In which I, once again, take a dump on the World Bank

In September of 2000, the largest meeting of world leaders in history—one hundred heads of state and forty-seven heads of government—agreed to an ambitious list of global targets at the United Nations (UN) Millennium Summit in New York. The list, drafted by UN Secretary-General Kofi Annan and a select circle of aides, was later pared down to eight specific goals and given a hard deadline of 31 December 2015. These became known as the Millennium Development Goals (MDGs).[1] This post examines The World Bank’s approach to filling global governance gaps in addressing the first of these goals; namely, the eradication of extreme poverty and hunger.[2] More specifically, I focus on the Bank’s role in plugging the knowledge gap, since this is where its influence is greatest. Despite the Bank’s frequent presentations that it was well ahead of schedule to meet MDG 1,[3] actual progress made has been trifling at best. This, I argue, is a result not of gaps in institutional authority or government compliance, but of political paradigms maintained by ‘ideas-controllers’[4] within the Bank, and a questionable approach to statistics.

The first MDG, as it was laid out in 2000, consisted of three sub-goals: reduce by half the proportion of people whose income is less than $1 a day; achieve full and productive employment and decent work for all, including women and young people; and reduce by half the proportion of people who suffer from hunger.[5] In the years since, the first sub-goal has had its dollar figure revised upwards three times, the second sub-goal has been all but abandoned due to unfeasibility, and the third has come to be recognised for what it is: wholly dependent on the first.[6] Indeed, in the spirit of Maslow’s hierarchy of needs, boosting incomes to ensure that basic physiological needs can be met is the obvious starting point.[7] As such, it is the reduction of extreme poverty that warrants our full attention.

Throughout the 1990s, international finance institutions (IFIs) pressured developing countries to privatise businesses and cut spending on public programs, applied by way of conditions—or, ‘conditionalities’—for receiving support.[8] As a result, Africa saw a rise in its rate of poverty and child deaths, as well as a significant drop in life expectancy; and the effects of economic crises and growing inequality threatened Asia and Latin America.[9] Global inequality, as measured by Bank economists, reached a Gini coefficient level of 0.67 by the end of the twentieth century.[10] In plainer terms, this is equivalent to the poorest two thirds of the world receiving zero income; and the top third, everything. The number of people living in poverty actually increased by approximately 100 million during the 1990s, even while total world income rose by an average of 2.5 percent annually.[11] Figures such as these were typical of those coming out of the Bank in the lead-up to the MDGs and indeed served as their justification; but, following a shuffle in ideas-controlling personnel as a result of pressure from the US Treasury in the wake of mass public antipathy towards global trade policy,[12] the Bank’s figures soon changed.[13]

In order to determine which gaps exist in global governance as regards global poverty, or indeed even to identify a problem, we must first examine the knowledge surrounding it. While the actors involved in tackling poverty are myriad, it is in filling the knowledge gap that the Bank stands virtually alone. As the ‘near-monopoly provider’[14] of world poverty estimates, it has an outsize influence on dictating not only where its own funds are directed, but also—by extension, through this structural power[15]—those of other institutions.[16] On its face, having a single organisation responsible for statistical analysis of the magnitude and causes of poverty makes sense: it is cost-efficient and ensures that everybody is working from the same information. But, while the former is undeniably true, the latter presents concerns about safeguards against misinformation and its potential to shape policy. As Thomas Weiss notes:

 [I]deology can trump or even determine information. When well defined ideological stances and lobbies are mobilised, data may or may not be powerful enough to call into question positions that have already long been formed and hardened … selective use of data can be a significant factor in the persuasiveness of knowledge.[17]

Despite mounting evidence of the counterproductive effects the Washington Consensus policies had on tackling poverty, the neoliberal ideological assumptions behind them remain the dominant political paradigm[18] at the Bank and other IFIs.[19] Of his time as Chief Economist and Senior Vice President of the Bank, Joseph Stiglitz recalls:

Decisions were made on the basis of what seemed a curious blend of ideology and bad economics, dogma that sometimes seemed to be thinly veiling special interests.[20]

Robert Wade describes how these special interests shape the Bank’s agenda by way of their own form of ‘conditionality’; that is, making funding dependent on their approval of key appointments to ideas-controlling positions, who:

… can shape what research is done and by whom, what evidence is accepted, what conclusions are drawn, how much and how long the results are scrutinized internally before being published, how the conclusions are advertised, what follow-up research is undertaken, and what is done to inject the findings into operational work.[21]

