In his 1999 Annual Meetings address, World Bank President James Wolfensohn struck an international chord of change, entirely transforming the Bank’s public stance on poverty. “Poverty is much more than a matter of income alone,” he said, “The poor seek a sense of well-being which is peace of mind; it is good health, community, and safety. It is choice and freedom as well as a steady source of income.” His goal, he said, and the goal of the Bank, was “to bring about the day when the poor of the world, the hopeful youth, the aged, the street children, the disabled, the rural workers, the slum dwellers, will all be able to cry out: ‘Today I fear no one. Today I fear no one.’ ”[1] The significance of this development is almost overwhelming. The Bank, as the foremost authority on international development, has the power to shape the discourse of the development community in a way no other organization does. The past few decades have witnessed an ongoing evolution in the rhetoric of the World Bank with regard to poverty reduction, and the stance taken by Wolfensohn represents, with out a doubt, the most significant shift in the Bank’s short history. The transformation in rhetoric has been institutionalized in two media: First, with the publication of the 2000 World Development Report: Attacking Poverty, which broadens the definition of poverty and the theoretical framework within which the Bank conceives of poverty; and second, with the initiation of the Poverty Reduction Strategy Paper (PRSP) program, a tool of the Comprehensive Development Framework (CDF) that places emphasis on national ownership of and participation in poverty reduction strategies. Together, the WDR and the PRSP program embody the “New Bank.”[2] But exactly what is new about this “New Bank”? What caused this shift in rhetoric? How significant are its actual changes? And what does this shift mean for tangible poverty reduction policy?

There are many layers of analysis to be undertaken here. In analyzing what this shift will mean for poverty reduction policy, one must first uncover the extent of the shift – to what degree have things actually changed? If the change undertaken is significant, where did it come from? If it does not represent a major departure from the way in which the Bank has operated in the past, why not? The answers to these questions are, of course, interrelated, and engage the broader theoretical issue of the sources of change in international organizations – particularly with regard to the role that states play in the formation of the policy of international organizations (IOs).

Sources of Change in International Organizations: A Theoretical Framework

Do IOs have autonomy in their decision-making processes? Is, on the other hand, state pressure the determining factor in IO action? This issue merits a extensive examination not only for a theoretical understanding of the influences that incite change within IOs, but for an understanding of the channels through which actors in the international sphere – which, in our increasingly globalized world, range from the street, to the academy, to the government itself – can make their voices heard. The international organizations of today are not simply fora for international cooperation as they have been theorized to be in the past. Indeed, IOs like the World Bank and International Monetary Fund have the power to influence and create policy that affects people around the world in their daily lives. The extent of the impact of today’s IOs has taken the debate about their power and influence out of the academy and the boardroom and placed it in the union, in the non-governmental organization, and on the sidewalk. The world is weighing in on the impact of IO decision-making. When human lives and the course of their development are the empirical data for international relations hypotheses, it is imperative that we no longer get the answers wrong. It is vital to understand what factors influence the decision-making process, not simply for theoretical interest, but for the lives of people whose daily activities are touched by IO policy.

The explanatory mechanisms in the debate on causal factors in IO change are many, but they engage a broader set of theories on IO influence and power in general. There has been a sort of theoretical tug-of-war for the past half century about who the most important actors in the international system are, with realists on one end and liberal-institutionalists on another.[3] In the early 1980s, for instance, literature on regimes and regime change dominated the way international organizations were discussed.[4] As a response to this, in the mid-1980s came a reassertion of the importance of the state as an explanatory variable and a unit of analysis.[5] But these models looked at the impacts of states versus IOs in the international arena. We must, then, extrapolate from them an analysis of the structures of power within IOs themselves. In attempting to locate the sources of change within IOs, we must first determine if IOs have the capability to make decisions autonomously, as independent entities, or if they make their decisions based on the mandates of the states they engage. I, therefore, disaggregate from the broader debate two opposing explanatory mechanisms, the first of which I call the “Agency axiom,” which has its basis in liberal-institutionalism but turns its lens of analysis inward, to the IO itself. The second side of the debate, what I call the “State-Vector axiom” has a root in realist state-dominance theory, but also draws extensively from hegemonic stability theory. The State-Vector axiom considers not only the influence of the state as a sovereign, theoretical entity, but the influence assigned to particularly powerful, hegemonic states, be their hegemony political, economic, or academic. This dichotomy id especially relevant for the examination of international financial institutions, as the economic futures of many developing countries are highly dependent on aid from international financial institutions. Discerning which actors pull the strings in these organizations can help explain the policy directions taken and can help reveal the mechanisms through which actors can change future policy.

