Mar 11, 1998
DEVELOPMENT: SELLING OLD MEDICINE IN NEW BOTTLES
Geneva, 10 Mar (Chakravarthi Raghavan) -- The World Bank's disavowal of a 'minimalist state' and promotion of an 'effective state' is no more than a repackaging and updating of its neo-liberal agenda, and promoting a state role to safeguard corporate interests, according to a just published briefing paper of the 'Bretton Woods Project', a UK-based group tracking the social and environmental impacts of Fund/Bank financing and schemes in the Third World.
The Bank which through the 1980s promoted the 'minimalist state' concept under its Structural Adjustment Programmes produced in 1997 its World Development Report (WDR-97) wherein with a mea culpa of sorts, and said the Bank said it favoured an 'effective' rather than a 'minimalist' state.
"The political significance of the WDR's rejection of a minimalist state, amounts to little in the face of abundant evidence that neo-liberalism has been less about stripping back the state than about redirecting it: disavowing a minimalist state that has never existed constitutes clever political manoeuvring rather than a U-turn," says the briefing paper.
The Bretton Woods Project (BWP) paper, "The World Bank and the State:
A Recipe for Change?', by Nicholas Hildyard of the Cornerhouse Public Outreach and Research Unit, in a 60-page critique, characterises the Bank's disavowal of a minimalist state in its World Development Report, 1997 (WDR-97) as "clever political manoeuvring rather than a U-turn", and perhaps a tentative attempt to justify a new role for itself as 'supra-national authority', as also to use the 'state' in developing countries as a scapegoat for failures that should properly be ascribed to the failures of the Bank's market-led reforms.
An appendix to the paper notes that in the 1950s, the Bank saw the state as an engine of development and its role as primarily a project-lending institution. From 1959, when India and Pakistan came centre-stage, the Bank began programme lending, and by mid-60s changed its tone and became critical of the Indian state, and pushed for liberalisation and programme lending for manipulation of entire economies. Under Robert McNamara (1968-1981), the Bank became more powerful, with McNamara's 'war on poverty' providing a more aggressive intervention in affairs of states, and trying to kick-start growth by sharply increased capital flows. McNamara's long-term non-project aid to developing countries in return for structural adjustment, unveiled at UNCTAD-V in Manila, provided the setting for a minimalist state.
Then came the late 1980s, when the Bank while still promoting a rollback of the state, became concerned with the quality, and not just quantity of the state capacity - with the 1989 Bank report on sub-Saharan Africa blaming the failure of SAPs on failure to implement the programs, with problems emanating from poor government.
And in 1993, while the publication of the East Asian Miracle spurred expectations of a radical change in approach and acceptance that in North-East Asia selective state intervention had contributed to growth, the Bank's document failed to fully endorse the role of states in development. Developing countries were advised not to follow the East Asian example, while a 1995 report, 'Bureaucrats in Business', failed to make any mention of the 1993 perspective of the State role.
While calling for an effective state, the WDR-97, the Hildyard paper notes begs the key question of 'effective for whom?', acknowledges that different groups may have conflicting views of the role of the state, but fails to engage those different views or discuss their validity. Instead it "adopts a tone and language implying that neo-liberal policies are self-evidently superior to other development agendas."
In a preface to the paper, Alex Wilks of the BWP says that though, in the preparations for the WDR-97, the Bank team went through a process of holding extensive consultations, those consulted felt that the Bank team was not prepared to address more fundamental arguments for example, on the relative strength of TNCs and governments or the universality of market models.
Not only NGOs, but also some academics and officials, Wilks says, were disappointed that the final WDR omitted some of their key criticisms and concerns, an omission explained by factors including:
Referring to Bank President Wolfensohn's plea at the 1997 annual Fund/Bank meetings for an end to "name calling" between civil society and multilateral institutions, and recognition by both sides that they share "a common goal", Wilks says "Whilst the common goal is described vaguely as 'development', agreement may be possible. But the mainstream Bank view of the political and economic routes to development still appear very different to those of most civil society organizations."