Such claims may be dismissed as mere speculation, but inconsistencies in the Bank’s published statistics cannot. According to The World Development Report 2000/2001: Attacking Poverty, the number of people living on less than $1 a day increased by 20 million between 1987 and 1998.[22] However, according to the Bank’s next major publication, the number of people living in poverty had decreased by 200 million between 1980 and 1998.[23] This is not to say, though, that the number of impoverished people necessarily fell by 220 million between 1980 and 1987; it is to say that the Bank routinely moves the poverty line and changes its methodology, producing discrete sets of statistics, each of which is utterly incommensurable with previous sets, but compares them anyway. Wade notes that raising the poverty line, first from $1 a day to $1.08, then $1.25, and then to $1.90, as the Bank has done, puts—somewhat counterintuitively—a downward bias on results, ‘making the trend look rosier than it is.’[24] Further, such an arbitrary international poverty line ‘is not adequately anchored in any specification of the real requirements of human beings.’[25] Rather more morbidly, Thomas Pogge adds:

A reduction in the number living in poverty might be due, for example, to many poor people having died. During the MDG reporting period, the ranks of the poor have been continuously thinned by some 50,000 deaths each day from poverty-related causes … These 18 million annual poverty deaths constitute about one-third of all human deaths. Given the World Bank’s method … such deaths improve the results.[26]

Furthermore, the starting date for measurement of the MDGs is 1990, despite their not having been conceived until a decade later, and not officially launching until March 2002. This choice of starting date is unlikely to be arbitrary, though. It not only allows twenty-five years instead of fifteen to reach the target, but also the conflation of poverty reduction achieved through the furious economic growth in China between 1990 and 2001 with that achieved by the MDGs.[27] According to the Bank’s numbers from 2008, the number of Chinese people living on less than $1.25 a day decreased by roughly 265 million between 1990 and 1999, achieving MDG 1 fully two years before the MDGs were even announced.[28]

China’s growth has begun to slow in recent years, but the sheer size of its population means its gains are enough to obscure the fact that sub-Saharan Africa has, at best, stagnated in terms of extreme poverty reduction during the MDG period.[29] China alone accounts for roughly three quarters of the world’s total decline in extreme poverty over the past thirty years, lifting 680 million people out of poverty between 1980 and 2010; more people than the entire population of Latin America.[30] Many Bank working papers now include graphs both with and without China included, in an attempt to show that, even without its growth, the world is still on track to meet MDG 1. In order to do this, though, reductions in poverty are expressed as a proportion, not of the world, but of the population of the less developed countries.[31] Because this population rises rapidly, the proportion of poor people drops significantly even when their number remains constant. Moreover, most of the Bank’s projections for less developed countries’ future poverty reduction optimistically assume they will follow the same trend as China, despite it having ignored all of the MDG recommendations.

In the fifteen years since the MDGs’ inception, the Bank has at different times employed gross domestic product; gross national product; population-weighted or unweighted data; household and individual surveys of consumption expenditure, net income or gross income, adjusted for various levels of purchasing power parity; or some combination of all of these to produce its findings. Each change in methodology is accompanied by a lengthy explanation of its merits, and the shortcomings of that which came before.[32] With the deadline for the MDGs approaching, the Bank’s progress reports showed some progress, but not too much; just enough to suggest that the poverty target could be met if only there were more funding. And, they still come with qualifications; for example, ‘Due to new data and revised methodologies, this Progress Chart is not comparable with previous versions.’[33] Such constant refinements could perhaps be justified if the goal were to come up with a grand theory of poverty, free of real-world consequences. But, as the de facto gatekeeper of the knowledge, the Bank’s role ought to be measuring poverty in an objective and methodologically consistent manner, in order to produce comparable statistics that can be drawn upon to direct its own funds and those of other institutions most effectively.

So, what possible solutions might there be for eliminating the Bank’s tactical selection of data to serve both its internal and external political ends? Perhaps none. Pogge and Reddy propose reform,[34] but only of the Bank’s statistical method, which does nothing to guard against future ideas-controllers tampering with it. Ideally, the Bank’s statistical wing would be wholly independent of its finance and policy wings. This, though, assumes that its funding would not be negatively impacted, which it almost certainly would be. Recent years have seen the Bank increase its transparency somewhat with its Access to Information policy,[35] but individual request are granted or denied on a case-by-case basis[36] and the policy includes a robust list of exceptions[37] that cannot be circumvented while its staff retain blanket immunity from legal action in 184 countries.[38] As such, the Bank continues to fall well short of the level of transparency it demands from its client countries.

Of course, the Bank plays a role in filling other governance gaps. Its very existence fills an institutional gap that would otherwise exist within the UN system for providing statistics and distributing loans—although, the IMF could probably fill the latter role. It serves to lessen gaps in norms and policy by, for example, making loans dependent on a state’s adherence to them. It has been less effective in filling compliance gaps, but, given some of its ill-advised one-size-fits-all former policies, this is perhaps fortunate. All of these, though, are informed by, and therefore secondary to, the role it plays in filling the knowledge gap.