Influences from Within: The Agency Axiom

Autonomy in an international organization is defined through various mechanisms, from staff resistance to change to the ability to structure knowledge in a particular field. Based in a liberal-institutionalist framework, the Agency axiom posits that IOs have autonomy in decision making – and therefore their own processes of change – and are important actors in the international system. This is contrasted with, of course, the strongly realist view that states are the fundamental units of analysis in the international arena. I divide the Agency axiom into two basic theories. First, the internal functional/organizational theory, which posits that IO autonomy is evidenced by such factors as staff resistance to organizational mandates, the establishment of hierarchy and authority, and bureaucratic rationalization processes – what I call the staffs, structure, and routines that demonstrate influences outside those of the nation-state. The second theory is what I call the knowledge-structuring theory, which posits that IOs are autonomous because they have the ability to create and diffuse norms and structure discourse in their particular field. My analysis of these arguments includes a critique of the assumptions of the Agency axiom. I argue that the “objectivity” the Agency axiom theorists afford IOs in both the creation of bureaucracies and the diffusion of their norms ignores the subjective sources of rationality and norms, and hence ignores an important role for states in IO change-based decision making.

Internal Function and Organization

Staff Autonomy through the Creation of Objective Experts

The most basic argument to be made about internal functional autonomy is an examination of the autonomy of the staff of international organizations. This was William Ascher’s essential task in his now foundational “New Development Approaches and the Adaptability of International Agencies.”[6] He examines the resistance of World Bank staffers in the early1980s to an ideological shift in development theory – in this case, their resistance to the social pricing concept. He bases his argument in the sociological phenomenon of role-setting[7] in which actors within the organization define their roles despite competing loyalties. Staffers at IOs such as the World Bank, he argues, feel the weight of professionalism and intellectuality in making their decisions, and tend to act along the lines of these factors, rather than along lines of national loyalties or influences.[8] This idea is especially important for the autonomy of international organizations, in that it is a mechanism for the depoliticization of decisions made in IOs. “As economists or engineers,” Ascher writes, staffers at the World Bank are “professionals bound by the standards and ethics of the discipline,”[9] not by the standards and ethics of the particular country from which they come or from which they feel pressure. He goes on to point out that the roles of staff as professionals and intellectuals gives their decisions a certain absolution from outside criticism – the status of staff member as “expert” gives their decisions a certain rational infallibility.[10] This means that even decisions that involve normative, value-laden factors can be made on the basis of technical expertise, and that expertise can serve as the refutation for criticism based on values and norms.

Ascher then goes on to detail the ways in which staffers are resistant to change within an IO, be it a change in policy or ideology, and finds that, for the most part, staffers demonstrate resistance to change when they compromise the roles of professional or intellectual. In the case of the World Bank, Ascher argues that staff was resistant to change in three ways: resistance to new criteria, resistance to the “bargainer” role, and resistance to political analysis.[11] Each of these somehow burdened the role of the staff member as an apolitical technical expert in the field of development. First, the addition of new criteria to the tradition of development economics compromised the ability of the objective economist to come up with viable mathematical models of and solutions for development problems. Second, the need to serve as a “bargainer” between the Bank and the borrowing county compromises the apolitical nature of the staff expertise, as it forces the staff member to advocate a particular set of values. Third, resistance was evident when Bank staffers were forced to make value decisions about the political quality of borrowing governments and their ability to repay loans. Why are these resistances evidence of IO autonomy? Ascher concludes by arguing that if a proposed change challenges the apolitical, technical duties of the staff, it will be more difficult to implement. “The viability of a development objective or strategy depends not only on the acquiescence of the obvious international actors,” Ascher writes, “...but also on the congruence with the professional role models of the relevant staff.”[12] In Ascher’s formation, internal staff have a significant level of veto power over changes – even those directed from powerful states. In this way, the autonomy of the staff of an IO translates to evidence of the autonomy of the IO itself.

The Establishment of Autonomous Structure and Routines: the Making of the Way things Work

The second category of internal functional/organizational theory is that which attempts to evidence autonomy in IOs through the structure and routines of bureaucracy. Michael Barnett and Martha Finnemore[13] examine the Weberian characteristics of bureaucracy as embodied in international organizations and argue that IOs have power in the international arena precisely because of the impersonal, rational and legal authority created by bureaucracy. They argue that by investing authority in legalities, procedures and norms, IOs exercise the bureaucratic process of rationalization, and this in turn gives them autonomous decision making power in the international arena. “Bureaucracies,” they contend, “embody a form of authority, rational-legal authority, that modernity views as particularly legitimate and good....the very fact that [IOs] embody rationality is what makes bureaucracies powerful and makes people willing to submit to this kind of authority.”[14] This rational-legal authority stems from both the depoliticization of decision making examined above, and from the routinization of hierarchies, procedures and rules. These procedures and rules, argue Barnett and Finnemore, are designed to create predictable outcomes given certain inputs or stimuli. The rules and structures then become inviolable, precisely because of the weight assigned to their rationality. They become “they way things work.” A great sense of inertia is afforded this concept by Barnett and Finnemore, as they write,

When bureaucrats do something contrary to your interests or that you do not like, they defend themselves by saying, “Sorry, those are the rules” or “just doing my job.” “The rules” and “the job” are sources of great power in modern society. It is precisely because bureaucrats in IOs are performing “duties of office” and implementing “rationally established norms” that they are powerful.[15]

The inertia assigned to “they way things work” by bureaucratic rationality is another type of IO resistance to state influence and evidence of the autonomous nature of IOs. If the bureaucratic structure in itself has the ability to dictate the ways in which decisions are made within an IO, then pressure from states, or any outside group, will be lessened by the degree of bureaucratic entrenchment.

