to the newly adopted Universal Declaration on Human Rights and to the ‘moral principles of all religions’ in order to make the haves of humanity to help the have-nots. However, it has to be stressed that these documents rarely speak of ‘poverty’, but mainly of social problems, needs, inadequate standard of living, and so on.

The UN worked on different development theories, greatly influenced by ECLAC (Latin American’s Economic Commission) and its director, Raul Prebisch. While there was quite some controversy on the role of international trade in economic development, a consensus existed on the need for rapid industrialization, the need for capital input and for the development of the necessary skills. The assumption was that due to market failures, states had to fill these gaps. But governments also lacked domestic savings and foreign capital on the one hand, and technical assistance on the other hand. They were dependent on foreign investments and aid.

In 1949 the ‘Expanded Program for Technical Assistance’ (EPTA) was created at the UN and in 1951 it had already funded projects in 71 countries (Jolly et al., 2004, p. 71).  As for the capital accumulation and a capital aid fund, no agreement could be reached to establish an international development authority. Ten years of discussions on a ‘Special UN Fund for Economic Development’ (SUNFED) did not lead to any positive result, due to the resistance of the US and major industrialized countries. Finally, in 1959 a ‘Special Fund’ was created enlarging the scope of EPTA but it was not allowed to become a lending institution. In 1966 EPTA and the ‘Special Fund’ became UNDP (UN Development Program) while the World Bank soon became the major provider of capital to developing countries.

In 1961, the General Assembly of the UN adopted its resolution on the ‘Decade for economic development’ (United Nations, 1961), an ambitious program with all the main points of agreement. It also called for the eradication of ‘hunger, illiteracy and illnesses’, but did not speak of ‘poverty’. Only in 1972 did the UN publish a report on ‘mass poverty and unemployment’, stating that ‘high rates of growth of output have not succeeded in making a perceptible impact’ (United Nations, 1972, § 4). In 1970, in the resolution on the second ‘Decade for Development’ (United Nations, 1970) did the UN General Assembly demand that developed countries transfer 1% of their GDP to developing countries.

In fact, the UN did make an important contribution to development thinking, but never had the resources to help developing countries and to put into practice its theories and ideas. Emmerij, Jolly and Weiss rightly remind us of the fact that 10 Nobel laureates in economics have spent a substantial part of their professional careers working as UN staff members and/or consultants contributing to the UN ideas and activities. This compares to one for the World Bank and one for the IMF … (Emmerij et al., 2004).

In  the meantime the ILO (International Labor Organization) had also continued its work on labor and social protection. In 1969 it had launched a ‘World Employment Program’ and discovered the ‘working poor’ and the ‘informal sector’. These studies revealed that high levels of employment cannot be reached without  a fundamental change in the patterns of inequality and systems of redistribution of income. They proposed a strategy of ‘basic needs’ and a focus on ‘equity’, adopted at the World Employment Conference in 1975.  

The World Bank agreed with this approach. In fact, since the end of the 1960s the focus had been  shifting more and more to ‘the gap’ between rich and poor countries, though this also quickly shifted to the gap within countries and from the reduction of inequality to poverty reduction. President McNamara proposed ‘to strive to eradicate absolute poverty by the end of this century’ (McNamara, 1973). As we know, by the end of the century, the objective became to ‘halve extreme poverty by 2015’ …  

What is interesting however is the way the World Bank proposed to eradicate poverty. It certainly never proposed to redistribute wealth, but did propose to promote growth and to have poor people contributing more to growth.  According to Chenery’s report on ‘Redistribution with growth’ however (Chenery, 1974), it is only the access to human and physical capital that has to be redistributed. It will allow the poor to produce more growth and consequently it will reduce inequality, so the reasoning goes. These ideas were totally incompatible with those of the UN and its ‘Declaration on social progress’ of 1969 (United Nations, 1969) in which economic and social rights and a traditional western view on social protection were promoted.

Parallel strategies

The 1980s have been qualified as a ‘lost decade for development’, precisely because of the coming to a halt of growth and economic development and the introduction of the ‘Washington Consensus’ which led to serious social consequences but also to a new vision on economic development and the role of the state.

The ‘poverty’ the World Bank speaks of in its Report of 1990 is indeed a different kind of poverty than what it referred to in the 1970s where it was only mentioned in general terms and seen as a matter of ‘backwardness’. In the 1990s, the World Bank published many documents (World Bank, 1991, 1993, 1993b) in order to clarify its conceptualizations of poverty and to propose its strategies to fight it.