Knowledge, as they say, is power. As the near-monopoly provider of world poverty statistics, the Bank’s influence on development policy has been far greater than that of any other institution. Unfortunately, this gatekeeper status means that any biases—either conscious or unconscious—that arise within the organisation, or that are imposed upon it, can lead to disastrous consequences for the world’s poor. Few would question the nobility of attempting to eradicate extreme poverty and hunger. But, the World Bank’s approach to meeting Millennium Development Goal 1 appears to have been one of ‘lies, damned lies, and statistics.’[39]

Notes

[1] UN, The Millennium Development Goals, September 2010, retrieved 5 October 2015 from http://www.un.org/en/mdg/summit2010/pdf/List%20of%20MDGs%20English.pdf

[2] As per common usage, ‘The World Bank’ or ‘Bank’ refers herein to only two of The World Bank Group’s five institutions: The International Bank for Reconstruction and Development (IBRD) and The International Development Association (IDA).

[3] See, e.g., Martin Ravallion, How Long Will It Take to Lift One Billion People Out of Poverty?, World Bank working paper #6325, 2013, p. 2; UN, The Millenium Development Goals Report 2013, retrieved 9 October 2015 from http://www.un.org/millenniumgoals/pdf/report-2013/mdg-report-2013-english.pdf; UN, The Millenium Development Goals Report 2015, retrieved 9 October 2015 from http://mdgs.un.org/unsd/mdg/Resources/Static/Products/Progress2015/English2015.pdf

[4] Wade uses ‘controllers of ideas’ to refer to senior positions within international finance institutions, ‘because the incumbent can shape the content of what the Bank tells the world.’ Robert Hunter Wade, ‘US Hegemony and the World Bank: The Fight Over People and Ideas’, Review of International Political Economy, Vol. 9, No. 2, 2002, p. 220.

[5] UN, op. cit.

[6] Marc F. Bellemare, ‘Development Bloat: How Mission Creep Harms the Poor’, Foreign Affairs, 5 January 2014, retrieved 10 October 2015 from https://www.foreignaffairs.com/articles/africa/2014-01-05/development-bloat; Michael Clemens & Todd Moss, What’s Wrong with the Millennium Development Goals?, Center for Global Development brief, September 2005, retrieved 9 October 2015 from http://www.cgdev.org/files/3940_file_WWMGD.pdf

[7] Abraham H. Maslow, ‘A Theory of Human Motivation’, Psychological Review, Vol. 50, No. 4, 1943, pp. 370–96.

[8] See, e.g., Sarah Babb, ‘The Washington Consensus as Transnational Policy Paradigm: Its Origins, Trajectory and Likely Successor’, Review of International Political Economy, Vol. 20, No. 2, 2012, pp. 268–297; John Williamson, ‘A Short History of the Washington Consensus’, Law and Business Review of the Americas, Vol. 15, No. 1, 2009, pp. 7–23; Stefan G. Koeberle, ‘Should Policy-Based Lending Still Involve Conditionality?’, The World Bank Research Observer, Vol. 18, No. 2, 2003, pp. 249–73.

[9] John W. McArthur, ‘Own the Goals: What the Millennium Development Goals Have Accomplished’, Foreign Affairs, Vol. 92, No. 2, 2013, pp. 152–162; Lolette Kritzinger-van Nickerk, Regional Integration: Concepts, Advantages, Disadvantages and Lessons of Experience, presentation to the Southern African Regional Poverty Network, May 2005, retrieved 11 October 2015 from http://www.sarpn.org/documents/d0001249/P1416-RI-concepts_May2005.pdf

[10] Shaohua Chen and Martin Ravallion, How Did the World’s Poorest Fare in the 1990s?, World Bank paper, 2000.

[11] World Bank, Global Economic Prospects and the Developing Countries 2000, cited in Joseph E. Stiglitz, Globalization and its Discontents, W. W. Norton & Company, NY, 2002, p. 37.

[12] See, e.g., Noah Smith, ‘The Dark Side of Globalization: Why Seattle’s 1999 Protestors Were Right’, The Atlantic, January 2014, retrieved 10 October 2015 from http://www.theatlantic.com/business/archive/2014/01/the-dark-side-of-globalization-why-seattles-1999-protesters-were-right/282831/

[13] Robert H. Wade, op. cit., pp. 220–3; Joseph E. Stiglitz, op. cit., pp. 33–4; The World Bank, World Development Report 2000/2001: Attacking Poverty, Oxford University Press, NY, 2001; The World Bank, Globalization, Growth, and Poverty: Building an Inclusive World Economy, Oxford University Press, NY, 2002.

