Global Policy Forum

by Joseph Kahn

The World Bank said today that its aid programs had helped ease poverty and allowed poor people to "live longer, healthier and more productive lives," defending its track record against Bush administration charges that it has been ineffective.

The report highlighting the bank's successes was released as the lending agency and several of its main donor nations, including the United States, are locked in a struggle over the quantity and usefulness of foreign aid.

President Bush, who is scheduled to meet other world leaders in Monterrey, Mexico, next week to discuss ways to help the poor, wants to overhaul the World Bank and convert many of its loans into grants. European leaders have resisted, saying the real problem is that the United States devotes too little money to fighting poverty.

The United States has already blocked an effort by Britain, the World Bank and the United Nations to use the Monterrey conference to push for large-scale increases in foreign aid. But Bush administration officials and their European counterparts are still arguing about how much money to give the World Bank for the next three years and what conditions to place on the aid.

While the bank did not name its critics, its report, "The Role and Effectiveness of Development Assistance," was clearly meant to answer complaints made by Treasury Secretary Paul H. O'Neill. Mr. O'Neill has argued that the bank's loans have heaped debt on developing countries but have done little to relieve poverty.

The bank said in its report that its aid programs have become more effective since the end of the cold war, because aid is now used less often to reward allies and more often to support viable projects. In 1990, the bank said, $1 billion of aid lifted some 105,000 people out of extreme poverty. The same amount in 1998 helped 284,000 people climb out of poverty - a tripling of its productivity, it says.

The report cited success stories in Bangladesh, Botswana, Chile, China, India, Poland, South Korea, Uganda and Vietnam, and it claimed specific achievements like helping reduce river blindness in West Africa and iodine deficiencies in China. The antipoverty loans the bank has made not only produce a healthy return in income improvements, the bank said, but they also are a catalyst to attract private investment to poor areas.

More broadly, the bank said, foreign aid has added 20 years to life expectancy in poor countries in the last four decades, and has cut their illiteracy rate in half.

The bank acknowledges some serious mistakes - failing to do more to limit the devastating effects of AIDS in sub-Saharan Africa, for example, or to increase incomes there after 1965. And more people live in poverty in Eastern Europe and Central Asia now than a decade ago, the bank said.

"People in developing countries are much healthier and better educated today than they were 50 years ago," said Nicholas Stern, the bank's chief economist. "It shows that the development community has learned from experience - from success and failure."

James D. Wolfensohn, the bank's president, cited some of the report's conclusions last week, when he called on rich countries to double their aid spending, to $40 billion to $60 billion a year.

The report's conclusions seem unlikely to sway some of its critics.

Speaking at a Treasury briefing, Mr. O'Neill said today that he would be "delighted to have demonstrated facts to show that we have been greatly successful" in fighting poverty, but he expressed doubts that he could be easily persuaded. "We have so many people in the world living on less than $1 per day, and that does not sound like 50 years of success," he said.

Mr. O'Neill has argued that the bank could be more effective if it gave money to health, education and sanitation projects in the developing world, instead of lending money to governments that sometimes waste the resources.

Bill Easterly, a former bank economist who now works at the Center for Global Development in Washington, raised questions about the examples in the report, arguing that it selectively reviewed positive statistics and countries but ignored some broad failures.

Mr. Easterly questioned the inclusion of countries like India and China in the list of those the bank claims grew out of extreme poverty under its guidance. Bank aid accounted for a small proportion of the economic activity in those countries but much more in nations that have failed to emerge from poverty, he said. "It's an old game that you pick whatever country or project is doing well, and then say it is doing well because our aid and advice and intervention," Mr. Easterly said.

Another longtime bank watcher, Jeffrey Sachs of Harvard University, said the bank was right to defend the effectiveness of many aid programs and to press for increased contributions from wealthy countries.

Some of the bank's programs have failed, Mr. Sachs said, but those failures often resulted from misguided efforts to reward Western allies during the cold war, programs that the bank was pressed to support by the United States. He also argued that the bank had been forced to make do with too few resources. "For most of the problems, responsibility lies with major donor countries, not with the professionalism of the bank," he said.

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