In the 1990s, poverty has become and individual problem, it is said to be different from inequality and mainly characterized by a lack of access to growth and to markets.  Poverty is a ‘structural’ problem, so the reasoning goes, in that it is the consequence of failed policies which led to an economic crisis and which have to be ‘structurally adjusted’. It sometimes can be linked to cultural values, to a demographic evolution and to ethnic minorities. There are many poor among female heads of households. Poverty reduction strategies will depend on the political will of governments who do not have to make a choice between growth and poverty reduction, but between the interests of the poor and those of the non poor. Poverty is a multidimensional problem, linked to a lack of access to basic services, like education and health care. Finally, according to the World Bank, poverty reduction is a matter of common interest (World Bank 1990, 1991, 1993, 1993b).

The World Bank admits that data on poverty and its evolution are failing. Efficient strategies though require knowledge on the number of poor, of where they live, on why they are poor and on their specific situation.

Most surprising is the fact that the World Bank states that development efforts of 1960 to 1990 have been very successful in terms of growth and social indicators (child mortality, life expectancy, literacy) but that nevertheless, the policies of the past are not the ones that are needed now (World Bank, 1990). It proposes all the ingredients of the ‘Washington consensus’, and in fact of what has later been called a neoliberal globalization. This is necessary, according to the World Bank, in order to help poor people become part of societies of which they have never been part of before. Society, here, is identical to market.

The proposed strategies do indeed make clear that times have changed. The World Bank discourse is clearly against social security and redistribution. Social security is seen as a ‘vested’ interest and is said to differ from the interests of poor people. In fact, markets and access to markets are the major ingredients of the new strategy. Minimum wages are to be abandoned, since poor people are ready to work for less and since they hinder markets to function correctly. International trade, deregulation, privatizations, good macro-economic policies are said to be of vital interest for growth and for poverty reduction.

Clearly, this new poverty approach remained a ‘Washington Consensus’ but with social safety nets added. Primary education, basic health service and, where possible, family planning had to be provided. Public transfers though were not needed, services can be taken care of by the private sector, NGOs or local communities. The income dimension of poverty is ignored and public expenditures have to be restructured. In this way, poverty reduction becomes the label behind which the Washington consensus is hiding…

At the level of the UN, the UNDP had equally come out with a new program in 1990, the ‘Human Development Report’ (UNDP, 1990). Many of the people working for this program were those who had tried, in the 1970s at the UN, to integrate economic and social development into one ‘unified approach’, or who had worked for Unicef or for the World Bank on ‘human resources’. UNDP proposed a new development indicator, the HDI (Human Development Indicator). It is a composite index with three dimensions, GNI (Gross National Income),  life expectancy and literacy. It gave a totally different ranking of countries, compared to GDP, and ‘human development’ promised to become a totally new paradigm, away from exclusive economic thinking. Human development was defined as the ‘enlarging of people’s choices’, based on A.K. Sen’s capability approach (Sen, 1989). Since 1990, UNDP publishes every year a Report with a lot of interesting statistics on inequality in very different domains (incomes, but also consumption, gender, trade …).

However, the proposed strategies were not very different from those of the World Bank. UNDP did stress the necessary political will of governments, since growth did not translate spontaneously into human development. But it did not propose any strategy deviating from the Washington Consensus, nor did it question the need for growth. After 1995 and the publication of two ‘human poverty’ reports with a ‘Human Poverty Indicator’ (HPI) (UNDP, 1998, 2000) and strong statements against social security, the income dimension of poverty gets equally lost and the UNDP focuses exclusively on ‘extreme poverty’. All other promising dimensions of development are neglected.

Nevertheless, the UN also organized a series of world conferences in the 1990s in order to revitalize development cooperation after the cold war. Freed from ideological contradictions, the UN considered the time had come to build a genuine international or even global community. One of these conferences was the World Social Summit in 1995 in Copenhagen. Its action program reveals a clear influence of neoliberalism, but simultaneously it remains  loyal to traditional UN points of view. It had three equivalent chapters: on poverty, on employment and on social integration. It paid attention to full employment and even to social security, although in a context of fiscal discipline (United Nations 1995).

