The World Bank and its ways of fighting poverty in the world

Transcription

1 The World Bank and its ways of fighting poverty in the world Poverty is one of the most disturbing phenomena of our times. The problem of poverty was always present in the history of man kind. However, in the past decade the debate over this subject has been more vigorous than ever before and it became a public matter. Thanks to the Internet and the development of the telecommunication technologies we ve been observing shaping of the new attitudes in the societies of industrialized countries. New movements are criticizing inequalities in the global economy and are influencing world leaders to take measures to solve the problem of poverty in the world. The World Bank, as an international organization brought in to being to fight poverty, is particularly involved in this discussion. The rising pressure on the part of public opinion has induced some changes in its operational policies. The definition of poverty It is not easy to define what poverty is. Frankly speaking there is no universal explanation for this term. It has always had several not entirely separable meanings and has been always defined according to the conventions of the society in which it occurs. It is usually perceived via the material aspect. However, looking at it only from this point of view doesn t give the full perspective. Economic factors are indeed very important. One cannot leave without physical elements that sustain most basic needs. There is however a dilemma how to set the scope of this so called basic needs. Food and water are not the only determinants in here. Also shelter, proper clothing, health care and education without doubts must be included in the equation. Nevertheless, even then the subject is not exhausted. Besides these economic factors there are also social aspects that are connected with the problem. The poor are differently treated and they do not have equal rights as the members of the society. The thing is that their social status is strictly connected with their wealth, making them unable to change their fate. This is why while referring to poverty the World Bank also mentions: lack of freedom, lack of representation and helplessness.

2 This helplessness causes that such people require help from the outside. Without it they cannot do anything about their current situation. However, it cannot be seen strictly from the economic point of view. This is a major error that was often committed in the past. It is not enough to give financial means to the poor in hope it fixes everything. It is also required to show them how to change their lives and where their problems come from. Poverty and inequality In the twentieth century the form of poverty was different than ever before. In the early capitalistic economies the total value of GDP was not enough to ensure welfare to all the members of the society. In the past century it changed but another problem has emerged, the problem of inequality. In the modern world the distribution of benefits among the countries is very unjust. The overall value of produced goods is sufficient to provide decent level of life to all the people in the world but these goods are concentrated in the hands of industrialized economies. This is why third world countries die of hunger while the West is overflowing in luxuries. Every state struggles with inequality. The division between the poor and the wealthy is present in every corner of the world. However, in the global scope when different regions are compared this problem is even more visible. According to the Human Development Report 2005 the average annual income in the world is 5533$. This is sufficient for a decent life in most of the countries (excluding wealthy regions where costs are very high due to the relatively expensive workforce and services). However, the richest 20% of human population generates 80% of all the goods while the poorest 40% generates only 5% of them. If we further analyze the figures it will turn out that the average income of the upper part of the data set is 50 times higher than the one of the lower part. While the composition of the richest countries in this juxtaposition is stable (mostly these are the OECD countries), there are some noticeable changes in the ranking of the poorest regions in the world. Africa is becoming the sad leader in this segment exchanging Asia. Measuring Poverty Due to the complexity of the subject of poverty there are significant problems to measure it. As it was mentioned earlier, this phenomenon can t be perceived only through economic factors. This is why commonly used indicators based on income are often misleading. There are at least several obstacles that are difficult to overcome while using this approach. First of all, income is often seasonal. It is also dynamic, meaning it changes in time.

3 Some people may indicated no or negative revenues and still live above average standards. Another thing is connected with the material goods produced for own purposes. They are not included in such indicators as they are never turned into cash. In rural areas they may be very important when measuring poverty. Local price differences and aid provided by the state are difficult to include in the equation as well. These are only a few examples of the problems connected with this approach. This is why the value of consumption instead of income is often taken into account. It is considered more reliable to define the scope of the phenomenon in the long term. All of this was mentioned to show that in fact there is no real way to determine the level of poverty in the world. The data is often obtained with a lot of simplifications. The subject is so complex that numerical measures merely estimate it. Due to the relativity of this subject, nobody is able to determine the real scope of it. It is important to remember about this fact while reading statistics. Methodology used by the World Bank Although, as it was said earlier, there is no real way to determine the level of poverty both locally and globally the World Bank proposed its own methodology at the beginning of the previous decade and it is becoming more and more popular. It is based on the poverty line set at the level of 1$ or 2$ per day. The indicator is calculated according to so called PPP- Purchasing Parity Power - meaning it reflects the local differences in living costs. According to the World Development Indicators 2006 over 20% of the people in the world lived for less than 1$ per day and about half of world s population lived for less than 2$ in There are some positive trends to be observed in the both categories. In 1981 these number were accordingly 40.4% and 66.7%. However, it is worth mentioning as far as the second line is concerned the absolute values are growing. This means that the pace of taken actions to fight poverty is not sufficient to cope with the natural growth rate which is very high in the low-income courtiers. There are some more trends that are worth mentioning. China has shown a significant improvement in the recent times. The overall statistics are much influenced by the changes in the economy of this country. Especially when we take into account that about 20% of world s population lives in China. On the other hand, Sub-Saharan Africa is in even worse situation than 20 years ago. The standing of this region is dramatic. Over 500 million of people live there for less than 1$ per day and this figure has increased by over 200 million since It is very disturbing and it shows that although in some parts of the world the effects of taken

