Optimism about the prospects of significant change at the World Bank could fall after leaked strategy documents (here and here, pdfs) revealed what critics have called an “unambitious” and “business-as-usual” approach to development, prioritising economic growth over pressing social issues such as rising inequality.
The documents, outlining “A common vision for the World Bank Group,” are due to be discussed by executive directors on Thursday. They introduce two new goals to guide the bank’s development work: reducing the percentage of people living in extreme poverty to 3% globally by 2030, and promoting “shared prosperity” by monitoring the income growth of the bottom 40% in every country.
Critics say the “shared prosperity” target merely expands the bank’s focus on the world’s poorest people rather than shifting it to also tackle inequalities and growing gaps between rich and poor.
Nuria Molina, policy director at Save the Children UK, said the targets were “very unambitious”. “The narrative is right, the terminology is right, but the devil is always in the details,” she said. To address inequality you must also rein in growth at the top, she argued. “You need to have a meaningful measure, and just looking at the bottom is not sufficient. It’s very important to look at the gaps.”
David Woodward, fellow at the New Economics Foundation and previously an adviser at the IMF and World Bank, said the documents reveal a “business-as-usual scenario, with little or no change in the basic thrust of its development approach”.
He said the documents showed the bank is still subordinating development goals to an overall economic growth agenda. “What we’ve still got is a global version of trickle-down economics,” he said. “We should not be designing policies promoting growth on the assumption that this will deliver everything else.”
The documents say: “The choice of the shared prosperity indicator underscores the importance of economic growth in the development agenda … The living standards of the less well-off in any society are unlikely to increase in the medium or long term in the absence of sustained growth of the overall economy. Economic growth has been critical for lifting millions of individuals out of poverty in the last two decades.
“Increasing the income growth of the bottom 40% in every country will necessarily require accelerating the pace of overall economic growth.”
Woodward said the goal to reduce to 3% the share of the world’s population living on less than $1.25 a day would still leave 200 million people in extreme poverty.
The bank says in the leaked documents that cutting the rate to 3% by 2030 would require a drop of roughly one percentage point each year: “It will require sustaining high rates of economic growth across the developing world, as well as more effectively translating growth into poverty reduction in each developing country.”
Last year the bank said the millennium development goals (MDG) target to halve the proportion of people living under $1.25 a day had been met ahead of schedule, largely due to progress in China.
Alex Cobham, research fellow at the Center for Global Development in Europe, said the document was “disappointing.” “What this document says is we’re not going to look at ratios. It feels very much against the flow of where the global conversation has gone,” he said.
Inequality has risen up the international agenda as leaders debate what should come next after the MDGs expire in 2015. This week, 90 economists and development experts, including Indian academic Jayati Ghosh and Kevin Watkins, the incoming executive director of the Overseas Development Institute, said a post-2015 development framework must aim to reduce “vast and increasing” inequalities.
“Inequalities threaten our ability to pursue fair and sustainable development as much as they threaten the eradication of extreme poverty. Research shows that inequality – both within and between countries – is a barrier to individual development and sustained economic growth. It undermines social cohesion and distorts the democratic process,” they argued in a letter sent to the high-level panel set up by UN secretary general Ban Ki-moon to explore what should succeed the MDGs. The panel is set to meet next week in Bali, Indonesia.
The leaked documents do mention inequality six times but do not propose a measure to track it or policies to address it.
Last week, Cobham, who is also a member of the advisory group to the UN consultation on inequalities, and economist Andy Sumner proposed a new measure of inequality based on the income share of the top 10% of a population compared with the bottom 40%.
A spokesperson for the World Bank said the leaked documents are early drafts and could be revised: “[They are] consistent with the vision the World Bank president outlined in … autumn 2012, where he talked about ‘ending poverty and building shared prosperity’. We expect President [Jim Yong] Kim to expand on this vision in the coming weeks.”
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