One year after the Social Summit the OECD published its new development cooperation proposals: ‘Shaping the 21st century’ (OECD, 1996), with seven ‘international development goals’. These goals have subsequently been integrated into the UN Millennium Declaration of 2000 (United Nations, 2000) and have become, slightly changed, the ‘MDGs’ (Millennium Development Goals).

Again, even if the Millennium Declaration confirms all the traditional values of the UN, from sovereignty to peace, cooperation, tolerance and solidarity, the MDGs are only a very weak reflection of this important statement of the international community. Its first point, to halve extreme poverty between 1990 and 2015 is less ambitious than the promise of World Bank’s McNamara in 1973! It does not mention anything on labor or social protection, it forgets or ignores economic and social development and even ‘forgot’ the objectives for human rights mentioned in the Millennium Declaration.[1] Poverty reduction, which clearly can only be the result of a successful process of economic and social development, here becomes an end in itself in order to remain totally compatible with neoliberal policies and its exclusive focus on growth.

In 2000 the World Bank published its second World Development Report on poverty (World Bank, 2001). It now uses a different definition, focusing on vulnerability, lack of voice and lack of empowerment. In fact,  its definitions become more and more subjective and impossible to measure. In reality, nothing changes, the World Bank still relies exclusively on markets to solve all social problems.

In 1996 World Bank President Wolfensohn had published a proposal for a ‘Comprehensive Development Framework’. It was in fact a kind of division of tasks with the IMF and contained some new ideas for the work of the Bretton Woods institutions. After having discovered the role of states and institutions for markets (World Bank, 1998; Burki & Perry 1998), it explains the relative failure of the Washington Consensus by a lack of ‘ownership’ of the reform programs by the developing countries. This ‘ownership’ will have to be introduced and will only be real if it is the consequence of a participative process. From now on, the IMF is going to concentrate on macro-economic policies, while the World Bank will look after structural development. In the framework of the new debt rescheduling program, HIPC (Highly indebted poor countries), developing countries will have to introduce a ‘PRSP’ (Poverty Reduction Strategy Paper) written according to the new principles. This document will have to be assessed and adopted by the staff of the two institutions but will then be the leading document for the policies to be implemented.

This means that from 2000 onwards, two parallel strategies are set up to fight poverty: the MDGs on the one hand and the PRSPs on the other hand. It has to be stressed that the first PRSPs in fact did say very little on poverty and hardly anything on how poor people can earn some income. Its first generation of documents do not mention the MDGs and cannot be qualified as being ‘owned’ by the respective countries. Most of them were written by the staff of the World Bank (PRSP, 2003). In fact, they were catalogues of structural (neoliberal) reforms.

As for the ILO, it had become totally marginalized by the globalisation. No international conventions were adopted anymore and the existing ones were not ratified or hardly implemented.  In 1998, it asked its member-states to adopt a ‘Declaration on fundamental rights at work’, containing the principles of some basic conventions concerning freedom of association and collective negotiations, eradication of forced labor and of child labor and eradication of all forms of discrimination (ILO, 1998). Furthermore, it succeeded in convening an independent working-party to write a report on ‘A fair globalization. Creating Opportunities for all’ (ILO, 2004). The ILO started to look for a new mission, its traditional way of working not being accepted anymore by its member-states nor by the new powers in the globalized markets.

After two decades of neoliberal policies it was crystal clear that the era of social protection and social security had ended. There was no protection anymore against markets, but only efforts to have people participate in markets. Social protection was no longer seen as a tool in order to allow people to take risks and have a fallback position, but instead it had become risk management (Holzmann & Jørgensen, 2000). Risks are unavoidable, so the reasoning goes, programs have to make people resilient so as to be able to adapt to ‘shocks’, with human capital, credit and insurance mechanisms. Social protection in its traditional meaning is a hindrance for markets. The yearly reports on ‘Doing business’ clarify what this means.  Public holidays, limited working time, firing costs, requirements for redundancy are elements for which countries get negative notes if they do not reform fast enough (World Bank, 2006).

As for poverty, international organizations which started to ask for poverty eradication, rapidly switched to extreme poverty and later to the halving of extreme poverty…

 What happened to social development?

As the new century started, not only the social development paradigm had totally changed, the geopolitical context was different as well.

