[PEN-L:11457] Re: Millennium takes a short cut?

["Patrick Bond" <pbond@xxxxxxxxxx>]

> > Has a volte-face truly occurred at the World Bank ... ?

Here's a bit of a critique that has been circulating in some
Bank-watchdog circuits...

From:          Bretton Woods Project <bwref@xxxxxxxxxx>
Subject:       WDR UPDATED BRIEFING

Dear Friends,

Attached is  a briefing I have put together responding to the WB's
World Devt. Report. Hope you find it useful.
Alex

BRIEFING ON ROLE OF STATE WORLD DEVELOPMENT REPORT (WDR)

This short briefing outlines the main content of the World Bank's 1997
World Development Report and suggests angles to use in press work so that
journalists can balance/enliven their coverage of the report's launch
next week.

The Bank will publish its WDR on The State in a Changing World on 25 June
1997. The WDR is the Bank's flagship research report, with around 150,000
copies produced in nine languages and a budget of $3 million. It is
circulated widely to politicians, officials, universities and many other
people across the world and is influential for many years. The Bank sees it
as a means to communicate staff's views on key matters, and also to raise
its profile as a global thinktank.

For NGOs it is important to respond both so that the Bank does not capture
or narrow this vital debate about the state and because the Bank this
year produced the Report using a new process involving consultations from
early on with NGOs, government officials, and business
representatives. NGOs in India, Japan, the UK and elsewhere have all expressed their deep
dissatisfaction with the process adopted and the way their comments
were used and the Bank has been asked not to portray this Report as based
on the views of civil society.

NGO interventions at this point will be useful both to influence the
press coverage and because the Bank's WDR team will in July make a
presentation to the Board advising how the Bank should operationalise their
findings. Their recommendations are likely to encompass issues such as
privatisation/regulation and deepening the Bank's work on good
governance and corruption.

WDR team members are currently travelling to key world capitals to
publicise the Report  before an embargo/publication date of 25th
June. If you do not have time to contact key journalists or do a press
backgrounder/press release before the publication date, you could
consider writing letters to the papers which cover the Report.

The debate about the role of the state and the role of the World Bank
will continue long after next week's WDR launch. The Bretton Woods Project
intends to pull together some NGO thinking on this subject into a
longer briefing to be launched at the Bank/Fund annual meeting in September.
We would be very interested to see any comments your organisation makes
on the Report, or any press cuttings from your country.WORLD BANK RELEASE

The Bank's publication announcement for the Report makes the
following main points:

The Report looks as what the state should do, how it should do it,
and how
it can do it better in a rapidly changing world. Because of failures
of
state-led or dominated development many people have concluded that a
minimalist state would be the best solution, but the WDR concludes
that
this extreme view does not match the evidence of many industrialised
or
newly industrialising countries which shows that an effective state
is
needed to complement the activities of private businesses and
individuals.
  "An effective state is vital for the provision of the goods and
services
- and rules and institutions - that allow markets to flourish and
people to
live healthier, happier lives. ... the state is central to economic
and
social development, not as a direct provider of growth, but as its
partner,
catalyst and facilitator."

The Report makes no attempt to describe a single recipe for an
effective
state - the requirements differ widely across countries at different
stages
of development. Differences in size, ethnic makeup, culture and
political
systems make every state unique, even among countries at the same
level of
income. The Report does, however, provide a framework for guiding
reforms
with a two part strategy:
   * Focus the state's activities to match its capabilities. Many
states
try to do too much with few resources and little capability.
Governments
should ... concentrate on the core public activities that are vital
to
development.
* A state can improve its capability by re-invigorating public
institutions. The Report puts particular emphasis on mechanisms that
give
public officials the incentive to do their jobs better and to be more
flexible, but which also provide restraints to check arbitrary and
corrupt
behaviour.

Effective states in the Report's examples all have some common
features:
  "the ways in which government has set rules that more broadly
underpin
private transactions and civil society, and how the state has played
by the
rules itself, acting reliably and predictably and checking
corruption".
"... the Report shows how opportunities for reform can open, and
widen,
with the help of careful sequencing and mechanisms to compensate
those who
stand to lose from reforms. It also argues that, as we approach the
twentieth century (sic), the challenge for states is neither to
shrink into
insignificance, nor to dominate the market, but to start taking small
steps
toward effectiveness."



NGO Media Backgrounder on The State in a Changing World, (1997 WDR)


1. Process/Production Issues

A. The Bank was encouraged to do its WDR on this topic partly because
of
concern from Japan, the second largest contributor to the Bank, that
the
Bank's view of the state's role in development was too narrow and did
not
take into account the activist state experience of some Asian
"miracle"
countries.

