A poor past, an uncertain future & the World Bank

By on April 27, 2018

Werner Soors is an ITM staff member

Caveat lector! The author of these 907 words is a socialist, and dislikes doublespeak. I hope this warning makes you read on as it explains my ambivalent feelings whenever the World Bank speaks out on poverty, inequity, exclusion, or people at large.

It all started with the World Development Report 1980, part II: Poverty and Human Development, in which the Bank admitted that poverty could not be comprehensively measured. Unhindered by such wise insight, the document went on advocating for (economic) growth as “vital to reducing all aspects of absolute poverty”. Trickle-down economics pur sang, which – as we know – never materialized. Comes 1990, with a whole World Development Report dedicated to Poverty, and the recognition that “lack of education, landlessness, and acute vulnerability to illness and seasonal hard times” are all “at the core of poverty”. Yet all of a sudden, absolute poverty had become measurable (a dollar a day) and the solution was refined: “the pursuit of a pattern of growth that ensures productive use of the poor’s most abundant asset – labor”. Let them work! Any resemblance to good old English workhouse logic was of course purely coincidental. Agreed, “primary education, primary health care, and family planning” could also be delivered. Who would like many paupers anyway?

By the turn of the century, most experts were aware that poverty is more than an economic condition. The UNDP had defined poverty as “a denial of choices and opportunities for living a tolerable life”. The World Bank itself had run its Voices of the Poor research project and finally reached the insight that poverty was a “multidimensional social phenomenon”, including “lack of voice and power”. Poverty reduction strategies were rolled out in line with an apparently revolutionary strategy summed up in the Bank’s 2000-2001 World Development Report: give the poor chances, empower them, and provide  them with security. Yet choices would again depend on economic growth (which by then everyone knew would not suffice), and empowerment on responsive governance (as if the privileged would be eager to share the helm). Most questionable was the risk management concept on which security should be based: as the poor have nothing to lose, they will be very willing to take risks, so let us teach them how to take risks and “take advantage of emerging market opportunities”. Too good to be true.

Pardon me if I skip the MDG years. You might remember the first one: “Eradicate poverty and extreme hunger”. But poverty did not decrease, and if it did, it did not in absolute numbers. Nor did the poor get more chances (unlike banks receiving bailouts, in 2008), were they empowered or did they feel by any means more secure. We even saw a new class of poor emerging: the working poor. As economists describe it, the labor share of income went down and profit share went up. ‘Flexible’ workers lose, and speculators win. I am lucky enough to live in one of the few countries where this perverse phenomenon is still partly remedied, via social protection.

This is not to say that nothing promising happened after 2000. The WHO put UHC on the agenda and made a call for action on the social determinants of health and for health equity (I leave it up to others to argue how far away we still are from this goal). Even the IMF, in 2014, came to the conclusion that inequality was something like a time bomb and that equitable redistribution was needed for sustainable growth. And we, the world, have the SDGs now, and should “leave nobody behind”. At this very moment in time the World Bank introduces its Changing Nature of Work, a working draft for its World Development Report 2019, presented and discussed at its 2018 Spring Meetings a week ago in Washington. To everybody’s surprise, the draft starts off with a quote of Marx.

I will spare you a discussion on all seven chapters and focus on one only: Social Protection and Labor Market Institutions. After all, next week is May Day, and social protection is what laborers then celebrate (or call for, according to the country you happen to live in). And at first sight, people might be happy with the Bank now putting a guaranteed income at the core of renewed social protection. Only problem, the Bank doesn’t promote guaranteed incomes to empower labor in relation to capital. On the contrary, it considers such basic income not as a right but as a form of social assistance. At the same time, “labor markets can be made more flexible to facilitate work transition” because “high minimum wages, undue restrictions on hiring and firing, strict contract forms, all make workers more expensive vis a vis capital”. I beg your pardon? Duncan Green calls this flexibility-on-speed, Peter Bakvis accuses the Bank of promoting deregulation disguised as a new social contract. I’m afraid they both got it right, but who hears them?

If we really want to leave nobody behind, and do something about poverty and inequity, we might need a renewed social movement for people’s wellbeing – not a new social contract to fit “The Changing Nature of Work”. So, if the World Bank has the guts to start its master plan with a quote from Marx, I might be excused for ending with another one: Workers of the world, unite, before it’s too late. And may you have a happy May Day!

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