The cold war was over, capitalism had invaded the former socialist countries, globalization was fast to expand and to integrate new markets in developing countries. Financial markets had an extremely rapid growth. There were no ideological enemies anymore, though a new discourse on the ‘the clash of civilizations’ was emerging. In the new unipolar world, the US was doing everything it could to maintain its hegemony and did not retreat from war. After the terrorist attacks of 9/11, Afghanistan and later Iraq became the new targets. In Africa, the democratization processes were a consequence of the retreat of Northern powers in the new geopolitical context. In many cases this led to conflict and wars, and finally to a new category of countries: the ‘fragile states’ which  begged for other military interventions. New emerging powers like China, Russia, India, Brazil and South Africa also asked for more power in global decision-making. But more and more, one major new problem had to be tackled and affected the development agenda: climate change. It seemed as if a new world was in the making.

The economic and social promises of neoliberalism still did not materialize and impatience was growing. This was particularly true in Latin America, where after the military dictatorships of the 1970s and 1980s neoliberalism had accompanied the democratization processes. Populations who had hoped for an improvement of their living standards again had to wait and started to resist. In Venezuela, Argentina, Brazil, Paraguay, Uruguay, Ecuador and Bolivia, left regimes came to power and started to experiment with new policies, including social protection. Again, enormous hopes were raised, but the results did not come immediately.  

Elsewhere, development and aid promises were repeated all over again but did not materialize. Social movements started to organize at the global level and created a ‘World Social Forum’, reacting to the ‘World Economic Forum’ of Davos. Their slogan: ‘Another world is possible’. After the ‘battle of Seattle’ in 1999, the WTO Doha ‘development’ round of negotiations for liberalizing trade got blocked. Northern countries  switched to bilateral agreements. The European Union started to negotiate ‘Economic Partnership Agreements’ with its allies from the ACP (Africa, Caribbean, Pacific) countries.

At the MDG + 5 summit in New York in 2005, rich countries promised to rise development aid. A huge civil society mobilization had taken place at Gleneagles for the G8 summit where the slogan was to ‘Make Poverty History’. However, seeing Bono, development NGOs and World Bank staff together to claim antipoverty policies made the whole event somewhat dubious. It was clear at that moment that the MDGs were not going to be met and that poverty as well as inequality was permanently rising.

Two new discourses started to emerge.

First, at the level of the World Bank, ‘social development’ became fashionable. ‘Social development’ never had been easy to define, but in the ‘old days’ it could be seen as promoting social integration at the national level, the elimination of social dualism coupled to a logic of social citizenship. According to Midgley it is ‘planned social change designed to promote the well-being of the population as a whole in conjunction with a dynamic process of economic development’ (Midgley, 1995, p. 25). It is linked to a philosophy of social rights which give meaning and content to civil and political rights and which can compensate the economic inequality that hinders political equality. In a framework of social development and social citizenship, policies and rights will be universal, even if this universality does not make targeted measures impossible. Social and economic policies go hand in hand and mutually reinforce each other.

For the World Bank however, social development is totally dissociated from social rights. It concerns the social mechanisms that allow for development and growth to happen. Given that traditional social protection undermines growth and welfare, the World Bank wants to examine the institutions, networks, norms and values at work in society. A central issue in this research is ‘social capital’, which it calls the ‘social security’ of the poor. Positive social capital cannot be based on ethnicity or nationalism but should strive for solidarity, stability and the prevention of conflicts. What social development is about is the creation of social links that allow communities to help themselves. The only thing states have to do is to create an ‘enabling environment’. It also refers to social sustainability and the ‘portfolio’ governments have to manage to not spoil this capital. The main objective is to create ‘inclusive societies’ where all people are active on the labor market and participate in the realization of growth (Word Bank, 2000, 2004). In  this way social integration becomes market integration.

This is a new discourse with old concepts but totally in line with neoliberal philosophy. Social protection is risk management and has nothing to do with rights or with allowances.

At the level of the UN, ILO, UNDP and UNRISD however, new (old) ideas are being developed (Bonilla Garcia, 2003; UNDP, 2005; Riesco, 2007, United Nations, 2006). The secretary-general of the UN already stressed in his report for the MDG+5 summit ‘In Larger Freedom’ (Annan, 2005) that development was a much broader concept than the mere MDGs called for. More particularly, he referred to the different UN conferences of the 1990s. Very soon, all UN institutions were reflecting on new forms of social protection, beyond poverty reduction. They did take into account the necessary budget restraints, but also stressed that a better balance had to be found between economic objectives and social justice. Social policies cannot be residual policies, they cannot be defined exclusively by the results of economic growth.