B. The Bank was to call the Report "The Role of The State", but
changed the
title to avoid accusations of overgeneralisation. Despite occasional
disclaimers throughout the Report, the Bank's conclusions are still
too
universal and reductionist, assuming that all countries need to carry
out
the same sorts of reforms, and have the same types of key political
groupings.

C. The Bank used a new process to produce this Report. Rather than
ask for
comments on a draft once much work had been done, Bank staff this
time
involved NGOs and others in discussions about the Report from very
early
stages, involved Ela Bhatt (founder of the Self Employed Women's
Association, India) as an adviser, and also encouraged comments via
an
internet "chatline".
On the role of citizen participation in policy-making the Report
raises
some important issues and makes a number of recommendations (ie
pp10-11)
that many NGOs would endorse, though the Report reads as "new
managerialist" in other parts, arguing that people must be persuaded
of the
benefits of pre-determined reforms and compensated where necessary.
Much
other material in the Report is at least non-controversial. NGOs are,
however, concerned that some of their more challenging questions, for
example on power relations, wealth disparities, the safeguarding of
individual and minority rights, or the fixation with economic growth
as a
measure of progress have not been adequately examined.
Isagani Serrano, Vice President of the Philippines Rural
Reconstruction
Movement, and Rajesh Tandon, of Participatory Research in Asia and
Chair of
the NGO World Bank Working Group's Sub-Group on Participation
presented a
paper to the Bank team last October, extracts from which appear as
Appendix
1. Their most important points have not been properly addressed in
the
Report, and Rajesh Tandon complains that he was subsequently sent no
drafts
of the WDR nor contacted by the Bank's WDR team when they visited
India.

D. By contrast with its haphazard and unsatisfactory efforts at
consulting
civil society groups the Bank undertook a survey of over 3,700 firms
in 69
countries, which is mentioned prominently in the final WDR. The Bank
is
understood to have considered carrying out a similar citizens'
survey, but
decided against it, on grounds of cost and/or time.

E. The budget for the World Development Report, not including
promotion, is
$3m. Around $0.5 million may be recovered from sales, as many copies
are
distributed free of charge. This contradicts the Bank's own mantras
on
market-testing, and can be seen as an attempt to crowd out other
views. The
WDR is one of the very few international reference works which many
cash-strapped universities in Africa and elsewhere receive. The Bank
could
spend this very significant annual amount of money to fund outsiders,
for
example African academics who operate on tiny budgets compared to
that of
the Bank, to conduct the research.


2. Some Welcome Rethinking

The WDR expresses some changes in the Bank's thinking about the
state. It
is welcome that the Bank acknowledges that recent reforms have
emphasised
economic fundamentals to the exclusion of the social and
institutional
basis needed to ensure sustained development and avoid social
disruption.
The position that the state must be rolled back to make way for the
market
has been replaced by a more nuanced view that development without an
effective state is impossible (see, eg para 1.23). This may presage
some
new flexibility in Bank programmes, but the Report's main analytical
device, dividing countries into those that are
"institutionally-strong" and
those that are "institutionally-weak" leaves much room for
conflicting
interpretation, and the recipe of reforms that should be adopted
(privatisation and liberalisation) remains unquestioned.


3. Key questions ducked or downplayed

A. Globalisation and Transnational Companies
Early outlines of the Report indicated that it would tackle how
states'
actions are being constrained by the globalisation of capital and the
increase in the power of transnational companies, and how global
markets
can be governed [footnote 1]. Yet the Report team could not reach
consensus
on this issue and dropped the planned chapter on it. Especially as
the Bank
bills the WDR as a "thinkpiece" and a vehicle for raising debate, it
should
have at least outlined, if not drawn conclusions on, contentious
issues of
shifting power balances and the inadequacy of current governance
structures
in an age of globalisation. Many NGO and other commentators see this
as the
key question to analyse in a report about the state in a changing
world.
As the Report fails to analyse the balance of political forces
between
states and transnational companies, which are increasing in wealth
and
lobbying power, its discussions of the slow progress in taking action
on
global climate change, realising a post cold-war peace dividend and
allocating health research budgets to diseases which kill poorer
people
(chapter 8) read as so limited and naive as to be almost useless.
[Footnote
2] The discussion of the benefits and pitfalls of economic
liberalisation
is also restricted to mentioning problems and then asserting
complacently
that business as usual will be the best way to deal with them (see
Appendix
2).