The Bank's latest view of an effective state, the BWP study says, is for reforms to establish a foundation of law, maintain macro-economic stability, invest in basic social services and infrastructure, protect the vulnerable, and protect the environment. States are also advised to establish effective rules and restraints, foster competition and increase "citizen's voice and partnership with the private sector."
While the WDR-97 has been welcomed in many quarters as a rejection of the Bank's free-market fundamentalism, "in fact it represents less a change of direction than a repackaging and updating of neo-liberalism, in the face of a popular backlash against the policies promoted by the Bank," says the paper.
"The political significance of the WDR's rejection of a minimalist state, for example, amounts to little in the fact of abundant evidence that neo-liberalism has been less about stripping back the state than about redirecting it: disavowing a minimalist state that has never existed constitutes clever political manoeuvring rather than a U-turn."
The WDR-97 fails to engage with critics of neo-liberalism or with alternative approaches to development. There is nowhere any discussion of substantive points raised by anti-poverty groups about the role Norther states could play in relieving Third World debt nor any discussion of the many proposals of trade unions and others to address the state's role in securing labour rights in a globalized economy.
The WDR-97 is also silent on the issues of states implementing international and national controls on TNCs, on NGO proposals to reform the WTO in order to address inequities in the world trade system or on the fundamental criticisms of neo-liberal theory and economics made by Japanese aid community and others.
The paper notes that at an early stage in the WDR production process, Kenichi Ohno of Saitama and Tsukuba Universities of Japan, had provided the Bank with a remarkably candid background paper summarising current discussions among officials and academic researchers responsible for Japanese aid policy, and raising some fundamental concerns and criticisms of the Bretton Woods institution's approaches and arguments.
But most of these were not discussed in the WDR, and the Ohno paper is merely listed in the bibliography, and a few of the concerns raised emerge in a muted form in the WDR.
The BWP briefing paper cites extensively from the Ohno paper, including the view that the East Asian solution to the vicious circle of weak government and economic backwardness is for "authoritarian developmentalism" in the early stages of modernisation. It also quotes Ohno's critique that while an appropriate development strategy must fundamentally from one country to another, and the 'path to market' is unique to each country, and though the Fund and the Bank argue that their SAPs are different for each country, "the difference extends only to the intensity of individual items in the set menu -- tight budget, subsidy cuts, monetary restraint, positive real interest rates, exchange rate devaluation, price liberalization, raising public utility charges etc. the original menu does not change. This approach ignores the fact that each country requires a different menu and the effectiveness of each policy is case-dependent."
In demystifying the minimalist state approach, the paper argues that far from doing away with state bureaucracy, neo-liberal policies have merely reorganised it.
At national and international levels, neo-liberal policies have led to a massive transfer of resources and power away from public institutions to private ones -- benefits that have accrued to the private sector, particularly the TNCs, through privatization, deregulation, reallocation of subsidies and pooling of national sovereignty to form new trade blocs.
The TNCs have used privatization of state companies to squeeze out competition in domestic or export markets, as evidenced by the way transnational tobacco firms bought up tobacco firms in east Europe.
On the GATT/WTO agreements and their effects, the paper points out that "US corporations now lobby the US government to target EC regulations while their subsidiaries in Europe lobby the EU to target US regulations."
In many cases companies are actively involved in writing new investment and environmental rules, the paper says, and cites the case of the Philippines where a new mining code introduced in 1995 was influenced by transnational mining firms.
The WTO/GATT agricultural agreement was supposedly intended to remove US and EU export subsidies to prevent dumping of agricultural surpluses on world markets. But the way the agreement was drawn up and implemented illustrates the way "free trade rhetoric has served as a convenient smokescreen for vested interests". It cites an OXFAM study that as a result of the agreement, rich country subsidies were left largely intact, and the EU and US have been able to maintain and even increase the level of their subsidies - through socalled direct payments.