Social protection, these organizations were saying, promote political stability. Governments should promote full employment and focus on the decent work idea of the ILO (ILO, 1999).[2] They gave examples of basic non contributive pension systems that work fairly well, given the fact that most pension systems had been privatized and had impoverished poor people that were unable to contribute. Education should be free for all, as basic health services, and user fees had to be abandoned. They defend universal systems, though they admit that targeted interventions may be necessary now and then. Unemployment benefits, insurance against labor accidents and care for children, the elements from traditional western welfare states, were not taken up at the global level. But some first attention is given to the redistributional impact of social protection and the necessary fight against inequality. The proposals of these different UN organizations certainly were not identical and point to some important differences, but they all refer to policies beyond poverty reduction and to possible universal approaches.

One important point has to be mentioned here: the re-emergence of an income focus. As was underlined in a famous OECD report on social welfare, families who need social assistance do in fact ask for monetary assistance in the very first place (OECD, 1999). However, people should not depend on social assistance, confirms the World Bank. Poor countries simply cannot bridge the poverty gap with cash transfers (Holzmann & Jørgensen, 2000; World Bank, 2001b). Furthermore, transfers have a negative impact on individuals. The are seen as disincentives for taking risks. The UN organizations are far less negative on cash transfers and refer to successful existing programs.

What has to be noted here is that while the World Bank refuses social assistance in cash, it does promote micro-credit. In fact, micro-credit has become very fashionable in the 21st century in the fight against poverty. The UN organized a Year on Micro credit and spoke of ‘a revolution at the bottom of society’. Micro-credit was supposed to empower people so as to allow them to make economic choices (United Nations, 2004). The World Bank even mentioned micro-credit in its document on human rights, since ‘there can be no equal opportunities if there is no equal access to credit’ (World Bank, 1998b).

One has to wonder then what the difference is between cash one has to borrow and pay interest on and social assistance? The difference points to an ideological bias: in the first case, borrowers are bound by an obligation to reimburse and reward the lender; if the loan is conditioned by productive activities, it will facilitate the integration of the borrower in the market. In the second case, allowances are given more or less for free and states have a redistributional role. Beneficiaries cannot be obliged to start any productive activity but can spend the money as they like. In the same way as was perceived social security in the past, micro-credit now plays the role of changing the behavior of people.

Nevertheless, the micro-credit approach is a first breach in poverty conceptualization: money can help to overcome it.

The second breach were the remittances. Their importance was discovered at the beginning of the century and very rapidly it was clear that they were growing and that they were far more important than official development aid. Moreover, since they were ‘private funds’ they directly benefited poor families (at least if migrants came from poor families). In Central America, some families received from 50 to 60 % of total incomes from remittances (Adams, 2003). All international organizations tried to find out how to improve their ‘development impact’ and to measure their contribution to poverty reduction (OECD, 2004; World Bank, 2006b). Again, implicitly, it was admitted that money played a direct role in poverty reduction.

No reliable data on poverty

Since two different strategies for poverty reduction were set up around the millennium year, one could expect poverty reduction was taking a new start and would give rapid results. Unfortunately, this was not the case. According to the World Bank, the only provider of global poverty statistics, extreme poverty was indeed falling.

All through the 1990s, statistics were being developed. In 2007 the World Bank updated its PPP (Purchase Power Parity) data and stated that the economy of China had been overestimated by around 40 %! India’s economy had been overestimated by 25 %. It meant that China’s share in the global economy fell from 15,8 to 10.9 %. The share of the United States rose from 19,3 to 21,4 %. The total share of developing economies fell with 7 % (World Bank, 2007).

In 2000 the World Bank had also changed its PPP data and changed its poverty lines. The consequence was that extreme poverty in Subsaharan Africa rose from 39,1 % to 49,7 %. The estimate for extreme poverty in 1980 rose from 800 million to 1,482 billion people (Chen & Ravallion, 2000).

What this clearly shows is the lack of reliability of World Bank statistics. With the PPP changes of 2007, poverty measures had to be looked at again and the first consequence was a rise in poverty with 300 to 400 million people. Then new poverty lines were introduced: 1.25 $ a day for extreme poverty and 2.50 $ a day for poverty.

