Kinky development and the growth fetish

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 24^th 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.