Global Policy Forum

By Stephen C. Smith*

In the last few decades, some progress has been made in helping poor people overcome poverty across the world. However, hundreds of millions still remain trapped in poverty. Stephen C. Smith, author of "Ending Global Poverty," argues that effective programs and organizations in those countries are making a positive impact.

We live in a special moment in history. There are real reasons for optimism. Economic growth is fairly high, technological progress and the spread of new technologies around the world is rapid. Meanwhile, market efficiencies are improving, democracy and freedoms are reaching an ever-larger number of people — and measurable progress has been made toward ending global poverty.

In one very possible future, we could virtually end extreme poverty in the next quarter century. But a different and far worse future is also all too possible. We could still lose the struggle to end global poverty. This is a time of dramatic change — and social and economic patterns have not become set.

In the developing world, instead of gaining new rights and freedoms, the poor could find themselves subjected to wider abuses and denial of basic rights. Hundreds of millions of people could sink further into hunger and disease, with large regions of the world trapped in poverty indefinitely. Elites in the developing world, aided negligently by global business, could view globalization as an opportunity to exploit the poor more effectively.

A new period of stagnation

Stifled by debt, the poorest countries could enter into a new period of stagnation. In developed countries, a growing focus on the war on terrorism to the exclusion of other social objectives and a frustration with the slow pace of progress, could lead to a loss of resolve. The struggle to end extreme poverty is strongly complementary with the struggle against terrorism, but in budgets around the world these goals seem to be in competition with each other.

If the priority of aid is to end extreme poverty, then we need to focus attention on what the poor need, what capabilities and assets they lack — and what local and global forces are holding them back. Aid could have more impact on extreme poverty — if it is approached with the perspective that helping people and local communities helps their countries to get stronger and their economies to grow.

Stimulating growth

We can hope that, by helping a country's government agencies or private sector, we will stimulate growth and efficiency and thereby help the poor. But we cannot focus on this hope to the exclusion of working with the organizations best situated to assisting the poor. Successful cases of development usually involve a unique, local response to local constraints that outsiders are not in a good position to understand.

Local responses

Few recent examples of highly successful development, which are concentrated in Asia, correspond to simple reliance on the invisible hand. Market incentives play a key role, but so do effective government and a dynamic citizen sector, working in concert.

Local development strategies can be worked out with foreign advice, but they must be locally owned — in fact as well as in name — and carried out on local terms. The World Bank, bilateral agencies and NGOs all have roles to play. However, to reach those living in extremely poor countries, the old model of seeking to influence elites to follow the popular theories of the moment will have to be discarded. Instead, we need to favor strategies for helping to provide the keys to capability at the community level — and assisting, not insisting, on particular policies.

Despite progress in understanding some of the key sources of growth and the role of institutions in improving market efficiency, remarkably little is known about how to design and implement policies to ensure that growth in the developing world effectively lifts the poor out of poverty.

The need for a larger voice inside the World Bank

In the world of policymaking as much as in the world at large, the voices of the rich can he heard loud and clear, while those of the poor barely register. The poor countries, and the poor themselves, now need a larger voice in the World Bank and other development decisionmaking.

Currently, the World Bank is governed by one-dollar-one-vote, giving control to rich country donors. As a first step to expanding the voice of the governed, the World Bank could create an advisory council comprised largely of people from developing countries who have made a difference in the lives of the poor, such as leading entrepreneurs.

A compelling moral issue

Rather than using ad-hoc committees to address controversial issues, this would be a permanent body, though with a rotating membership selected by an independent and transparent process. The council would need guarantees of independence and full access to information and staff assistance, and would make public recommendations, and control a steadily growing share of the budget. This would go a long way to restoring credibility. Ultimately, the one-dollar-one-vote structure of World Bank decisionmaking will have to give way to a more people-friendly formula.

Every era has its compelling moral issues. For Ralph Waldo Emerson it was slavery. He would have preferred to contemplate, and to discuss philosophy with his friends. But in the end, Emerson felt he had to risk everything to take a stand against slavery at a time when it was perceived as an extreme and inflammatory position.

About the author: Stephen C. Smith is Professor of Economics at George Washington University and author of "Ending Global Poverty," published in May of 2005.