Knowledge-Structuring

The second, and perhaps more important, aspect of IO autonomy stems from the IO’s ability to structure knowledge and discourse in its particular field. This is, of course, related to the bureaucratic power of the IO as outlined above. Only with a seemingly objective expert staff and an institutionalized set of procedures and rules, both of which define the legitimacy of the IO, does the IO have the power to structure, and subsequently change, discourse.[16] I divide the knowledge-structuring theory into two related but distinct categories: First, the creation of a well-defined language within the field of the IO, what I call the shaping of the discourse. Secondly, and more importantly, there is the active dissemination of that discourse in the international system, the diffusion of international norms. There is, however, an important oversight in much of this theory. In examining the theoretic ability IOs posses in structuring knowledge, the source of the knowledge is often overlooked. It is vital to a complete understanding of the sources of IO change to go beyond the simple recognition of IOs as autonomous shapers of discourse, and ask from where the classifications and norms come that they are creating and spreading.

The Power of International Organizations in Shaping Discourse

Within a given field in international relations – be it, for example, nuclear proliferation, human rights, or development – there exists a discourse through which all debates are framed. This discourse is, however, far from static. It is not only the formation but the evolution of discourse that is, according to the Agency axiom, an important function of the IO. If, as has been posited above, the actors within IOs form objective, expert opinions within their field, than the systems of categorization and definition they use are granted legitimacy, thereby creating a discourse. Barnett and Finnemore examine the ways in which IOs classify objects in the international arena, particularly people. “The ability to classify objects,” they write, “to shift their very definition and identity, is one of bureaucracy’s greatest sources of power.”[17] They point out that, for example, the debate surrounding definition and classification of “refugee” has not only legal and political implications for those classified as such and those nations struggling with refugee problems, but has discursive implications as well, influencing the way in which policy makers and UN officials conceive of refugees and their agency in their own lives.[18] The way in which IOs classify objects, most pertinently people, determines the relative power afforded to those in the categories. In this way, IOs have significant impact on the lives of people and the relations of nation-states on a daily basis.

Additionally, IOs engage in what Barnett and Finnemore call the “fixing of meanings.”[19] This is related to the classification principle, and bears out in the same type of exercise of power. They argue that because actions toward objects are defined on the basis of the meanings conferred on them, the ability to dictate those meanings is invested with a great deal of power. Indeed, they argue, the ability to fix meanings in discourse is the ability to structure the very boundaries of that discourse, and therefore the boundaries for acceptable action. This is particularly true in the example they use – that of the evolution of development discourse. The boundaries of this discourse, birthed and fostered by IOs such as the World Bank and the International Monetary Fund, determines what constitutes development, who gets to do the developing, and who is to be developed.[20] This, of course, not only determines the shape of development in a country deemed developing, but determines the level to which the IO – such as the World Bank or the IMF – will be involved in that process. As the IO classifies and fixes meanings in the evolution of a discourse, they set themselves up as the authority on that discourse. This, when taken together with the objective expert premise of bureaucratization, makes the IO an authority figure in the international system. This, of course, leads to the establishment of the IO as the diffuser of their discursive definitions – the diffuser of norms.

The International Organization as Diffuser of Norms

The idea that norms hold power in international systems is a fundamentally liberal idea, one that is systematically backed up by the construction of IO power delineated above. Norms arise through a tacit mutual understanding of “they way things work.” The mutual nature of norms – that they are shared by multiple parties in, in this case, the international arena – is a defining factor. Therefore, for an idea to become a norm, it must be promulgated in the international system. This is the ultimate function that IOs serve in the Agency axiom. The most important aspect of this function of the IO is that norm diffusion is not a passive process. Even if one accepts the inherent bureaucratic power of IOs, it must be recognized that the diffusion of norms is an act to be undertaken. As Barnett and Finnemore put it, IOs “are the ‘missionaries’ of our time,”[21] spreading their particular values and norms through the mechanisms of globalization. For some IOs this process is more explicit than for others. For instance, the World Bank continues to engage in what it refers to as “project identification,” in which Bank staffers seek out projects in countries in the developing world that they deem “bankable,” thereby explicitly seeking expansion of Bank policy influence. Whether promoting something as broad as peace or development or as narrow as stabilized regional oil prices, IOs seek, implicitly and explicitly, to spread their particular agenda in the international system.

