World Bank’s retreat from direct poverty reduction and back to trickle-down infrastructure growth
The World Bank is backing off sustainable development, and instead are now re-focusing on infrastructure and growth. This time an undefined 'responsible' growth. They are reverting to depending on the trickle-down theory[1] of big infrastructure. That means less direct poverty reduction by the soft sectors, such as education, health and nutrition. The bank prefers infrastructure, so do the industrial countries that get most of the procurement benefits. Certainly, infrastructure is needed to raise output, for domestic processing, for job creation, and to facilitate development. But the bank’s contribution to infrastructure is minuscule, whereas its erstwhile poverty reduction can make a big difference. The private sector often builds infrastructure (e.g., factories) better than the bank/government can.
If “Responsible Growth” meant prudence and care by ensuring social and environmental quality, or clear responsibility for the poor and their environment, there would be some merit in the concept. But the opposite seems more likely. The decadal gutting of the social and environmental safeguard policies is almost complete. The two 1993 energy policy papers promoting energy conservation and renewable energy, least-cost planning, transparency and emphasis on demand-side management have been demoted. They were rarely complied with but now are no longer policies. The World Bank’s 1995 “Carbon Backcasting” study found that had the cost of carbon emissions been set above zero, renewable energy would have burgeoned and coal loans would have been phased out. The 1999 “Fuel for Thought: environmental strategy for the energy sector” although weak on environment, also was ignored. The 2000 World Commission on Dams (WCD) recommendations to phase down big dams have been dismissed and reversed. The Bank actively pressured governments to reject WCD’s findings. Big dam lending resumed a year later, and big high-risk water projects were prioritized in the 2003 Water Sector Strategy. The 2004 independent Extractive Industry Review (EIR) of the World Bank Group’s oil, gas and mining portfolio urged extending the moratorium on coal, phasing out of oil, and boosting lending for renewables. The Bank rejected nearly all EIR’s conclusions, and promptly resumed lending for coal. President Wolfowitz opened the door for financing nuclear energy in 2004, especially for India. This was emphasized in 2006 by the Bank’s Energy Framework paper prepared in response to the 2005 Gleaneagles G-8 call for reducing climate change risks.
Switching from the widely-accepted “Sustainable Development” of the 1987 Brundtland Commission, and the two UN Environmental Summits (Rio 1992, Johannesburg 2002), to “Responsible Growth” surely cannot be muddled thinking; it must be a deliberate paradigm shift. “Responsible Growth” halts the trend over the last decade of emphasizing sustainable development, as in the Bank’s “Beyond Economic Growth”, and direct poverty reduction of the Millennium Development Goals (MDG). As soon as the Bank adopted the United Nations MDG in 2000, it undermined them by emphasizing trickle-down.
The sole intellectual underpinning for the recent regression away from the MDGs/direct poverty reduction and back to trickle-down growth in infrastructure is the 2000 World Bank paper by David Dollar and Aart Kraay “Growth is Good for the Poor” advocating free market fundamentalism. It is a weak reed on which to hang such an immense policy switch away from MDGs and back to trickle-down. The Dollar/Kraay paper has been roundly rejected (e.g., Mark Weisbrot, Oxfam, Ed Amann, David Woodward and Andrew Simms). Of every $100 worth of growth in world income per person, only $0.60 contributed to reducing poverty. To achieve a single $1 of poverty reduction requires $166 of global production and consumption, an extreme form of environmental and economic inefficiency. Rich countries benefit handsomely from the World Bank’s reversion to trickle-down infrastructure, much more than from the MDG approach of direct poverty reduction through health, water supply, education, rural electrification, and nutrition.
There is no inkling that aggregate growth is not improving livelihoods. No recognition that 178 member countries recorded negative average growth between 1990 and 2001. No mention that the costs of growth are undercounted and in an increasing number of countries exceed the benefits.[2] No attempt to target growth for the 30% poorest in a nation. Redistribution is still anathema to doctrinaire economists just like corruption, debt relief, and military expenditures were until recently.
Further Reading
- Bank Information Center, Bretton Woods Project, Campagna per la Riforma della Banca Mondiale, CEE Bankwatch Network, Friends of the Earth-International, Institute for Policy Studies, International Rivers Network, Oil Change International, & Urgewald. 2006. How the World Bank’s energy framework sells the climate and poor people short. A Civil Society Response to the World Bank’s Investment Framework for Clean Energy and Development. Washington DC., BIC et al. 36 p.
- Daly, H. 2003. Uneconomic Growth and the Illth of Nations: Defining the Optimal Scale of the Macro Economy. The Beatty Lecture.
- Daly, H. E. 2003. The Illth of Nations and the Fecklessness of Policy: An Ecological Economist’s Perspective. Post-autistic Economics Review, 22 (1).
- Daly, H. E. 1999. Uneconomic growth in theory and in fact. The Annual Feasta Lecture, Trinity College, Dublin.
- Dollar, D. and Kraay, A. 2000. Growth is good for the poor. Development Research Group, World Bank: Washington DC.
- Dollar, D. and Kraay. A. 2001. Growth is good for the poor. Policy Research Working Paper 2587 World Bank: Washington DC.
- Dollar, D. and Kraay, A. 2002. Growth is good for the poor. Journal of Economic Growth, 7:195–225.
- Environmental Defense Fund and Natural Resources Defense Council, 1994. Power Failure: A Review of the World Bank’s Implementation of its New Energy Policy. Washington, D.C., EDF & NRDC
- Extractive Industries Review. 2003. Striking a Better Balance: The World Bank Group and Extractive Industries. Emil Salim Washington DC., EIR: 7 vols.
- Goodland, R. 2003. Sustainable development sourcebook for the World Bank Group's Extractive Industries Review: examining the social and environmental impacts of oil, gas, and mining. Washington, DC: EIR [for] World Bank Group, 189 p.
- Rutherford, D. 2000. Dictionary of economics. New York, Routledge, 539 p. ISBN: 0415250919
- Soubbotina, T. P.2004. Beyond economic growth: an introduction to sustainable development. Washington, D.C., World Bank, 205 p. ISBN: 0821359339
- World Bank, 2006. An Investment Framework for Clean Energy and Development: A Progress Report. Vice Presidency for Sustainable Development Washington, D.C., World Bank, 108 p.
- Woodward, D. and Simms, A. 2006. Growth isn’t working: the uneven distribution of benefits and costs from economic growth. New Economics Foundation 32 p.
- World Bank, 1993. The World Bank’s role in the electric power sector: policies for effective institutional, regulatory, and financial reform. Washington, DC Washington, D.C., World Bank, Policy Paper # 11676: 86 p. ISBN: 0821323180
- World Bank, 1993. Energy efficiency and conservation in the developing world. Washington, DC, Washington, D.C., World Bank, Policy Paper # 11987: 107 p. ISBN: 0821323172
- World Bank, 2002. Private Sector Development Strategy: Directions for the World Bank Group. Washington, D.C., World Bank, 119 p.
- World Commission on Dams, 2000. Dams and Development: A New Framework for Decision-Making. London, Earthscan 404 p. ISBN: 1853837989
- World Bank, 2004. Water Resources Sector Strategy: Strategic Directions for World Bank Engagement. Washington, D.C., World Bank, 101 p. worldbank.org. ISBN: 0821356976
Notes
This Informational Box is an excerpt from An Introduction to Ecological Economics by Robert Costanza, John H Cumberland, Herman Daly, Robert Goodland, Richard B Norgaard. ISBN: 1884015727
