Global Policy Forum

By Kavaljit Singh

The overriding objective of the just concluded official visit of World Bank President James Wolfensohn to India was poverty reduction. During his visit, not only did he spent more time with non-governmental organisations (NGOs) than with government officials and business representatives, but he also emphasised the strategic role of the World Bank in reducing poverty in the coming years.

It is surprising that after lending billions of dollars for the big infrastructure development projects and supporting neo-liberal adjustment programmes in over 100 countries, the World Bank is nowadays reinventing itself as an anti-poverty crusader. By suddenly espousing the cause of the poor, the Bank has not just shocked the global financial community but also its die-hard critics who had never anticipated that much of their lexicon such as 'empowerment', 'governance', 'microcredit', 'decentralisation' and 'transparency' would soon become buzzwords at the Bank.

Despite the new rhetoric, there has been no major shift in the Bank's commitment to neo-liberal thinking. Except financial liberalisation where the Bank has done some rethinking in the aftermath of Southeast Asian financial crisis, it remains committed to the rest of the components of the 'Washington Consensus' which includes trade liberalisation, privatisation, cut-backs in social sector spending and deregulation.

In a neo-liberal framework of the Bank, poverty is not a result of the economic system and therefore, it isolates poverty from the process of economic development and aims at reducing poverty through specific programmes targeted at the poor. As witnessed in several Latin American countries, such targeted programmes, no doubt, provide temporary relief to the poor as well as help in containing social and political conflicts arising out of economic deprivation.

But, these programmes do not make a dent at the structural problems that perpetuate and reinforce poverty on a mass scale. It appears that the Bank is looking for a simplistic solution to the complex issue of poverty as it has discovered microcredit as the new panacea for poverty eradication. Through its micro-lending arm, CGAP, the Bank has been paying more attention on policy reforms such as privatisation of micro-lending institutions, removal of subsidies for banks that service the poor, and stronger debt collection laws that may benefit lenders but end up hurting poor borrowers, particularly women.

Keeping the CGAP framework in view, the Bank launched a project in India titled Rural Women's Development and Empowerment Project with the sole focus on the establishment of self-help groups. It is unfortunate that rural women's empowerment is only seen in terms of economic development and that too with a narrow focus on credit and income-generation programmes. Any strategy that views micro-credit as a substitute for social sector spending and anti-poverty programmes is unlikely to succeed even in reducing poverty, what to talk about total eradication of poverty.

The other important component of the Bank's recipe for social sector is privatisation of education, health and other welfare systems. By imposing user fees and running social programmes on commercial basis has created new inequalities as bulk of poor people don't possess purchasing power to access these services. Before preaching the virtues of transparency and good governance to the world, it is high time that the World Bank should start practising these at the Bank itself.

Despite pressures from activists and groups, there have been only marginal changes in the Bank's own disclosure policy. Unlike the UN, the membership of the World Bank is not based on the principle of one country-one vote. Rather, the voting power is based on the amount of money each member-country puts into the Bank. Because of this peculiar system, the US (being the largest shareholder) can veto any proposal. By adopting the principle of one country-one vote, the Bank can curb the overarching influence of the US.

The author is the Director of Public Interest Research Center

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