September 22, 2000
Earlier this year, the United Nations issued a report stating that bad governments share the blame for poverty and underdevelopment. Now the World Bank is saying much the same thing, that political, legal and social changes, not just economic growth, are needed in developing countries to alleviate poverty. These conclusions signal a significant, welcome change in the approach of these powerful bodies to development.
At the U.N. millennium gathering earlier this month in New York, the heads of U.N. member states signed a promise to cut the number of those living in extreme poverty by half by 2015. It's doubtful that the goal will be reached, but it calls attention to the right spot. The World Bank's emphasis, in its World Development Report, is on the promotion of legal systems to make market economics work for everyone and on the need to help people weather shocks such as epidemics and natural disasters. This is quite a departure from its earlier hard-line market economy prescriptions.
Fostering aggregate economic growth is still the best way to help the poor. However, privatization, rules for capital movement and open trade do not work by themselves in countries with corrupt governments, bureaucracies that stifle entrepreneurship or educational systems that leave most children out. The World Bank also has a role to play in helping its member countries to develop legal systems that promote equal justice, transparency and certainty. (Russia is a good example of what happens when privatization and market reforms occur in a lawless society.) Just as important, the bank can help to develop schools and battle AIDS, malaria and other economically debilitating diseases.
However, world bodies are on slippery ground when proposing, as the World Bank did, to address poverty through social engineering. Giving local authorities a say in national decision-making and promoting equitable inheritance laws or gender equality are worthy goals. However, these are political issues for the people of a nation to decide. Both the U.N. and the World Bank have rightly stretched the development debate beyond market economics into good governance. Translating this into a concrete, working program will be harder.
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