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Kinky development and the growth fetish

Emre Özaltın's picture

If you want to see exemplified the contrast between the old World Bank and the new – where we came from and where we are going – you need look no further than the recent pronouncements of Prof. Lant Pritchett.

As a new member of the World Bank, and one who spent a long time before joining considering whether the values of this institution matched my own, I have followed Prof. Pritchett’s blog and attended his recent talk with interest. Apparently I am not the only one; the standing-room only presentation generated much lively discussion.

Prof. Pritchett believes that those values – desire to help the disadvantaged, environmental consciousness, aversion to extreme inequality, etc. – which he labels “post-materialism” borne of advantage, are out- of- step with the aspirations of the citizens of developing countries and are contributing to the World Bank’s growing irrelevance.

He harkens to the good old days when the World Bank invested in infrastructure, and laments that, by focusing on the poor (which he labels “kinky development”) and having social and environmental standards, the World Bank is imposing its values – Western values derived of a unholy alliance of hippies, bleeding hearts and Nordics – on poor countries, when all they want is growth.

The argument is that one should focus on growth and growth only. And not for its overall impact on human well-being mind you, but for growth as the goal itself.

I call this proposition The Growth Fetish.

First, Prof. Pritchett is charging that the modern paradigm in development is being paternalistic by imposing values on those who don’t share them. Any time one sees this charge made, alarm bells should be going off for it almost always signals a hidden agenda: a fetishist in altruist’s clothing. It is a charge one hears often against approaches that do not meet a certain narrow world view and typically against policies that aim to mitigate the damage done by the fetishist approach. For in the fetishist’s world, all outcomes borne of overall growth are positive (or at least utility maximizing).

Second, the approach employed by Prof. Pritchett is reminiscent of a bygone era when dogma trumped data. His argument and resulting policy advice rests on flimsy analysis: the surveys in question allow for non-probabilistic sampling; the poorest are most likely to be excluded from the samples; the potential ecological fallacy is not acknowledged; the survey question upon which the key argument rests has nothing to do with poverty or human development (respondents are asked whether they prefer economic growth, defense, voice/say, or clean cities and countryside!). In contrast, guided by accumulated evidence, the World Bank is letting go of long-held dogmatic views of development and doing so not by adopting new dogma, but by adopting perspectives that are evidence-driven and can be modified or abandoned in light of new research.

For example, we are now far removed from the days of Wealthier is Healthier which was not only a theoretical piece but reinforced accepted doctrine and contributed to putting pressure on countries to disinvest in health and education (see point above on paternalism). The new-Bank has veered from this perspective, not due to changing dogma but to decades of research showing the important direction of causality from health to wealth (not to mention education to wealth) and the realization that investing in human development is excellent business.

This is the reason why the Copenhagen Consensus of Nobel laureate economists chose precisely those areas where the new-Bank is active as the most important investments one can make. Not surprisingly, interventions with the highest cost-benefit (micronutrient supplementation, deworming, conditional cash transfers to name a few) are precisely those that Prof. Pritchett deems unrelated to development. The type of interventions he favors figure low on the growth agenda: a dam in Africa ranked 24th on the list in 2008 and not at all in 2012.

Third, Prof. Pritchett gives the reader a false choice, between economic growth and the current development agenda. The sum of the activities in which we are engaged are not incidental to the challenge of development. They are development. For example targeting, investing in health and education, and doing so in multisectoral and coordinated ways, are all critical to growth. And while Prof. Pritchett may criticize implementing technological innovations in developing countries as being divorced from true development, it is precisely those technologies that have allowed us to fine tune our interventions and target them appropriately to context. Technology is no panacea to be sure but a tool that is increasingly enabling us to enhance the effectiveness of development. It is the notion that growth rests on large infrastructure projects and trickle-down economics that is antiquated and it is an approach that the World Bank, to its credit, no longer supports.

To be clear, I don’t completely disagree with Prof. Pritchett’s perspective and no one disputes that growth is incredibly important to raising all levels of the income distribution. But growth fetishism suffers the same shortcomings as its twisted sister, market fundamentalism. Growth and markets are incredibly important (intermediate outcome and system respectively) but when you start to value them in their own right, divorced from actual human goals, you put yourself in the absurd position of defending (often based on the lazy notion of revealed preference) clearly non-optimal outcomes like environmental degradation and extreme inequality. The new development agenda has, rightly in my opinion, put growth in its place, not as a goal but as an invaluable tool towards the goals of human development.