Finnemore attempts to codify this idea with her examination of poverty reduction discourse and the World Bank under McNamara.[22] She argues that the World Bank had become the international “arbiter of development norms”[23] and that the Bank, as an IO, had the ability to sell its notions of poverty reduction in the McNamara era to member states. This ability, Finnemore contends, stemmed from the Bank’s international prestige and power – which, of course, resulted from the Bank’s bureaucratic structure, and therefore legitimacy, as discussed above. Arguing that what occurred was a redefinition of development norms, and that the World Bank, as an international organization, played a large role in that change, she labels the evolution of the importance of poverty reduction a “normative shift promoted by an international organization.”[24] She argues that the Bank, under McNamara, was able to institutionalize poverty as a Bank concern, thereby making it an inextricable part of development discourse. If Finnemore is correct, and the norms diffused by IO had the power to change the discourse of development, and therefore development policy, than the IO is indeed autonomously powerful in the international arena. But what, according to Finnemore, led to the change in stance at the World Bank itself? She points almost exclusively to the charismatic leadership of Robert McNamara, the Bank’s President from 1968 to 1981, as the catalyst in World Bank rhetoric. “If concern about poverty were promoted by IOs,” she hypothesizes, “one would expect to see executive heads and IO staff pushing member states to change their policies, rather than the reverse.”[25] Indeed, Finnemore’s argument points to the leadership of the executive head of the Bank as the primary causal factor in the Bank’s shift of focus, and it has been said that “the sudden upgrading of poverty alleviation under McNamara was an exceptionally personal decision.”[26] Additionally, it has been pointed out that while McNamara’s stance on poverty was novel in 1968, by the early 1970s “it was soon followed and overtaken by a wave of questioning and reformulation of development doctrine” in both “officialdom and academia.”[27] The World Bank was indeed, then, through the leadership of McNamara, an arbiter of discourse on development, playing a critical role in the way in which the world conceived of poverty and development.

Influences From Without: the State-Vector Axiom

Even with the increasing importance of IOs, states continue to be a highly important unit of analysis within the field of international relations. The degree to which states have control over phenomena in the international arena is subject to much debate, most of which is not pertinent here. The degree to which states exercise ideological, managerial and monetary control over international organizations, however, is. Aspects of state influence can explain not only the nature of change within international organizations, but can explain the extent of that change, and the degree to which a demonstrated area of transformation is significant. State preferences are clearly not the only factors of import in the attempt to explain IO behavior, but the State-Vector axiom takes the implicit and explicit role of states in IO change as the single most important explanatory variable.

This theory does not imply, however, an outright return to realism. In an increasingly globalized world in which international organizations exist for reasons other than cooperation between states, much realist discourse does not contribute to the study of change within IOs. A traditional realism that attempts to explain the anarchical tendencies that lead to the disintegration of cooperative IOs[28] can do little to explain the kind of power that today’s most important IOs – such as the IMF, the WTO, and the World Bank – seem to exercise in the world system. Rather than foster cooperation between sovereign equals in the world system, today’s IOs often break the world into two sides – developing and developed – and attempt to reconcile the values established in the latter with the realities present in the former. It is in this construction that state power within IOs is exercised. Those states in the developed world created today’s IOs and have continued, the State-Vector axiom argues, to maintain monetary, managerial and ideological control over them, even as they purport to, and sometimes serve, universality. The founding nations in a given IO – be it the World Bank, the IMF, or the UN – continue to exercise power within the IO for obvious reasons: it was at their directive that the particular IO was created, and hence the values of the IO represent the values of the founding nations. When nations that were not among the founders attempt to assert value systems or beliefs that are contrary to those of the founding nations, they are often met with serious resistance on the part of those founding nations – despite any claims to autonomy the IO itself might have.

State Power and Ideological Entrenchedness: Resistance to Change within IOs

The persistence of the values of founding members of IOs has important implications for the sources of change in within them. Changes are much more easily accepted in the type of IOs mentioned above when they do not threaten the managerial, monetary or ideological control of the founding states – which, in most cases, has become the ideological alignment of the IO itself. There are three important and highly interrelated ways in which state power is entrenched in IOs, and they mirror the ways in which Agency axiom theorists define autonomy. The first is the existence of a state influenced “meta-policy” that dictates IO action on the aggregate, making it more difficult for dissenting IO staff to express themselves within the IO.[29] The second is the entrenchedness of what would be “objective” meta-policy norms within the staff – precisely the “expert” status lauded by Barnett and Finnemore. The third is the hierarchical bureaucratic system that institutionalizes the meta-policy and filters out dissent as it works its way up the ladder of responsibility within the IO. All three of these things – bureaucratic norms, staff professionalism, and hierarchical bureaucratic structure – are used as evidence of the autonomy of IOs, according to the Agency axiom. All three of them, however, serve to compound the extent to which state influence is exercised within an IO by magnifying it and replicating it in the many structures of the IO. The result is the process of “paradigm maintenance,”[30] as Robert Wade puts it, a process through which dissenting views and calls for change undergo a gradual dilution within the IO, making significant change in the presence of state influenced meta-policy a slow and difficult process.

