Thursday, 26 February 2009

"The World Bank needs reform to create a fairer society"

Guest post by veteran anti-poverty campaigner Peter Townsend, in the run-up to the G20 conference.

Reconstruction of the banking system must extend to the World Bank. Its influence is all-pervasive. Governments and pressure groups hang on its words. But its persisting failure to deal with the huge scale of poverty in the developing world, together with its failure to deal with, or even report, predatory corporate forces, including banking systems, places it at the storm-centre of world recovery and reform.

The bank does not have capability to lead recovery from deep recession. Getting rich quick has meant exploiting many millions on the lowest incomes and failing to satisfy their basic human rights. This subversive motive must be ascribed to the reach and dominance of neo-liberal economic ideology in the last 40 years.

The World Bank monolith has helped to implant neo-liberal ideology among governments, corporations and consumers, weaken the state and reinforce economic inequality and destitution. Intelligent and sophisticated staff have been driven by forces subservient to that neo-liberal philosophy. The Bank advocates disastrous policies, like its meagre and superficial anti-poverty policies, lends with anti-social discriminatory conditions, and has little experience or resources to invest grants directly in jobs, services and people.

After 1944 the Bretton Woods institutions turned out to be a pale shadow of Keynes’ intentions. Their total resources were less than a third of what he advised. Eligible countries were not entitled to automatic help. They had to contribute to a Fund to be eligible for membership to apply for loans – and which imposed stringent conditions. Membership was not universal; debtors had less independence, aid had strings, and the US remained predominantly in charge of those strings.

With public confidence in financial institutions at an all-time low, and expectations of major change in the air, the question of World Bank reform takes centre-stage. One change would be to measure the true extent of world poverty. In 1990 the bank affirmed that its dollar-a-day measure was only half the story. It failed to develop a more reliable and reproducible international measure. Over two decades the bank has also failed to correct its own poverty estimates reliably for inflation. As a result poverty has been seriously under-estimated.

A second change would be for the bank to adopt a different social development strategy. This would include job creation, new tax systems, staged international planning, accountable leadership, social security and other public services.

If a small percentage of the resources of global corporations was committed to social security, a minimum wage and the right to improved employment conditions in low income countries they could share the kind of stability across the world that companies and European governments achieved domestically a century ago.

That would mean the bank, corporations and NGOs keeping track of activities in subsidiaries and sub-contracted employment, and extending the same rights to those workers. New international company law, and more effective international taxation, would be necessary components. ‘Corporate social responsibility’ would acquire new meaning.

The global corporations should add one or two per cent of wage costs in different countries, for example, towards a universal child benefit to help banish malnutrition, poverty and premature child death, and encourage more schooling and access to health care. Employer contributions towards domestic social insurance schemes in the OECD countries could be applied to employer operations in low-income countries.

The strategy could satisfy the principal UN millennium goal of eliminating poverty, slowing or halting runaway social polarisation, mark the necessary reconciliation of market globalisation and public ownership and control; begin measured stages in the fulfilment of human rights; and thereby internationalise development.

Peter Townsend is one of the authors of From Workhouse to Welfare:, What Beatrice Webb’s 1909 Minority Report Can Teach Us Today, published by the Fabian Society on February 21.

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