Finally, it is true that the World Bank operates in an increasingly crowded field and may not wield the influence it once did. An evaluation of the causes of this belong in a separate discussion, but I suspect are largely unrelated to Prof. Pritchett’s diagnosis and, in my opinion, the rise of new players such as the Asian Infrastructure Investment Bank and New Development Bank should be welcomed. Regardless, the “solution” is certainly not for the World Bank to try to become more like these new institutions by relaxing safeguards and focusing on infrastructure. If it did, what then would justify its continued existence? Nostalgia? Geopolitics? I hear staff rushing for the doors.
 
No, the future of the World Bank rests precisely in differentiation and specialization by exploiting the unique niche it occupies in the development knowledge space; in continuing to transform itself into the knowledge bank and reorienting to focus on improving the well-being of those who have been left behind. Who else but the World’s premier development institution should work to improve the lives of the neediest?

Kinks and fetishes aside, a new generation of leaders is orienting the World Bank towards evidence-driven solutions to the world’s biggest development challenges. If the Bank can continue to nourish its strengths – its multisectoral approach; its convening power to coordinate and organize concerted action; and, most importantly, its institutional knowledge held in the tacit and technical knowledge of its staff – I suspect that it will continue to be a highly relevant player and indeed will expand its scope well beyond LICs and MICs.

Comments

Submitted by Paul Cadario on

Your last paragraph, about the Bank's future relevance, is broadly correct. The jury is out on whether the new organization will lead to a better mobilization of the tacit and technical knowledge of its staff.

I did not read Lant's paper so negatively: what he said was that Robert McNamara brought Somalia a dam that's still working, and Jim Yong Kim brought an app for the poor. It's like telling a post-conflict state that the first thing it needs are advisors for the Minister of Finance, and then wondering why its health system can't cope with a completely unexpected epidemic. Escaping from poverty is providing people with services people need, want and ultimately can afford, through their taxes and what they pay private providers. In the beginning, donor involvement needs to address access, quality and affordability. An app to report to an agency that doesn't deliver is about as much good as saying your UN-defined electricity need is met with enough solar power for a lightbulb, a radio and a fan (and somewhere to recharge your phone).

The World Bank has no monopoly on working to improve the lives of the neediest. It now has to determine what it does well, with or without others, and what it's uniquely placed to do, or to constructively lead. I think that's what Lant Pritchett and many others wish the Bank would 'get'.

Paul, thank you for commenting. It goes without saying that mobile tracking technology for the poor is of little value absent programs that will use the resulting data to target the poor. I think this applies broadly to all technologies, a point I make in the blog.

If we are agreed however that the development agenda should give weight to improving the lives of the most vulnerable, then the issue of how to identify and target them becomes salient. This is certainly a challenge in Somalia with a large poor, rural, and nomadic segments of the population.  Again, the technology becomes a means to increase the effectiveness of interventions.

I disagree that the solutions to poverty alleviation need to be tax- based or purely private sector driven. Take the example in question Somalia, with a large informal economy coupled with weak capacity to collect revenues and tariffs. Certainly the private sector can and should be an important actor in service provision, with the Government ideally playing a regulatory and stewardship role. However, I argue in the blog that pure market solutions to the world’s development challenges are not sufficient, on their own, to produce optimal outcomes.