The Existence of an IO “Meta-Policy”: The Overarching Framework for State Influence

The existence of an articulated mission and an understanding of the means of accomplishing that mission are prerequisites for the establishment of an IO – they are defined at the time of the IO’s creation and maintained throughout the course of the IO’s existence.[31] This mission and means constitute what Wade calls a “meta-policy,”[32] what an Agency axiom theorist would call the IO’s established norms of operation – “the way things work.” The meta-policy does indeed give the operational structure of and IO legitimacy in acting according to the norms, as Barnett and Finnemore argue above, and it purports to universality, the idea that there is one correct set of rules that apply within the field in question. But the source of the meta-policy must be analyzed in order to determine the degree to which IO actions – and therefore changes or resistances to change – are truly autonomous of state interests. In Robert Wade’s analysis of the Japanese challenge to World Bank economic policy, he defines the overarching meta-policy of the Bank as “derived from neoclassical economics and receiv[ing] the endorsement of the US- and UK-trained economists”[33] and he stresses the importance of the strategic and diplomatic power of the US within the World Bank. Clearly, in this case, the meta-policy is not some objective, rationalized set of bureaucratic norms – while it attempts to function as such, the state power inherent in it is thinly veiled. It is a system created and legitimated through a powerful set of states according to their interests. Wade argues that Bank acceptance of any alternate policy, such as that of the Japanese, would “delegitimize [the Bank] in the eyes of American academic economics, with its belief in the overwhelming virtues of markets and its political agenda of deregulation,”[34] and that this would run counter to the meta-policy of the Bank, thereby destabilizing its very operation. Therefore, as Wade says, “policies that seem to be inconsistent with neoclassical normative theory are excluded from the start.”[35]

The Staff of IOs and “Expert” Status – The Primary Level of State Influence

Once it has established the existence of a meta-policy that dictates IO operation, the State-Vector axiom examines the degree to which that meta-policy in entrenched in the staff of the IO. In the Agency axiom, Asher argues that the expert status of IO staffers affords them autonomy from state influence, and they are therefore objectively professional in their actions and prescriptions. When the expertise that a particular staff holds, however, has come exclusively from one source – in the case of the World Bank, from the meta-policy of the Anglo-American economic tradition – the objectivity of this expert status must be called into question. Wade points out that two-thirds of Bank economists had been certified by US universities, and that, more impressively, 80 percent had been certified by North American or British Universities – this is a gross overrepresentation relative to the US’s shareholdings in the Bank.[36] He reminds us, additionally, that the Bank President has always been an American, meaning that the entrenchedness of Anglo-American economic theory has traditionally been guaranteed not only in the upper level staff of the Bank, but in the executive levels as well. This brings up an important point about staff autonomy within IOs – the Agency axiom seems to overlook the fact that staffers must be selected by the IO itself. This creates, in effect, a screening process that ensures that very little dissent will be institutionalized within the IO. As Wade puts it, “If [staffers] were to show sympathy for other [economic] ideas…they would be unlikely to be selected by the Bank, on grounds of incompetence.”[37] Incompetence, in this case, is the non-agreement with the established Anglo-American economic prescriptions of the Bank. This almost exclusive adherence to the Anglo-American economic tradition within the staff compounds Ascher’s role-setting thesis of resistance to change, by deepening the reasons behind that resistance. It can be argued that a challenge to the role of “professional” or “intellectual” is a challenge to the belief system that established that authority and to the ideological tenets on which it rests. Therefore, challenging the objective expert status of a World Bank staffer is challenging the legitimacy of the economic ideology that gives him that status. Change, therefore, will be much more difficult to enact if it challenges not only the professionalism of a particular staffer, but the ideological (and state directed) meta-policy behind his expertise.

Hierarchical Structures and the Magnification of State Influence

So far, the State-Vector axiom has demonstrated state influence in two related ways. First, the ideological leanings of the state with regard to the intent of the IO are articulated in the IO’s mission and means of accomplishing that mission, creating a meta-policy. Secondly, the IO selects staff whose expertise is in alignment with that meta-policy, and that staff then legitimates their views and actions through the bureaucracy of the meta-policy. The final way in which state influence is demonstrated in an IO is through the very hierarchical structures that Agency axiom theorists see as a source of autonomy. Given the existence of a meta-policy, and the existence of a group of staffers whose expertise is based in this meta-policy, the hierarchical structures inherent in bureaucratic IOs make sure that the differing opinions that may exist in the ranks of IO staff are gradually filtered through a hierarchical order, thereby ensuring that the public face of the IO continues to demonstrate coherence and loyalty to the meta-policy, even in the face of challenge. Wade points out that this is especially true at institutions such as the Bank. “A document goes through rounds of discussions at successively higher levels of the hierarchy,” he writes, “each level being a filter that narrows the range of views espoused by ‘the Bank.’”[38] He details the ways in which many of the messages deemed inconsistent with Bank policy were filtered out of the East Asian Miracle study through successive levels of editing, until the final product had been toned down enough so as not to “stray outside of the range of views represented within the Bank.”[39] It is not simply, however, that the higher levels of staff care more about the maintenance of meta-policy coherence, as Wade points out. “Promotion criteria select people for the higher levels who make decisions quickly and with closure, using ‘facts’ selectively to support pre-conceived patterns and convictions.”[40] This is not to say that new ideas cannot be generated from the highest levels of IO leadership – Robert McNamara, as Finnemore points out, was highly influential in reorienting Bank policy toward poverty reduction. It was his task, however, to prove that poverty reduction did not contradict the neoclassical fundamentals upon which Bank meta-policy was based.[41] Later Bank officials whose views are not so easily reconciled with those of the Bank meta-policy, however, found themselves ousted from positions of Bank leadership.[42]