The latest figures with these poverty lines are:

Extreme poverty (1,25 $ d day)

a)      Headcount index : from 52,0 % in 1981 to 41,6 % in 1990 and 25,7 % in 2005

For Subsaharan Africa: from 50,8 % in 1981 to 54,9 % in 1990 and 50,4 % in 2005

 

b)      Number of people: from 1.904,3 million in 1981 to 1.815,5 million in 1990 and 1.399,6 million in 2005

For Subsaharan Africa: from 202,0 million in 1981 to 283,7 million in 1990 and 384,2 million in 2005.

 

Poverty (2,5 $ a day)

 

a)      Headcount index: from 74,8 % in 1981 to 70,5 % in 1990 and 57,6 % in 2005

For Subsaharan Africa: from 79,5 % in 1981 to 80,6 % in 1990 and 79,9 % in 2005.

 

b)      Number of people: from 2.738,8 million in 981 to 3.075,9 in 1990 and 3.140,2 in 2005

For Subsaharan Africa: from 316,1 million in 1981 to 416,7 million in 1990 and 609,9 million in 2005.

 

Source: Chen and Ravallion, 2008.

 

These statistics remain controversial. As is stated in a recent UN report (United Nations, 2010), either the numbers for China are underestimated, or the numbers for the rest of the world are overestimated.

What should be clear by now is that the MDGs will not be met in 2015, at least if they are looked at at country level. Globally, the first MDG of halving extreme poverty could be met, thanks to China and India. In fact, at the moment the MDGs were adopted in 2000 with the reference year of 1990, China already had met its goal … As for Subsaharan Africa, its extreme poverty has almost doubled instead of being halved, from 202 million people in 1981 to 384 million in 2005.

 Spring is in the air?

The failures of both strategies for poverty reduction are obvious. Since the UN MDG+5 summit, many new ideas have been launched in order to try and revitalize the international cooperation agenda, to promote economic and social development and to re-introduce social protection.

One of the major new ideas was the ‘decent work’ agenda from the ILO. This is certainly not a revolutionary proposal though it would indeed mean a major improvement for all workers if it were respected. It demands a respect for the ILO core labor standards, for employment, for social protection and social dialogue. This agenda was adopted in 1999 and the trade unions succeeded in including it in the MDG list of indicators in 2005.

Secondly, the thinking on social protection went ahead. It started with ECLAC and a reflection on social citizenship (CEPAL, 2000). As for the UN, after Kofi Annan’s report on ‘Larger freedom’, it constantly referred to the ‘IADG, including the MDGs’ (Internationally Agreed Development Goals, this is the results of the UN conferences, and the millennium Development Goals).

In 2005, the UN report on the world social situation focused on inequality, stating that inequality can cause and exacerbate poverty (United Nations, 2005). It is therefore crucial, according to the authors, that policies and programs for poverty reduction include socio-economic strategies to reduce inequalities.  Furthermore, there appears to have been less of interest in policies to equalize the distribution of income and wealth. In the past two decades, according to the report, the share of the richest 10 % has increased from 51,6 % to 53,4 % of total world income (United Nations, 2005, p. 44).

In 2006, the World Bank Development report equally looked at ‘equity’, though from a totally different angle. It did not look at income, as usual, but at equal opportunities to pursue the life of one’s choosing. The World Bank wants to promote a level playing field, it accepts that some kind of redistribution may be necessary, but only in terms of access to services, assets and political influence (World Bank, 2005). In order to avoid all misunderstandings it stresses that the policy aim cannot be equality of outcomes. Nevertheless, earlier research of the World Bank had already shown that income inequality hinders growth and poverty reduction (Ravallion, s.d.).

The outcome document of the MDG+5 conference in 2005 stressed in its § 19 that the member states ‘underline the need for urgent action of all sides, including more ambitious national development efforts backed by increased international support’ (United Nations, 2005b). In its reaction to this, the UN published a series of ‘policy notes’ (United Nations 2006) on macro-economics, trade, finance and social policy. They explicitly deviated from Washington Consensus policies, in questioning the low inflation targets, in pointing to unemployment, in pointing to the problem of tax havens and the need for increased taxes, different from regressive VAT (Value Added Tax), in questioning public deficit rules as well as the independence of central banks. On social policies, it stressed the importance of redistribution and the need for creating virtuous circles between human and economic development. Redistribution, so it states, has faster impact on poverty reduction than growth. It notes that the targeted pro-poor policies, coupled with the flexibilization of labor markets weakened governments, development processes and social cohesion. Furthermore, it made an appeal for global social justice and international redistribution.