Submitted by Johannes Linn on

Emre, you chose polemical dialogue with allusions to fetishes etc.. It's fun, but is it useful? I doubt that you have abandoned the notion that growth is a necessary part of development. Would you argue that the "new" World Bank has given up on growth as a necessary element to achieve "shared prosperity" (a key slogan of the new Bank)? Would you argue that convergence for shared prosperity is possible without low and middle income countries growing more rapidly than high income countries? Would you argue that shared prosperity is possible without investing in sustainable infrastructure in the developing world? [As an aside: I'm afraid that insufficient infrastructure investment in the developed world puts a risk its prosperity, esp. for the US!]. There is plenty in Lent's article to argue with, but dismissing him as a representative of the "old" Bank (whatever that is) and eulogizing the "new" Bank (whatever that is) glosses over the important issues that Lent addresses, namely how to prioritize the use of limited development resources, understanding what drives the demand for and supply of development assistance funds, and asking whether the Banks has perhaps been captured by special interests in some of its lending policies. If the Bank were to abandon a focus on growth (along with other goals) and were to opt out of infrastructure financing (along with other sector of engagement), it would certainly marginalize itself. To me the great attraction of the "old" Bank was -- and of the "new" Bank will be -- that it can walk and chew gum at the same time: it can focus on poverty reduction AND on growth, it invests in human capital, infrastructure, agriculture AND social protection, it offers finance, knowledge AND advocacy. It does so (when it works well) in a way that builds on synergism and effectively addresses tensions across goals, priorities and instruments at the global, regional, national and local levels, rather than narrowly focusing only on one or the other goal, priority and instrument. This is the unique strength of the Bank, on which it can and should build.

Thank you Johannes. Hopefully the discussion is fun and useful.
 
I agree with your comments and I think that the arguments made in the blog are in line with your arguments - something that I hope has not gotten lost in the polemics.
 
The blog isn’t an argument against growth – it’s an argument against growth only (this is the argument made by Lant – note the title of the presentation: Why are we thinking about anything else? The politics of growth as a development objective). I argue against the view that income is essentially all that matters and that inequality is a concept of little consequence.
 
And the blog certainly isn’t an argument against infrastructure (else I should expect to get some deserving reproach from colleagues working on these projects). The Bank and others will (and should) continue to build/upgrade/maintain roads, desalination plants, electric grids etc. etc. Rather, I argue that one advantage of the twin goals is that they give a useful lens through which to evaluate these (and indeed all) interventions. Will that power plant or new hospital benefit the poorest or will it contribute to widening income inequality? – and if the latter we should modify the intervention or consider abandoning it altogether. This is in contrast to the approach that infrastructure, as long as it contributes to GDP growth, is a good investment.
 
In that sense, far from abandoning growth, the argument is to focus on growth that is inclusive, sensitive, and sustainable (by walking AND chewing gum: engaging simultaneously in multiple areas and levels as you correctly point out).
 
Regarding your point on where to focus limited resources, what is driving supply and demand, and special interests:  obviously one can only touch on these superficially here, but broadly speaking I am making the argument that there is both a strong moral and development case to be made for focusing limited resources to the neediest and that, while approaches to development have always had a political and ideological component, the choice of interventions is increasingly evidence driven.
 

Submitted by Paul Cadario on

I very much agree with Johannes Linn. The Bank can walk and chew gum at the same time. I would add 'if it has the capital and leadership to credibly do so.'

I'll be charitable and say the jury's out, and that self-serving bloggers for a particular sector do the broader institution, its owners and its clients, no good.

Submitted by Burak Türkgülü on

The choice of strategy among the development community is not really based on some grand ideas about what development should achieve. They are just based on what can be relatively easily done and the rest is rhetoric to justify the new alignment. The field of development economics (which used to encompass growth economics as well) now confines itself to solving small-scale problems and somehow pray that it will all translate to macro development/growth overestimating the rate of (increasing) returns to these programs. They may make relatively few people marginally better off, probably as long as the programs are supported by the donors and/or the local political structure sees some gain in participating, but it is doubtful if such programs will provide any sustainable and widespread prosperity.

Thank you Burak for your comment. I think ‘ending poverty’ is quite a grand idea. Similarly, the MDGs presented in many respects ambitious and grand goals (and, arguably, were overall a success). I agree that the choice of interventions (where we invest) has too often not been systematic or evidence- driven and that coordination has been lacking (or perhaps, more accurately, coordination has been unsystematic and left to personalities on the ground). I think both are increasingly (albeit slowly) changing – with focus towards best-buys and high-yield investments and concerted action that is coming from both coordination at the highest levels and driven by bottom-up country level demand. The estimations of the returns to these investments are indeed large and backed by a growing body of evidence (and whether one agrees with this direction or not, far from doing what is easy, this is a relatively harder path in terms of design, implementation, supervision and evaluation than any macro-level investments). It is in this sense that I drew the distinction between the dogma-driven models of development that are largely evidence-insensitive and the current paradigm.

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