“DEVELOPMENT REDEFINED: How the Market Met its Match”
February 24, 2009
The session was held in room J1-050 and attracted some 50 participants including Bank staff, CSO representatives, academics, and students. John Garrison began the session by introducing the two authors John Cavanagh (Director of the Institute for Policy Studies) and Robin Broad (Professor of International Development at American University); and the two discussants Hassan Zaman (Lead Economist in the central Poverty Group of the World Bank), and Rick Rowden (independent consultant and until recently with Action Aid). John Garrison highlighted the significance of this discussion as it comes at a time of the triple global crisis – food, financial, and climate – and how the book provides a useful retrospective of development trends over the past 30 years, and frames well the underlying challenges facing our planet.
Robin Broad and John Cavanagh thanked the Bank for the invitation to discuss their book. They explained that the joint book conveys a journey which began 30 years ago in the Philippines where Robin lived with poor villagers while carrying out social research. The book analyzes the international development policies over a three phase period: 60s-70s, 80s-90s, and the current decade. The first phase was marked by experimentation and development alternatives geared to promoting national industries, re-distributional social programs, and local development. The second period was marked by the ascendancy of Presidents Thatcher and Reagan and their single-minded push for market-oriented policies and the so called “Washington Consensus” promoted by the World Bank, IMF, and WTO.
These policies, broadly characterized by fiscal adjustment, trade liberalization, and privatization, became prevalent throughout the developing world and crowded out other policy alternatives. It propagated the myth that only countries which were willing to become ‘globalizers’ would prosper. The authors cited research by well known economists that showed how these policies led to low levels of growth and an increase of poverty in most of the developing world. While China and India are cited as two countries which benefitted economically from opening their markets, the authors feel that these countries should not be categorized as “globalizers” and that these gains would have not occurred without strong government control and planning. In addition, many locally-driven alternatives to this market approach have emerged in places such as Malaysia (financial controls), Ecuador (sustainable oil exploration), and Bolivia (re-financing gas contracts).
The current triple crisis highlights what civil society movements and others have been criticizing about the current model of development. The food crisis is a direct result of policies which underfunded agriculture and rural livelihoods and led to rampant urbanization and growth of urban poverty. Concurrently, the problems posed by climate change clearly demonstrate that a new, more sustainable model of development needs to be developed. The financial meltdown was long in coming and we need to consider re-regulating global markets and perhaps introduce a financial transactions tax as is done in the United Kingdom. While it is clear that the Washington Consensus is dead, some of the orthodox economic thinking it generated is still being pursued by the Bank and IMF – but, the authors hope the development debate can become vibrant.
Hassan Zaman expressed his appreciation for the invitation to discuss the book, and said that he wanted to make three basic points. First, that there is clear evidence which shows that while global poverty indicators are still unacceptably high, there have been significant developmental advances over the past decades. For instance, the number of people living under a $1 dollar a day has decreased from 52% in 1980 to 26% in 2001, even when considering population growth. In the area of education, the ratio of girls to boys in terms of enrollment worldwide climbed from 87% to 95%. In the area of water and sanitation, 1.6 billion more pole have gained accessed to safe drinking water. On the other hand, advances in human development indicators still lag in other important areas such as healthcare where infant mortality rates are still quite high in many countries.
Second, the way the Washington Consensus has been characterized over the years is too narrowly defined. While it is true that these policies did focus on economic growth and tax cuts, they also included a broad set of measures such as increased spending on social protection and property rights. The application of these policies did result in economic growth in many countries and promoted the growth of successful locally-grown industries such as tourism in Kenya and the garment industry in Bangladesh. Third, the Bank did learn a good deal from these ‘first generation’ reforms and has evolved since then. Today the Bank also pays increasing attention to poverty reduction, governance reform, and fighting corruption. It also realizes that trade liberalization and privatization needs to be led by the governments, and carried out carefully and sequentially. This is reflected, for instance, in the conditionalities the Bank attaches to loans which have been greatly reduced in number and the majority is geared to governance issues.
Rick Rowden recounted how the ‘global justice’ movement emerged in the last 10 years to protest market fundamentalism and an over reliance on fiscal policy and stability. The movement began with the opposition to the Multilateral Agreement on Investments which led to the now famous protests of Seattle in 1999. This was followed by the collapse of the WTO negotiations in Cancun in 2003 as developing countries balked at unfair trade conditions being imposed by the rich countries. In the health area, developing countries and CSOs are pushing back against attempts to privatize health and impose drug patents (i.e. HIV/AIDS anti-retroviral drugs). The global justice movement is advocating greater ‘fiscal space’ so developing country governments can pursue policy alternatives to the Washington Consensus.
The final portion of the event comprised several rounds of questions from the audience and responses by the panelists. There were questions about a variety of topics. One person asked about responsibility the Bank has for the seemingly intractable problems being experienced by Haiti. Another about whether the garment industry in Bangladesh, Vietnam, Cambodia, and other countries should indeed be viewed favorably, as they seemed to have brought on greater hardship for the poor. Another asked about how the Bank could be considered an advocate for clean technology when its funding for fossil fuel projects has continued to increase over the years. There were several questions about the quality of the poverty numbers used by the Bank, and what the ultimate goal of development should be. Several in the audience asked whether using economic growth as the yardstick was adequate, and suggested that improving people’s livelihood would be a better measurement.
There was a question on the “Doing Business” report published by the Bank and why it rates such undemocratic countries a Belarus and Singapore as top performers. Finally, there were a number of questions about the current financial crisis and what steps should the Bank take to address it. There seemed to be consensus that we are undergoing a paradigm shift, and that structural change is coming in the areas of global governance, financial regulation, and development policies.