Source:
Incidencia Democrática
Thu Jun 22 2006
The World Bank Report "Poverty Reduction and Growth: Virtuous and Vicious Circles" is presented as a new way in the form an economy is run. Such paper refers to the progress and needs of the economy. It raises as focal point the need to fight poverty and provide those most in need with better living conditions. It is quite surprising for the World Bank to point out that the new policy to be followed in the region from now on would be one resulting in palpable benefits for the poor.
Erwin Pérez
i.dem@i-dem.org
In February of this year, the World Bank, widely known for its economic ‘recipes’, released the report ‘Poverty Reduction and Growth: Virtuous and Vicious Circles’, which is presented as a new way in the form an economy is run. This paper refers to the progress and needs of the economy. It raises as focal point the need to fight poverty and provide those most in need with better living conditions.
The World Bank, characterized by the influence it exerts on the implementation of the neo-liberal economic model that strengthens inequalities, appears now as an institution that is concerned about the well-being of the poor whom, according to the Economic Commission for Latin America and the Caribbean (ECLAC) account for 213 million people or 40.6 per cent of the population, of whom 88 million (16.8 per cent) live in extreme poverty. It is quite surprising for the World Bank to point out that the new policy to be followed in the region from now on would be one resulting in palpable benefits for the poor and one that would finally allow them to get out of poverty.
The new adventure of the World Bank, according to Guillermo Perry, chief economist for Latin America and the Caribbean, includes three programs of significant importance which would be adopting policies aimed at improving the access of poor people ‘to infrastructure and public services in laggard regions of the country’; and at expanding ‘financial services to micro- and small enterprises, to small farmers…’ and also proposes (and this really comes as a surprise) ‘quality education for children in poor families’. The statement of the World Bank comes as a surprise given the fact that the measures and programs imposed by international institutions such as the Bank itself, the International Monetary Fund and the Inter-American Development Bank, have been geared towards restricting social investment, thus creating economic unbalances with clear social and political effects.
There are two clearly identifiable situations to be considered with regards to this change of position. However, it should be pointed out that this is not in fact about policy change. A first explanation is given by the report itself: ‘Latin America’s persistent poverty itself can be hampering the achievement of growth rates’. That is, the increased number of poor people is hampering the dynamics through which the wealthiest Latin American families get richer. From a different perspective, that of the poor, it is about defending favorable conditions for rich families rather than a true determination to eliminate poverty.
The second explanation should be outlined at the political level. In recent years, electoral processes in the region have left a sour taste in the mouths of those politicians that adhere to the economic policies of international institutions (IMF, WB, IADB); the ‘trickle-down’ theory, the measures imposed within the framework of the Washington Consensus and its Structural Adjustment Policies (SAP), have turned out to be disastrous for poor countries, and therefore have lost political ground. The action of the World Bank is aimed at reducing social and political tensions in order to prevent unmanageable collapses. In other words, the aim is to give poor people only that which would keep them quiet. Nothing further than that.
Latin America continues to be one the world’s most unequal regions (and Guatemala is an avant-garde country in that deplorable aspect), where practically one every four persons lives on less that two dollars a day. That is a reality that cannot possibly be hidden, and that is one of the key parts in the World Bank report since it acknowledges (as should be done by many neo-liberal theorists) that the trickle-down theory is not working; that social services are necessary to reduce poverty and that SAPs were a failure. Who defends now those measures? Only liars.
The State then is called on to provide those social services to the population; however, the problem is that such State in most countries has been dismantled. The case of Guatemala is of serious concern since one part of the State is under the control of organized crime, while the other part is controlled by conservative economic powers, which refrain from paying fair taxes. Thus, without the necessary resources it is unthinkable that the weak structure of the state may address the needs of the population.
In the World Bank report, neo-liberal business people should notice that deep-rooted inequalities have political repercussions. Or, have they already forgotten the Alfoso Portillo experience? Guatemalan business people should change their position towards the poor, even if it were only to disguise their failure in achieving the development of the country, just as the World Bank does.
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