The 2010 report on the World social situation ‘Re-thinking poverty’ follows these same lines, strengthening the criticism on exclusive poverty reduction policies. ‘The crisis calls into question the sustainability of global poverty reduction, as well as the underlying development paradigm’ (United Nations 2010). There is an urgent need for shifting away from market fundamentalism and for going to national development policies. With a reference to the Universal Declaration of Human Rights, the UN calls for ‘transformative social policies’ with the examples of China, Costa Rica, Kerala, Cuba and Sri Lanka. It has serious doubts about the effectiveness of poverty reduction strategies (United Nations 2010). Emphasis should be put on the need to provide economic security for all, with a basic package for all. This is perfectly feasible and would not cost more than about 4 % of GDP. There are strong ethical and strategic reasons for moving towards a universal approach in social policies (United Nations, 2010, p. 151). In this way, the UN joins the ILO which had already made a plea for a ‘social protection floor’, though limited to access to basic services (water, education and health care) plus transfers in cash and kind (United Nations 2009).

The World Economic and Social Survey even goes further and warns for ‘getting on track after the crisis and to return to an unsustainable path of global development’. The crisis and the major changes in the global economy call for a shift in thinking and a reconsideration of conventional wisdom. The development successes of today all are the result of ‘old thinking’, that is agrarian reforms, investments in human capital, selective trade protectionism, government support for industrialization, and so on. The ultimate objective of development, according to the UN, is to improve human welfare and to eradicate poverty (United Nations, 2010b). With MDGs and PRSPs, so it adds,  it is difficult to repair the damage caused by market liberalism. Social policies of today largely remain marginal to economic policies.

The UN also calls for a new aid architecture and a more radical shift towards the principles of the Paris Declaration. It proposes trust fund mechanisms for better alignment of aid and a global fund for using innovative forms of international levies. The current globalization pattern is not feasible, business as usual is not an option, the globalization process has to be reshaped…

In the meantime however, the World Bank goes on defending its old and failing mechanisms. Markets remain its alpha and omega. It has changed on only one point: the money dimension of poverty.

Taking note of the rising poverty and inequality numbers, its researchers have finally discovered the recipes that work: cash transfers. The main example is the ‘bolsa familia’ in Brazil, where poor families receive a small allowance in cash, provided their children go to school and are regularly checked in a medical center. Mexico followed suit, and today, according to a World Bank document, tens of countries in Asia, Latin America and Africa are experimenting with so-called ‘conditional cash transfers’ (World Bank, 2009). In Brazil, more than twelve million poor families receive a grant of approximately 30 $ a month, with possibly an extra 20 $ per child. Extreme poverty has fallen below 5 %. President Lula has also risen the minimum wage and introduced basic pensions (Hanlon et al., 2010).

In all countries where similar systems have been introduced, the results are positive. Money seems to be indeed the fastest way to escape poverty. As every housemother knows, money is used to feed their children, but also to buy fertilizer and improve productivity. In Brazil the system has helped to seriously reduce child labor.

It has taken 30 years for the World Bank to understand that poverty is, in every market economy, in the very first place an income deficit. Surely, poverty reduction policies can and should in many instances be multidimensional. But all policies should be geared towards a better income for the poor, and this has never happened within the neoliberal economic market system the World Bank imposes.

This being said, it should also be stressed that the conditional cash transfers cannot be a panacea. With the current philosophy of the World Bank, there is a serious risk they will become something like a ‘basic income’ which is not enough to live from, but which also ignores inequality. Cash allowances can certainly help poor people to survive, but they cannot be seen as sustainable social development mechanisms. They are far too limited for that purpose and do not need to fundamentally change neoliberal policies. They are perfectly compatible with them. They are just a cheaper and more efficient way to reduce poverty than the current policies.

If one wants to promote social development, one should look at the UN and UNRISD proposals: in order for social policies to realize their transformative potential, they must shed their residual role and occupy a more central position in development efforts. This means that social policy should support and enhance a dynamic accumulation process that allows for the creation of income which can then be taxed and redistributed. In this way, social and economic policy mutually reinforce each other. The Washington consensus has failed, but so-called post-Washington Consensus policies persist with the same and fundamental shortcomings. A good social policy does not have to reduce poverty, but to prevent poverty. Therefore, these policies have to be universal.

