World Bank, Growth and Poverty

The furore over the resignation of Ravi Kanbur, the principal author of the World Bank’s forthcoming World Development Report reflects not only the muddled thinking of the bank and its split-personality but also its organisational degeneration and supine leadership. Kanbur abandoned piloting the report apparently because he could not reconcile himself to the revisions which the critics of its initial draft, both inside and outside the bank, insisted on. The controversy centred on whether the accent on growth and globalisation is without a downside of adverse impact on poverty alleviation and income distribution. NGOs such as Oxfam and Third World Network have started to see a sinister game of the rich countries in the exit of Kanbur.

The real story is different. The seeds of this fiasco were sown by the opportunist manoeuvring by the World Bank president, James Wolfenson, some six months back to placate the NGO lobby and court cheap popularity. Posing as the redeemer of the world’s poor. Wolfenson played down economic reform policies directed at growth in two published articles, co-authored with Joseph Stiglitz, then the Bank’s chief economist, and Amartya Sen. Sensing the dangers of a shift in the Bank’s policies away from growth, two economists, both incidentally Indians, Jagdish Bhagwati and T N Srinivasan, severely criticised the position taken in these articles. They argued that if what Wolfenson together with Stiglitz and Sen was advocating was the official policy of the Bank, it would do great harm to development of the third world as it had done to the Indian economy in the 1960s and 1970s. No amount of anti-poverty measures would succeed in alleviating poverty if wrong policies, leading to low growth, were followed. This new policy stance of the Bank’s president constituted the framework of the World Development Report 2000.