The New Bank and IO Change Theory: Testing the State-Vector Axiom

Wolfensohn’s “New Bank” serves as a perfect test for the State-Vector versus Agency debate. Clearly, the Bank has undergone significant change in the past half decade. But what exactly are the nature and extent of the change? To discern the extent to which the policies of the “New Bank” are the result of an autonomous process of decision making or the continuation of a hegemonic meta-policy, it must first be determined exactly what is new about the Bank. As such, the following chapter will first present a critical history of the Bank’s view of poverty, and posit that throughout the Bank’s short lifetime, poverty reduction has served as a tool of institutional survival – and continues to do so. The weight poverty has carried as a policy issue, I argue, is conditioned upon external and internal pressures that have systematically threatened the Bank’s existence, and poverty has been either been accentuated or neglected according to institutional needs. The current emphasis on poverty, I posit, fits this paradigm perfectly. Wolfensohn, faced with increasing criticism and skepticism as to both the efficiency and relevancy of his institution, has created a framework which seeks not only to make Bank policy more efficient, but also to make Bank influence more relevant in a wider array of development issues.

I posit, however, that Wolfensohn did this without making any substantive changes to Bank meta-policy. I will demonstrate this through an examination of the institutional manifestations of the “New Bank.” First, through an assessment not only of the content of the 2000 WDR, but of the process through which it was written, I will detail the continued influence of not only the Anglo-American economic tradition, but, where the meta-policy boundaries were pushed too far, the actual intervention of the US state. I will then turn to the policy manifestation of the “New Bank,” the PRSP program. After an analysis of the stated goals and structures of the program, I engage in an evaluation of the completed initial PRSPs of Mozambique and Honduras, two of ten countries to have completed and submitted their papers. I will detail the ways in which the papers reinforce the Bank meta-policy in both content and in consultative process. The chapter comes to two conclusions, which are, of course, interrelated. First, I conclude that the Bank undertook necessary changes to salvage its image and credibility, and in doing so, renewed its focus on poverty and expanded its role in the development arena. In undertaking this change, the Bank was clearly able to structure knowledge and disseminate development norms. I conclude additionally, however, that the changes undertaken at the Bank have been manifested in such a way as to have little to no impact on Bank meta-policy, and have even systematically reinforced the primacy of that meta-policy by embedding its theories and structures in the organization of the “New Bank.” The existence of knowledge structuring and norm dissemination cannot, therefore, be conflated with institutional autonomy.

The final chapter posits that the expansion of knowledge areas in which the Bank has expertise has dangerous implications for the future of economic development. Given the evidence that Bank meta-policy is highly resistant to change due to the power structures inherent in it, the augmentation of traditional areas of Bank influence with the social and political issues of development creates the risk of unproductive co-optation. If, as in the case of the PRSP program, existing meta-policy remains at core of Bank directives but is cushioned with social and political considerations, the weight of those considerations can be diluted. I point out that this process is already beginning, as some civil society critics of Bank policy are co-opted into the Bank system. This will only mean the further dissemination and legitimation of Bank meta-policy, and has the potential to undermine productive dialogue on development issues. The only solution to this problem will be to change the hegemonic power of Bank meta-policy, through a change in the power of the Bank’s stakeholders, particularly those of member governments.

A Note on Methodologies and Limitations

This paper attempts to both compare stated Bank goals with programmatic realities and analyze the assumptions that underpin both. As such, it relies heavily on Bank primary source material, but also upon secondary accounts of internal processes to which I was not a party and which have not been heavily publicly documented. Therefore, the critique of the 2000 World Development Report is undertaken comparatively and in looking at inconsistencies within the document itself, then supplemented with published accounts of its writing process. An additional limitation arises given the relative newness of the shift in Bank stance. The volume of academic literature on the new Bank stance is rather limited – but this, I contend, adds relevancy and importance to my study of the issue.

Despite the limitations, I attempt to undertake a rigorous, but far from exhaustive, critical history of Bank treatment of poverty, followed by an examination of Bank rhetoric and policy as embodied in World Bank public documents. With regard to PRSP evaluation case studies, I have selected Mozambique and Honduras as important examples of the program. First, because the program is so new, very few full PRSPs have been completed – Mozambique and Honduras are among the first of the 10 countries to have filed complete PRSPs. Secondly, Joint Staff Assessment review papers have been filed for both cases, and there has been some non-governmental and outside critique of both the PRSPs themselves and the participatory processes they used. Beyond the structural rationale for the choice of these two cases, however, there are important characteristics of the two nations that make their choice logical. The selection of a country in Latin America and a country in Sub-Saharan Africa not only speaks to any regional differences that might exist, but allows for a comparison with past Bank programming, particularly past structural adjustment measures, which were concentrated in these two regions. Additionally, the two countries have similar poverty rates, making their fight against poverty of the same magnitude. I think that the study of these two cases, together with the Bank guidelines for the program and a survey of non-governmental critique thereof, serves to illustrate the way in which the program is a vehicle for broader Bank goals.