B. International Taxation
The Report does not address the concern that states' ability to raise
taxation is declining as a result of globalisation of capital, and
that the
taxation that can still most easily be collected is that which falls
most
heavily on labour/poorer people. The implications for tax revenues
and
progressive taxation are not set out, nor are possible means for
tackling
this such as greater global coordination of taxes on mobile revenues
or
measures to minimise offshore trading or the use of exotic financial
instruments such as derivatives.


C. The difficulties of regulation/structuring good private sector
deals
The WDR points out that regulation has run into problems in some
instances,
but its analysis of privatisation focusses too strongly on efficiency
and
underestimates the difficulty of designing and negotiating deals and
regulations that uphold the interests of poorer people and the
environment.
It exaggerates the demise of natural monopolies (p. 65) and
underestimates
the difficulty of establishing a genuinely competitive regime in
small and
poor countries (ie Haiti, Laos). It does not properly outline the
difficulties of persuading companies to provide such services to very
poor
people and regions, and the role that governments will have to play
in
guaranteeing or incentivising such investments if they are to happen.
The
privatisation of services such as water and sanitation, transport and
power
is a very important issue for development and the environment, and
the
long-term implications of contracting these to foreign private
companies
should have been examined. How, for example, will a small
municipality like
Gdansk (Poland) be able to negotiate effectively and on an even basis
with
a major transnational like Lyonnaise des Eaux which has the contract
for
its water and sanitation?


D. Universalist/reductionist political analysis
The Report addresses the politics of privatisation and globalisation
in a
very simplistic manner. It expresses the view that these trends
should not
be debated but that people should be persuaded of reforms' benefits
through
"consensus building" and perhaps compensation (ie para 9.4). Although
the
Report admits that application will be "highly country-specific" it
proposes "political cost-benefit approach" to assess the
redistribution and
efficiency implications of reforms, and set out how different groups
are
likely to react to reforms (table 9.1). For example it states that
"employees and managers of public enterprises" will oppgose public
sector
reform, while taxpayers will support it. Such formulaic political
analysis
cannot substitute for consultation.
The Bank's view of democracy/expression of peoples' collective
interests
appears limited. For example: "in Uruguay, for example, a 1989
plebiscite
rejected privatization legislation. And yet, a recent study shows
that
inefficiencies in public utilities add 30 percent to the average
Uruguayan's electricity, water, and telephone bills. And as we saw in
Box
4.2 many of the commonly held arguments against privatisation are not
valid." The Report does not note that many people in Britain, one of
the
pioneers of privatisation, are still very sceptical about the
privatisations of UK utilities [footnote 3].


E. States Seen only as Deliverers of Growth and Services
The Report admits that "the choice of political regime has
justifications
that go far beyond economic conditions", yet it argues that democracy
should be managed to ensure that development goes forward:
"researchers
have yet to reach a consensus on the precise relationship between
growth
and democracy .... states need skill to manage the political
transition [to
democracy] in such a way that it supports rather than impedes the
development agenda" (p. 150). The state's roles beyond delivering
services
and limited coordination/regulation of the economy, for example in
areas of
promoting rights to affordable housing, food, labour organisation,
information access are almost ignored. The Report also skates over
the
historical development of the concept of the nation state in Europe,
its
export in the colonial era, and the displacement of other forms of
sovereignty/social organisation.


F. Bank and the State
Whilst the Bank argues that the WDR is a Report on a key development
issue,
not on the performance of the Bank itself, discussion of the state
would
naturally be expected to deal with the Bank's influential roles
including
those of structural adjustment lending, aid donor coordination,
privatisation advice, and project funding. Yet, perhaps because the
Report
is reviewed by Bank staff keen to avoid any criticism of
operations/regions
in which they have been involved, the Bank and its sister agencies
hardly
figure as actors in it, except in a very general section on aid
(p.140-1)
and when agencies like the Global Environment Facility are lauded for
their
"crucial role" (p.138). Very relevant analytical/critical Bank
studies on
such roles are thus not mentioned  [footnote 4]. Also, the Bank does
not
have its own house sufficiently in order to start advising others on
how to
organise staff and build effective public sector institutions
[footnote 5].