4 steps are positive in others progressing pauperization can be observed. This in turn means that nowadays the division between the rich and the poor is not up-to-date as there is also a category of even poorer. All of this causes that the problem of poverty in the world is still existent. Previous attempts to settle it in some regions have failed meaning that the changes in the policy concerning international aid had to be implemented. From the beginning of this decade the World Bank has been realizing new operational policies that give hope to change this state of affairs. Millennium Development Goals The Millennium Development Goals (MDGs) is one of the most significant projects concerning poverty reduction in the modern world. In 2000 the General Assembly of the United Nations proclaimed a Millennium Declaration. In this documents the United Nations pledged to take appropriate measures to help fight poverty in the world and to make globalization work for everyone. The commitment was made in the form of specific goals which are supposed to be achieved until These are: 1. Eradicate extreme hunger and poverty 2. Achieve universal primary education 3. Promote gender equality and empower women 4. Reduce child morality 5. Improve maternal health 6. Combat HIV/AIDS, malaria and other diseases 7. Ensure environmental sustainability 8. Global partnership for development MDGs cannot be perceived as a strategy aimed at fighting poverty. It is rather a measure of the effectiveness of taken actions in this area. Seven of the mentioned points refer to the low income countries and set the goals to be achieved in the near future. The last one is a cue for the international community that shows how to execute the policies to make them effective. The World Bank was not the initiator of the project but it actively involved itself in the realization of it. During the presidency of Mr. James Wolfensohn the new strategy of Bank s operations (Comprehensive Development Framework) was introduced. It is largely connected with the initiative of Millennium Development Goals. This new approach revolutionized the whole concept of poverty alleviation.

5 CDF - Comprehensive Development Framework As it was mentioned before, the problem of poverty in the modern global economy is still present. While in some parts of the world significant progress was made in this field in others the situation has become even worse. The measures taken in the past were ineffective in some regions. That s why the policies of the World Bank had to be thought over. This happened a few years ago when Mr. James Wolfensohn, the former president of the organization, introduced a new strategy concerning the Bank s operations. The Comprehensive Development Framework is a completely new approach to the problem of poverty. For the first time it was proposed in 1999 and was fully launched in Before its introduction it often happened that the international aid was measured in the input volume rather than by its results. Mr. Wolfensohn stressed that this has to be changed. The projects cannot be ended only with the assessment of how well the funds are handled. There is also the necessity to include the impact of the programs on the environment in which they are realized. Particularly the social aspect has to be taken into consideration. This is why the new evaluation procedures (Impact Evaluation) where implemented together with the CDF. They help to determine how the projects influence the lives of the poor. Very important is the fact that also unintended effects are measured. This in turn helps to include them in the future programs. The Comprehensive Development Framework is based upon four major points: 1. Long-term holistic vision 2. Country ownership 3. Country-led partnership 4. Results focus To ensure long term sustainable growth there is a need to perceive the problems of a particular country as a whole and not only through particular projects. This need is expressed in the first postulate of the strategy the long term holistic vision. There is no point in building schools if there are no roads to get to them. Growth has to be seen as a giant puzzle in which the elements are connected with themselves. There is also a necessity to involve the governments in the process of creating poverty reduction programs. Without the support on their part the chances of making the international aid effective are very slim. What is more, without such a support the entities providing the

6 resources will always be criticized that their operations are not properly aimed. For these reasons the point referring to the country ownership was included in the strategy. There is also a need to create a discussion panel between the international entities interested in providing aid and the local organizations aiming at poverty alleviation. Often the governments are burdened with all the problems in this area and usually they are not able to cope with them simultaneously. This is why the increased cooperation in this field is needed. The important thing is that the World Bank cannot be perceived as a coordinator of these efforts. The country itself should be responsible for taking proper actions. The third point of the Comprehensive Development Framework is referring to this subject. The last issue connected with the CDF, and probably the most important one, is the approach concentrated on measuring of the results of the provided financing. As it was mentioned earlier, in the past the international aid was often measured through the input volume. This tendency was even named - approval culture. Many international organizations fearing the reduction of their budgets granted founds without any control over their results. This way a lot of money was wasted but still the numbers concerning the international aid looked impressive. This is why the last point of the CDF is probably the most important one. The results focus must be carried out to ensure the realization of the MDGs and to fulfill the pledge given to the poor countries. There is however some concern that this approach will cause that the resources will be directed into the fields where the goals are easily met while neglecting the others. Hopefully this scenario will not occur. As far as the implementation of the Comprehensive Development Framework is concerned, according to the 2005 CDF progress report Enabling Country Capacity to Achieve results - the actions taken by the low-income countries are going in good direction. Especially the first two points are realized well. There are however some problems with the last two. This is particularly disturbing in the case of results focus. It was supposed to be the most important element of the whole strategy that distinguishes it from the previously taken actions. It is also directly connected with the MDGs. Hopefully in the future the obtacles in this field will be overcome. So far it seems that Comprehensive Development Framework has a chance of making a difference in the modern world. However, it is too soon yet to see its direct effects. Poverty alleviation is a long term process and the results of taken actions are often visible after years or even decades. What is left is hope that before 2015 industrialized countries in cooperation with the international organizations will manage to fulfill their pledge to the poorer part of the world.