Chapter 2 Examining the World Bank’s New Poverty Strategy

Historical Determinants, Institutional Capacities and Influence Vectors

Introduction

Sources, Natures and Extents of Change

Despite not being an explicit concern of the World Bank’s Articles of Agreement, poverty alleviation has become the central policy issue for the Bank, now defining its very mission. Through the redefinition of poverty in the 2000 World Development Report and the restructuring of the institutional approach to poverty with the creation of the Poverty Reduction Strategy Paper program, the World Bank has experienced what one former Bank economist characterized as “an institutional revolution still in progress.”[43] Indeed, the language of the 2000 WDR and the PRSP program guidelines has institutionalized the evolution of the discursive framework of poverty, an evolution which has been transpiring for the past quarter century in the development community at large. Emerging from the Bank’s new approach to poverty reduction is a seemingly revolutionary rhetoric that redefines poverty alleviation to include the promotion of opportunity, the facilitation of empowerment, and the enhancement of the security of the world’s poor. If poverty alleviation is to be central to development strategy, it must, according to Bank logic, address the complicated and multifaceted nature of poverty together with the need for economic growth.

While the importance of this monumental shift in Bank discourse cannot be denied, the new framework created raises an important question for both those attempting to understand the significance of the new Bank framework and those who will be the beneficiaries of its policies. To truly begin to understand what this new policy framework will mean for the alleviation of global poverty, we must understand the significance of the changes that have been made. Exactly what has been the extent of this institutional revolution? I argued in the previous chapter that because the policies undertaken at the World Bank cannot be separated from the interests of the Bank’s powerful members – in particular, the United States – any attempt at change in Bank policy will be constrained by those interests. Because the Bank’s autonomy is checked by the academic, professional and financial power of the US through the overarching meta-policy, the new language of the WDR and the new polices of the PRSP program, I will argue, have done little to change the character of development policy.

This chapter attempts to examine the source, the nature, and the implications of the Bank’s seemingly revolutionary shift in rhetoric, as embodied in language by the 2000 WDR and in policy by the Poverty Reduction Strategy Paper program. In undertaking this examination, I ask three main questions. First, from what can this shift be considered a departure? How has the Bank treated poverty in the past? Second, why has the Bank redefined its poverty reduction strategy? Are there institutional and organization rationale for the development of the new rhetoric? Lastly, and most importantly, does the seemingly revolutionary shift in rhetoric really comprise a departure from previous Bank policy? To address both the sources and the historical implications of the new stance, an examination of the historical treatment of poverty reduction as a policy objective is necessary. I intend to not only detail the vacillation of poverty’s importance in the past 40 years, but to show that the current stance on poverty is a child of institutional necessity – and that this is not the first time in the Bank’s history that this has been the case. To then address the degree to which the shift in rhetoric can be considered a departure from earlier policy, I plan to analyze the nature of the shift itself through an examination of both the content and intent of the concrete manifestations of change in Bank language and policy direction – the 2000 WDR and the PRSP program. Through an assessment of both the language used by the WDR and of the process through which the report was written, I hope to prove that the report demonstrates precious little in the way of actual change. I will then turn my analysis to the PRSP program itself. By evaluating the Bank’s many guidelines for the program[44] and then the program’s implementation in two case studies – Mozambique and Honduras – I hope to demonstrate the degree to which the program potentiates better outcomes for the world’s poor.

The History of Poverty Reduction as a Bank Policy Objective

Personal Crusades, Structural Reforms and Institutional Necessities

The importance of poverty reduction as a development objective has varied greatly in the Bank’s short history. While it was “at first merely seen as a desirable side effect of the Bank’s lending,” poverty reduction has, in recent years, come to be “the central object of its existence”[45] and its “overarching objective.”[46] References to poverty appear nowhere in the Bank’s Articles of Agreement, and poverty is given virtually no place in the Bank’s first twenty years of publications.[47] The nascent Bank of the Marshall Plan years focused on the reconstruction of Europe. Then, in the 1950s, the Bank began to make “development” loans, consisting mainly of utility, transportation, and agricultural infrastructure projects, a significant percentage of which went to the more developed countries and the colonies of the world powers.[48] With the creation of the IDA in 1960, and then the presidency of Robert McNamara starting in 1968, poverty’s importance as a policy consideration was reinvented. When McNamara left the Bank in 1981, the decade of structural adjustment lending began, but then the presidency of James Wolfenson in the 1990s saw the Bank reorient itself, once again, toward the reduction of world poverty. While the changes in attention to poverty reduction made over the course of the Bank’s short history have had highly normative manifestations, they have been far from simply moral decisions to address the plight of the world’s poor. Rather, there have been institutional needs that have forced the Bank, at different points in its existence, to redefine its role on the world development stage. A bank with no borrowers would simply cease to exist. In order to increase or ensure volume of lending and create new markets for Bank loans, the Bank has slowly expanded its role as a development lender, and the World Bank Group of today lends funds for nearly every conceivable development need. The following short history of the Bank is far from exhaustive, but I hope to show not only the ways in which Bank policy and rhetoric have fluctuated throughout the Bank’s history, but also uncover the institutional motivations and organizational pressures that have effected these changes.

