Yves here. While readers may think development policy has limited relevance to US and advanced economy readers, the IMF and World Bank have been and continue to be vehicles to make the world, particularly smaller or otherwise more influe...
Yves here. While readers may think development policy has limited relevance to US and advanced economy readers, the IMF and World Bank have been and continue to be vehicles to make the world, particularly smaller or otherwise more influenceable regimes, more friendly to the interests of US multinationals. And at the same time US companies are taking down a record share of GDP in profits, the country’s ranking in inequality is worse than that of many developing economies. New York City is more unequal than China, and as the chart below shows, is also more unequal than Russia, famed for its oligarchs, and India, which still has hundreds of millions living in abject poverty.
So the World Bank’s efforts over time to exclude issues like corruption and inequality from its analysis have direct and obvious parallels to policy discussions here. Wade’s anecdotes of the way the World Bank refused to even allow the “c” word to be acknowledged are striking. It’s a near certainty that the big reason inequality is now a regular topic of conversation among economists, for instance, is that the rapid rise of a super rich class while average workers are left in the dust makes it impossible to ignore.
By Robert Wade, Professor of Political Economy, London School of Economics. Cross posted from Triple Crisis
On May 29 2013 James Wolfensohn, president of the World Bank from 1995 to 2005, gave the Amartya Sen lecture at the London School of Economics, on the subject, “Reflections on a changing world, 1950-2050”.
His reflections on the changing world were mainly reflections on what he achieved as World Bank president. He emphasised five.
• Re-focusing the World Bank – and the whole development “community” – on poverty as the central issue of development.
• Elevating “corruption” as a major development problem, instead of sweeping it under the carpet.
• Writing-down countries’ debt (especially African) – so that World Bank loans no longer went straight out the door to western banks and instead were used for investment in the country.
• Putting Bank operations in a particular country in the context of a broad vision of the economy’s future development path five to ten years ahead, in the format of his “Comprehensive Development Framework” (CDF).
• Decentralizing World Bank operations, so that more of the total staff operated from regional or country offices rather than from headquarters in Washington DC, and more meetings with shareholding states were held in borrowing countries rather than in Washington or Paris.
Here I comment on the first two: poverty reduction as the central goal of development, and corruption as an explicitly stated problem. I put them in historical context, not least because the World Bank operates without memory of its own history – as seen in the fact that most Executive Directors (the civil servants of member countries who constitute the 25 seat Executive Board, which governs the Bank on a day-to-day basis) and also most staff have never even heard of, let alone read any of The World Bank: Its First Half Century, the independently written but semi-official history published by Brookings Institution in 1997. For most of the time since it was published the World Bank book shop has not even stocked it, on the ostensible grounds that the Bank did not publish it. Or to be more exact, these are my findings from asking just about every staff member and Executive Director I’ve met since 1997 about the two-volume history, and from enquiring about its availability on every visit to the Bank. I have a vested interest, as author of chapter 13, “Greening the Bank: The struggle over the environment, 1970-1995”, volume 2, pp.611-734.
Poverty Reduction and Inequality
Wolfensohn’s elevation of poverty reduction as the central goal echoes then World Bank president Robert McNamara in 1973, forty years ago, who solemnly proposed in a speech in Nairobi, Kenya, a “new strategy”. The “ambitious objective