4. Implications for the World Bank?
As well as writing the Report itself, the WDR team has to write a
short
paper for the Board by July stating how they think the Bank should
operationalise the WDR strategy. Whilst the Report's failure to
analyse the
Bank's current role will make this hard, they are likely to make
recommendations on:
 	The Bank's use of Country Assistance Strategies, the key planning
document setting out the framework for the Bank's programmes;
 	The Bank's work in the social sectors;
 	How the Bank selects which countries to lend to ("Clearly, a high
priority for aid agencies is to channel resources more systematically
towards poor countries with good policies", WDR page 140);
 	A possible new role for the Bank as an "extraterritorial commitment
mechanism" to give companies confidence in regulation where states
are
deemed to be institutionally weak. [Footnote 6];
 	Deeper involvement in institutional and legal reform. [Note: the
Bank
will have to consider at what point should it amend its Article of
Agreement prohibiting involvement in politics]. Available:
Notes from consultation meetings with UK NGOs and others, June 1996,
April
1997, and with US NGOs, September 1996.
Comments on WDR drafts by Public Services International and the
International Committee of Free Trade Unions.


Footnote 1: An early outline of the Report sketched out a section
that was
later dropped. It stated: "The pressure to change comes from outside
the
nation state as well. Large private capital flows and lower transport
and
communication costs have made it tougher for individual states to act
alone
and independently-some call it "the end of geography." Governments
that
challenge financial markets do so at tremendous cost to their
credibility-as Mexico's recent experience has highlighted.
The chapter will also ask who governs the global markets.  Foreign
investors do not always want governments to pursue sensible policies.
Market-led globalization could worsen inequality (though evidence
suggests
the opposite), and a global market may not produce the best outcomes
for
emerging environmental problems.  How are countries that once
provided
elaborate social safety nets to contain the risks and uncertainties
generated by volatile international markets are now forced to cut
back due
to fiscal pressures handling these  trade-offs?  Could it lead to a
reversal to inward-looking policies?  Can more imaginative national
and
international solution be found? And unless cooperation across state
boundaries is more effective, such problems as global warming, ozone
depletion, and narcotics may continue to escalate?  The Report will
show
that much more needs to be done to strengthen state institutions and
international coordination to address these cross-national issues.",
(posted on World Bank web page "chatline", June 1996).

Footnote 2: An article on global warming in this week's Economist
(14/6/97), by contrast, stresses that "the reluctance of governments
to
pursue even basic measures is due in part to the political power of
industries such as coal, oil and nuclear energy, which will lose out
as a
result."

Footnote 3: Despite its apparent economic efficiency benefits,
privatisation is still unpopular amongst much of the British public
for
reasons including: huge pay rises for bosses, failure of water
companies to
do enough to mend leaks in their systems, higher electricity rates
for
poorer people on meters than people with good cash flows who can pay
by
direct debit.

Footnote 4: For example Review of Public Enterprise Reform and
Privatisation Operation, PSD, August 1996 which concluded that 38% of
the
Bank's current operations supporting public enterprise reform and
privatisation are rated `unsatisfactory' and that "the causes of poor
performance lie as much with Bank incentives, procedures and culture
as
with conditions within the recipient country".

Footnote 5: For example p. 79 of the WDR states: "what matters is
whether
the actual rules and incentive mechanisms embedded in the system can
translate the fine words into reality". A World Bank staffer quoted
in
Masters of Illusion, Catherine Caufield, 1997 (p. 328), asked to
comment on
Bank reforms since 1995 stated "the cognitive dissonance between
high-level
pronouncements and daily practice is at an all-time high."

Footnote 6: "In many developing countries legislative and judicial
oversight of the executive is weak. ... An independent judiciary is
vital
to ensure that the legislative and executive authorities remain fully
accountable to the law, and to interpret and enforce the terms of any
written constitution. ... These institutions of restraint take time
to
establish themselves, but international commitment mechanisms such as
international adjudication, or guarantees from international agencies
can
serve as a short-term substitute", WDR, page 8. The Bank is already
rapidly
expanding its use of private sector guarantees, and is expected to
make a
major announcement on a new Bank/IFC/MIGA initiative at this year's
annual
meeting in Hong Kong. Appendix 1

Quotes from Reforming the State, a Citizens' Perspective, Isagani
Serrano
and Rajesh Tandon, prepared for presentation to the Bank's WDR team,
October 1996.

"The problem before us is not whether our lives will be better off
with or
without the state. Nor is it a question of whether humanity stands a
better
chance of survival with more state or less of it. Because the state
is here
to stay ... the question for us is whether and how the continued
existence
and functioning of the state can lead to more good than harm for
ordinary
citizens."

"Since the early 1980s, which saw the beginning of structural
adjustment
programmes, discourses about the role of the state have been
dominated by
World Bank thinking or rethinking. The premature judgement, now
undergoing
a more nuanced expression, is that the state should stay away from
the
economy and leave the business of running it to the market."