While the neo-liberal reforms of 1980s and 1990s, did result in some measurable gains from a conventional economic perspective, and even some ordinary people may have benefited by dismantling of bureaucratic regulations, "the economic booms that helped create billionaires and bring consumer gadgets to the middle classes have been at the cost of growing social and economic exclusion of others."
The numbers in absolute poverty are growing in North and South, as are income disparities. Globalisation and liberalization have also increased regional inequality. SAPs, imposed by the Fund and the Bank in exchange for loans have consistently caused hardship.
Even in the US where jobs have been created, the majority of jobs are poorly paid and the benefits system is harsh. Even the official US unemployment figures -- an estimated 6.543 million or a 4.8% unemployment in May 1997 -- is challenged by the AFL-CIO which puts the figure at closer to 12 million.
And in the South, the flexible labour policies have become "an euphemism for creation of jobs at sub-poverty level wages."
Referring to the various responses to the globalization and neo-liberalism -- ranging from the chauvinistic xenophobic nationalism (of Pat Buchanan in the US, Zhirinovsky in Russia and Bharatiya Janata Party in India), through that of mainstream think tanks like the Brookings Institution, the Japanese government, non-governmental coalitions and movements to "reclaim the commons" and for a "cosmopolitan localism", the BWP papers says the WDR-97 is clearly a response to these wide concerns from many quarters.
"A closer reading of the Report, however, and consideration of the wider international and historical context in which it has been written, suggests that in many important respects, the WDR-97 constitutes not so much a sea-change in Bank thinking as a repackaging and updating of the neo-liberal agenda.
"The political significance of the Report rejection of a minimalist state, for example, amounts to little in the face of now abundant evidence that neoliberalism has been less about stripping back the state than about redirecting it. "Disavowing a minimalist state that has never existed constitutes sharp political manoeuvring rather than a U-turn."
Reflecting the Bank's continued neo-liberal framework, the WDR-97 views an effective state almost exclusively through the lens of economic efficiency and its benchmark for 'effectiveness' of political processes, procedures and institutions is whether they act lubricants or potential barriers to free market economic reforms and fiscal discipline. It grossly over-simplifies the complex political, social, cultural and economic landscape in which states and markets operate, and depoliticises the debate over what constitutes an effective state.
While the text of the report is littered with arguments for limiting the scope for arbitrary action by the state, this analysis does not extend to the private sector, and in fact portrays companies merely as engines for growth.
It makes little or no mention of the "capricious, unaccountable or arbitrary action by the corporate sector or of the political influence that companies wield.. (it) does not also advocate controls which might check abuse of corporate power.
Despite the considerable evidence submitted to the WDR team on the inappropriateness of promoting a single universal approach to reform, the WDR gives space to one view only "of what constitutes an effective economy and an effective state.... the approach to reform is only marginally less formulaic than previously".
And throughout the WDR, the Bank seems more interested in telling others, particularly developing country governments, what to do rather than assessing its own roles and how they have undermined states' capacity to plan and fund development. There is no analysis of why the Bank's interventions to support privatization and public sector reform have a very high failure rate or whether the Bank and other aid agencies are appropriate institutions to define the role of the states in societies where they themselves have no democratic mandate and are extremely unaccountable.
"Given such omissions, many have questioned the Bank's motives for raising the issue of the state in such a prominent way," says the BWP paper. "One interpretation is that the Bank is following its own institutional imperatives: by focusing on the 'ineffectiveness' of states, the Bank is able to use the state as a scapegoat for failures that should properly be ascribed to the failure of market-led reforms.
"There is also a concern, voiced by many NGOs, that the bank is seeking to bolster its position as a provider of North-South finance and advice in an age where the private sector is increasingly taking on the task of 'developing' the South. The fear is that it is seeking to carve out new rules as a supranational authority which oversees the politics as well as economics of Southern States."