Conclusion

Neoliberalism is not dead. Only a couple of months ago CGD (Center for Global Development) published a document about the Washington Consensus being a ‘damaged brand’, confirming the relevance of its prescriptions. Its failures are due, according to the authors, to its incomplete implementation, their lack of correct sequencing of the reforms and the incompleteness of the agenda. It should have taken into account the volatility of financial capital, innovation needs and … equity (Birdsall et al., 2010).

The current financial and economic crisis has worsened the social situation in today’s world. More than one billion people are suffering from hunger. Climate change causes disastrous natural catastrophes. While some cautious remarks about ‘change’ are being made at the Climate Conference in Copenhagen or at the G20 summits, all in all, there is no fundamental restructuring of economic, social and environmental policies. Global institutions remain biased in favor of the old Northern hegemonic powers.

More and persistent resistance will be needed to really make an end to neoliberalism and to restore development. If ‘another world is possible’ the alternatives should be on the table. The UN documents are very helpful and point in the right direction. But they are far from sufficient.

The world is at a crossroads.

On the one hand, neoliberalism can be strengthened and lead to repressive and military solutions for economic, social and environmental problems. A lot of ‘spin’ has been developed about the ‘strong states’ that the World Bank and the IMF today call for. But it has to be stressed that these states are not identical to the former nation-states. In fact, one can see four stages in neoliberal policies. In the first instance, the economic role of states was abandoned. Public companies were privatized, all kinds of regulations cut back, central banks were strengthened. Secondly, the social role of states was being cut back. Social security systems were dismantled and poverty reduction policies were put into place, more often than not in the hands of NGOs, churches and local communities. Thirdly, states were being re-built with the specific role of protecting markets and market players: protection of investments, property rights, competition, consumer rights … Fourthly, these achievements had to be protected as well. This is when social movements began to be criminalized, when security invaded the development discourse after the invention of ‘fragile states’, and when military interventions are being prepared.

In the light of the growing impatience of peoples, after decades of non-met promises, and the unavoidable conflicts due to climate change, water shortages, droughts and floods, this can only lead to disastrous consequences.

On the other hand, more policy autonomy for developmental states with participatory democracy can lead to more economic, social and environmental justice. Nations and people should be free to choose the economic and social systems they prefer, whether they call them socialism or capitalism or anything else.

However, no solutions will be possible if the development paradigm of Northern countries is not fundamentally changed. The ecological footprint of wealthy countries already is far too high, and innovative solutions will necessarily have to be introduced if poor countries want an opportunity to develop.

Globally, institutions will have to take into account the new power of emerging nations, but also give more voice to countries which remain crucial for the commodities wealthy countries are living from. Global redistributive mechanisms will have to be organized to replace the failing aid cum philanthropy system.

These are minimal requirements for a peaceful world. Other solutions are possible. A post-development movement is rapidly gaining influence, calling for ‘mother earth’, community solidarity, dignity, and so on. While many of its criticism on modernity and development have to be taken very seriously, it is not necessarily an emancipatory movement. It is one thing to reject ‘endless progress’, ‘growth’ and ‘homogenizing states’, it is quite another to refuse human rights, secular states and gender equality. Western hegemony certainly has committed many crimes and continues to impose its neocolonial and imperialist vision. It does not imply that everything the ‘Western world’ created, has necessarily to be refused. Individual freedoms go hand in hand with collective freedoms, equality and emancipation need states to promote and protect them.

Most of all, it is only too easy to see how ‘local communities’ with interpersonal direct solidarity, with a weakened or non existent system of human rights opens the door for intolerance and exclusion. Furthermore, this is perfectly compatible with existing neoliberalism that will only be too happy if groups of people marginalize themselves and stop demanding justice.

If development and poverty reduction have served in the past as perfect mechanisms for legitimating capitalism and colonialism, genuine development and poverty reduction remain necessary. Words are not things. If other concepts are needed,  there can be no problem to find them. As long as the objective remains an inclusive and emancipator society, with respect for diversity and rights for all.


 

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[1] The MDGs concern the halving of extreme poverty and hunger from 1990 to 2015, universal primary education, gender equality, reducing child and maternal mortality, combating HIV/Aids, environmental sustainability and a global partnership.

[2] The decent work agenda is about respect for core labour standards, employment, social protection and social dialogue.

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