[14] Robert H. Wade, ‘Is Globalization Reducing Poverty and Inequality?’, World Development, Vol. 32, No. 4, 2004, p. 574.

[15] That is, ‘the ability to get the outcomes one wants’ without force or payment. See, e.g., Joseph S. Nye, Jr., Soft Power: The Means to Success in World Politics, PublicAffairs, NY, 2004.

[16] Robert H. Wade, loc. cit.

[17] Thomas G. Weiss, Global Governance: Why? What? Whither?, Polity Press, Cambridge, UK, 2013, ebook, pp. 141–2.

[18] Peter A. Hall, ‘Policy Paradigms, Social Learning, and the State: The Case of Economic Policymaking in Britain’, Comparative Politics, Vol. 25, No. 3, 1993, p. 275.

[19] Sarah Babb, loc. cit.; Jan Aart Scholte, Globalization: A Critical Introduction, 2nd Edition, Palgrave Macmillan, NY, 2005, pp. 387–8.

[20] Joseph E. Stiglitz, op. cit., p. 14.

[21] Robert H. Wade, ‘US Hegemony’, p. 220.

[22] The World Bank, WDR 2000/2001.

[23] The World Bank, G, G & P.

[24] Robert H. Wade, ‘Is Globalization Reducing Inequality?’, p. 573–4.

[25] Thomas Pogge & Sanjay G. Reddy, ‘How Not to Count the Poor’, Social Science Research Network, 29 October 2005, retrieved 10 October 2015 from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=893159

[26] Thomas Pogge, ‘Poverty, Hunger, and Cosmetic Progress’, in Malcolm Langford, Andy Sumner & Alicia Ely Yamin (eds.), The Millennium Development Goals and Human Rights: Past, Present and Future, Cambridge University Press, NY, 2013, p. 211.

[27] Howard Steven Friedman, Causal Inference and the Millennium Development Goals (MDGs): Assessing Whether There Was an Acceleration in MDG Development Indicators Following the MDG Declaration, Munich Personal RePEc Archive paper #48793, 3 August 2013, p. 10.

[28] Shaohua Chen & Martin Ravallion, Absolute Poverty Measures for the Developing World, 1981–2008, 2008, retrieved 11 October 2015 from http://siteresources.worldbank.org/ICPINT/Resources/270056-1255977254560/6483625- 1291755426408/20_ICPBook_AbsolutePovertyMeasures.pdf

[29] Shaohua Chen & Martin Ravallion, More Relatively-Poor People in a Less Absolutely-Poor World, World Bank working paper #6114, 2012, p. 16.

[30] ‘Not Always With Us’, The Economist, 1 June 2013, retrieved 11 October 2015 from http://www.economist.com/news/briefing/21578643-world-has-astonishing-chance-take-billion-people-out-extreme-poverty-2030-not

[31] Shaohua Chen & Martin Ravallion, ‘The Developing World is Poorer Than We Thought, But No Less Successful in the Fight Against Poverty’, The Quarterly Journal of Economics, November 2010, p. 1593; Siew Mun Tang, ‘Rethinking Economic Security in a Globalized World’, Contemporary Politics, Vol. 21, No. 1, 2015, p. 41.

[32] See, e.g., Martin Ravallion, ‘The Debate on Globalization, Poverty and Inequality: Why Measurement Matters’, International Affairs, Vol. 79, No. 4, 2003, pp. 739–53.

[33] UN, Millennium Development Goals: 2015 Progress Chart, 2015, retrieved 11 October 2015 from http://mdgs.un.org/unsd/mdg/Resources/Static/Products/Progress2015/Progress_E.pdf

[34] Thomas Pogge & Sanjay G. Reddy, loc. cit.

[35] The World Bank, The World Bank Policy on Access to Information, 1 July 2010, retrieved 11 October 2015 from http://documents.worldbank.org/curated/en/2010/07/12368161/world-bank-policy-access-information

[36] Toby McIntosh, ‘Appeals Body Says World Bank Violated Access Policy’, The Global Network of Freedom of Information Advocates, 26 June 2014, retrieved 11 October 2015 from http://www.freedominfo.org/2014/06/appeals-body-says-world-bank-violated-access-policy/

[37] The World Bank, ‘List of Exceptions’, Access to Information, retrieved 11 October 2015 from http://www.worldbank.org/en/access-to-information/ai-exception

[38] Ibrahim F. I. Shihata, The World Bank Legal Papers, Kluwer Law International, The Netherlands, 2000, p. 610.

[39] Often misattributed to Mark Twain, Twain himself credited this phrase to Benjamin Disraeli, though it is not found in any of his works. Joel Best, Damned Lies and Statistics: Untangling Numbers from the Media, Politicians, and Activists, University of California Press, 2012, p. 5.

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About samquigley

I'm Sam Quigley.
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