"It would seem that the growing consensus within official circles
around
the question of good governance will lay the issue to rest. However
this is
hardly the case from a civic perspective. It goes without saying that
citizens view good governance as a matter of right. In the same vein
it is
also a matter of right to bring down a government that cannot deliver
good
governance. The central concern from a civic perspective is this:
much, if
not all, of the discussion on governance has thus far been confined
to
state-market dynamic, leaving out the citizens in the margins.
Participation, from a civic perspective, means that people are able
to
control the events and processes affecting the everyday lives."

"We hold that politics and economics should be democratized in ways
that
assure citizens a central place in governance, and not simply see
them as
the outcomes of political and economic activities."

"Reforms that were meant to lessen state intervention in the economy
have
actually facilitated the domination by the corporate elites who are
accountable to no one but themselves." "If it can do little else,
because
of declining resources, government must put its power to bear to tame
rampaging corporations and dedicate all it has to assist in the
restoration
of citizens' sovereignty". "A growing number of citizens everywhere
who
have been resisting state imposition will not submit themselves to
the new
tyranny of the market."

"Deregulations targeted at protective barriers have prised open the
national economy and paved the entry of global corporations. These
major
corporations would merge with national elites or run the show
themselves.
The usual come-ons used by the state are tax holidays, unrestricted
profit
remittances, relaxation of labour laws and banking and capital
markets
regulations and  unrestricted land acquisition."

"The right to know, a basic element of transparency in governance,
continues to be denied to ordinary citizens."

"Growth has come to mean the same as human development. And instead
of
being just a means to human development it has become an end in
itself.
.... The current expression of ideological consensus is that growth
is
necessary but its benefits should be shared and it should take into
account
environmental concerns. ... The 1996 Human Development Report points
out to
us a very disturbing phenomenon - jobless, ruthless, voiceless,
rootless
and futureless growth. This kind of growth cannot be sustained for
much
longer except at great social and environmental costs."

"Equality of social condition is the foundation of a sustainable
future.
Its realisation is therefore the ultimate test of state leadership
and
performance and the basis for its continued existence."

"The values that propelled the rat race of the twentieth century will
have
to be replaced with a new set of values that gives the highest
premium to
equity, cooperation, sharing and caring, with respect for diversity".


"Structural adjustment ... may have improved the financial and
investment
environment but at the same time have also diverted government
attention
and energy away from the needs of the poor and ordinary people."

"Peoples' trust in government is fast slipping away."

________________________
Appendix 2: The WDR on Globalisation/Liberalisation (pp. 131ff)


"The need for international cooperation stems from global and
regional
manifestations of the problems described in earlier chapters, such as
missing markets and the presence of externalities. World peace, a
sustainable global environment, a single world marketplace for goods
and
services, and basic knowledge are all examples of international
public
goods. They will be underprovided without conscious, concerted, and
collective efforts to provide them. Development aid, although not a
public
good in the strict sense, also justifies international cooperations
because
of global equity considerations."

"Expanding world markets.
The liberalization of trade and investment laws around the world has
contributed to an enormous increase in the volume of world trade and
foreign direct and portfolio investment, whose impact on the welfare
of
participants has been considerable and for the better. Multilateral
and
regional agreements have supported market expansion, as greater
economic
interdependence has made it necessary to maintain and expand an
international system of liberal trade and investment. Invigorated by
buoyant trade, the global economy has grown rapidly, and that growth
shows
little sign of abating. International migration of people in search
of work
is the laggard in this story. As World Development 1995 showed,
annual
migratory flows from developing countries are no greater now,
relative to
total population, than in the 1970s. Most workers in poorer countries
are
only beginning to experience the benefits _ and the costs _ of global
migration. But the expansion of markets and the increase in
competitive
pressure will leave some countries highly vulnerable to unforeseen
shocks
and policy mistakes. As Chapter 3 explained, countries will need to
adopt
prudent, consistent, and credible policies at home to prepare for the
new
global environment. International collective action can help support
these
efforts by offering ways for countries to make external commitments
that
will give these policies more credibility.
The growing global consensus on the benefits of more liberal trade
and
international market expansion is reflected in the large and growing
membership of the WTO. ...
Yet reducing border barriers is only one of the preconditions for
participating more actively in the global trading system. Countries
also
need a competitive exchange rate, good availability of foreign
exchange,
and a transport infrastructure that can support expanded trade. Thus,
despite spreading trade liberalisation, the share of trade in GDP
fell in
forty-four of ninety-three developing countries between the mid-1980s and

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