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| Sunday, 13 June 2004 |
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World Bank changes tune The approach of the World Bank towards developing countries is undergoing radical change from forcing policies to respecting each country's own choices and support to achieve them. It has been reiterated by the WB President James D. Wolfensohn and David Dollar. World Bank President James D Wolfensohn at the Shanghai conference on scaling up poverty reduction held during the last week of May in China said: " The Washington Consensus has been dead for years." " The Washington Consensus has been replaced by all sorts of other consensus. With an interchange of ideas we are approaching our discussions with no consensus. Today we gather with the hope of sharing experiences, and learning from each other." The aim of the Shanghai conference was sharing knowledge and experience of poverty reduction among developing countries looking for solutions from the developing world for the developing world. Specialists and policy makers from across the globe shared their expertise about what works and what doesn't, and why analysing some 100 case studies of poverty reduction, and identifying those key success factors economic, social, and managerial. The Washington Consensus consisted of policy advice given by economist John Williamson to Washington- based institutions (WB and IMF) to implement in Latin American countries in 1990. These policies were * Fiscal discipline * A redirection of public expenditure priorities toward fields offering both high economic returns and the potential to improve income distribution, such as primary health care, primary education, and infrastructure * Tax reform (to lower marginal rates and broaden the tax base) * Interest rate liberalization * A competitive exchange rate * Trade liberalisation * Liberalisation of inflows of foreign direct investment * Privatisation * Deregulation (to abolish barriers to entry and exit) * Secure property rights Since then, the phrase "Washington Consensus" became a lightning rod for dissatisfaction among anti-globalisation protestors, developing country politicians, officials, trade negotiators and numerous others. It is often used interchangeably with the phrase "neo liberal policies". WB and IMF generally prescribed these policies to all developing countries for poverty reduction and economic growth and forced them to implement the policies. Wolfensohn's statement is a clear indication of the recent World Bank approach in recommending policies to developing countries. WB has accepted that its approach in the past two decades was wrong. Giving an interview to the World Bank website, David Dollar the Bank's Development Policy Director accepted that the WB has made mistakes in the past. Answering a question Dollar said, "In the early 1980s, there were many countries in which the World Bank and the IMF were trying to impose a policy package. So it is a fair criticism of the World Bank that this institution was trying to push a similar set of policies in many countries. They might have been the right policies, but I think we've learned that this is not an effective way to promote the changes needed to seize the opportunities of trade and integration. People just react instinctively against having something imposed from the outside. So we've shifted much more to a learning model. We've been wrong about some things, no question. We have to learn from experience" On the new vision of the World Bank, Dollar said " We're not forcing policies or a model in any country. We're respectful of countries making their own choices. I see lots of countries choosing, on their own, to integrate into the international economy and we are supportive of that. Where you have a country that is struggling to improve the investment climate, deliver basic services, integrate with the world economy, we can help them on how to do that. That is the new vision at the World Bank. It is helping countries learn what policies and institutions are going to work for them." But Dollar says some policy generalisations are still valid. "No country wants an inflation of 100 percent. I don't think any country will want to close itself off completely from the world market. There are basic principles when looking at integration and making it work for a country. These include macro economic stability and a sound investment climate, among others. But how you work in each country is different. Countries have to figure out what is economically wise for them and what's politically acceptable for them. I think the World Bank has become more savvy in how we help countries adopt the policies that are going to work for them. They cannot be imposed from outside. It has to be a learning experience," he added. ( GW) |
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