Demanding the agenda

This, according to the Bank, is what a State must provide: legal foundations; a non-distortionary policy environment, including macro-economic stability; investment in basic social services and infrastructure; protecting the vulnerable; protecting the environment. But only within the limits of its capabilities. In fact, the Bank seems to say, developing countries should stick to the basics and protect property rights essential to the proper functioning of the market. In short, the Bank says the State must be a “partner, catalyst and facilitator” of the markets.

Reports suggest that, “extra territorial and international restraints can substitute for limitations” of countries that lack the internal mechanisms “to enforce laws or to signal credibly that the rules will remain reasonably stable”. Apparently, World Bank and IMF conditionalities, “can be viewed as a sign of national commitment to the policies that are included in the conditions” and “countries with weak domestic commitment mechanisms can strengthen their credibility by binding themselves to pay a penalty should they violate the agreement.”

It is also accepted, according to the Bank, that the State need not be the only provider or even a provider of certain of its basic services. The delivery of these services, according to the Bank, could also be channelled through NGOs. The Bank appears to believe that a proliferation of NGOs in Africa is a sign that these are bodies through which “citizens seek representation of their interests.” It says: “The rapid growth of NGOs illustrates this trend most vividly”.

The Bank’s illustration of an area where NGOs are engaged in service delivery “because the reach of government or providers is weak”, is the West Bank and Gaza. This illustration, is just one example of the Bank’s inability to see that its agenda and ground reality, in a very large part of the world, function on separate planes. The West Bank and Gaza are hardly examples of a nation, never mind of “the state” or “government”. West Bank and Gaza are also examples of the failure of international political regulation.

But according to the Bank, it’s all very simple, if only “the States” would listen. State capability can be enhanced by recruiting public officials on merit and not through political patronage, and by involving the people in decision-making. Instances of people having a greater say in decision-making are “client surveys” and “citizen’s charters”. If for instance “poverty and economic marginalisation stem from ethnic and social differences, policies must be carefully crafted to manage these differences as Malaysia and Mauritius have done.” In the first case, by enshrining the rights and privileges of one ethnic group above all others, and in the second, by “accommodating” the three main ethnic groups.

Improving a State’s capability also depends on containing corruption, which the Bank says, has a “clear negative correlation” with investment and growth. The bank, however, relies on a private sector survey of 69 countries, which begs the question: is public sector corruption the only type of corruption that hinders growth? Besides which, if this were true, South Korea, for instance, would not today be an Asian Tiger. Endemic and institutionalised corruption were part of the “Korean miracle”. Britain on the other hand, is relatively sleaze-free, and meets all the necessary Bank conditions — an independent judiciary, limits on the discretion of officials and regulators, etc. — and its growth rate is far slower.

The illustration that the Report uses to bolster its arguments underline the problems with trying to extend the theory of economic design to the realm of politics. Illustrations from small countries, with small population sizes and uncomplicated ethnic mixes, or surveys of limited scope, are the usual Bank fare. But illustrations from the American “wild west” in the 19th century or mercantilist Europe in the Middle Ages are indicative of the fact that those who put together this report ignored history, context, culture, politics and human nature, which are all essential elements in the formation of modern nations and “the State” as we know it.

This, if nothing else should make one re-focus on the fact that the WB is an international lending agency and not some benevolent post-modernist missionary. The thrust of the report is basically this: The economic agenda has been set and largely accepted across the world, and now the social and political agenda must be set in order to make the economic agenda work.

What the Bank says about South Asia:

“The main issue in South Asia is over-regulation and an over-extended State — both cause and effect of bloated public employment, and the surest way to corruption…regulatory simplification and public enterprise reform, and the resulting contraction of the State will…boost economic efficiency, increase competitive pressure, reduce corruption and produce fiscal savings. Another imperative is to build stronger partnerships with…business and civil society, to improve feedback and supplement the State’s capability.”

What the Bank says about India:

“The old national consensus on socialism has given way…to a new consensus on liberalisation. But formidable challenges remain. Most parties agree on the need for reform, yet no party is eager to retrench surplus labour, close unviable factories, or reduce subsidies. The reforms so far are a positive step but must be extended and accelerated if India is to catch up with the East Asian Tigers.”

In India, “bureaucratic capability suffers not merely from legendary amount of administrative red tape, but the fact that the autonomy of highly qualified civil servants is severely circumscribed in practice…by frequent, often politically motivated transfers of personnel and other arrangements.”

Reactions:

Ben Fine, Professor of Economics, London University“At a scholarly level, it is complete and absolute garbage. This is in keeping with the past. This report is saying the same things from the other side, it is just ideological acrobatics to carry on doing what they’ve done in the past. What is really going on is that governments have not implemented earlier policies, and therefore the Bank has to make governments implement these. They are breaching the margins of political interference, although this is nothing new.”

Alex Wilks, Brettonwoods Project

“The Bank has taken a very technocratic view of the State as pursuing merely economic goals. The ethnic, social, and environmental questions are down played. It does not view companies and businesses as lobbyists and interest groups and views them as engines of growth and prosperity. It fails to tackle one of the main questions in a globalising world, of the power balance between TNCs and the States and despite disclaimers throughout the report its conclusions are too simplistic and universalist.”