Making the World “Bankable”: The Creation of the IDA

It was not until the 1960 establishment of the International Development Association (IDA) that poverty was addressed institutionally at the Bank by targeting low-income countries. Poverty alleviation was by no means, however, the explicit goal of the IDA. First suggested in 1958, the IDA was institutionalized in 1960 for three reasons: First, the availability of suitable borrowers in the world was declining rapidly. Second, as Bank President Eugene Black later admitted, the IDA would offset the UN General Assembly’s slow approval of the Special United Nations Fund for Economic Development (SUNFED), which the Bank saw as inferior and meddlesome.[49] Third, the Bank later came to realize that the IDA would ease the IBRD’s burden of risk from less creditworthy nations, thereby keeping the faltering IBRD afloat. The creation of the IDA was, however, another way in which the Bank’s member countries were able to exert influence on the Bank, and continue to do so today. Unlike the IBRD, which raises its funds through the sale of bonds, IDA funds are donated by member governments, and are typically replenished every three years. Not surprisingly, the US has used the leverage of being the largest donor to exert influence over Bank policy. In 1996, for instance, a strongly Republican and traditionally isolationist Congress[50] cut the replenishment payment by more than half, thereby triggering cuts from other major donors. It was only the lobbying of some of the US’s largest corporations – who are awarded the contracts for the development projects in developing nations according to the US’s contribution to the IDA – that put IDA replenishment back on track.[51] Throughout the entire process, the future of the IDA hung in the balance of US domestic politics.

The 1960s and Bank Uncertainty Regarding Poverty

The 1960s betray a deep ambiguity when it comes to Bank policy toward poverty. In 1963, George Woods, an influential New York investment banker, was appointed President of the Bank. In the midst of Kennedy’s “Development Decade,” the developing world was accumulating debt at an alarming rate and the Bank again found itself faced with a shortage of suitable borrowers by the middle of the 1960s.[52] By 1966, the gap between the incomes of rich and poor nations – even when leaving out the US – was 16:1, and the demise of many colonial systems was generating greater and greater numbers of nascent national economies with low national incomes and poor infrastructure.[53] Woods found the constraints on Bank lending dogmatic, asserting that the restrictions of the creditworthiness of a borrower or the rate of return of a project would be the Bank’s demise. He was the first President to introduce the idea that the Bank should have a say in the macroeconomic policy of its borrower nations. “This is more and more what we find ourselves talking about with member countries,” said Woods in the preface to the 1966/1967 Annual Report, “fundamental policies to govern their day-to-day economic decisions.”[54] He was also the first to introduce lending for social programs, suggesting in a 1963 speech that the Bank should leave the “proven ground” of 1950s-style infrastructure lending and venture into the new and “less familiar terrain” of health, education, family planning and sanitation.[55]

Woods’ primary task, however, was to seek an increase in assistance to the poorest countries through the expansion of the IDA. A former Bank economist remembers Woods lamenting, “There is no future in the World Bank group unless the IDA becomes more important than conventional lending.”[56] In addition to small increases in IDA funding, Woods managed to increase the staff size and the operating budget of the Bank by a considerable degree. It was clearby the end of his term, however, that Woods was frustrated by the ambiguity of the “Development Decade.” The increased funding and rescheduling of debt service had had little effect on poverty rates, and the gap between poor and rich countries was continuing to widen. The Bank found it necessary to begin making balance of payment loans, disguised as “industrial import loans,” to India, a major borrower that prior to the 1960s had been considered a Bank success story. By the end of his term, Woods was faced with a world turned sour on development, and was worried that the rich nations of the world might just turn their backs on the impoverished. In a speech delivered to the Swedish Banker’s Association shortly before the end of his term, Woods attempted to “inject political leaders and the public in general with a sense of urgency and hope about development.”[57] Whether Woods succeeded or not in his quest to remake the Bank into a development organization remains a subject for debate. Woods’ final action as Bank President, however, may have been his most important. Kapur, Lewis and Webb, who have written the most recent authorized history of the Bank, said of Woods, “In all that [he] did to push the Bank toward development and poverty, the more far-reaching move may have been his choice for a successor.”

Poverty Redefined: The McNamara Years

Robert McNamara took office in 1968, having swayed Woods with his assertion that economic development was essential to the security of nations. While there can be no doubt that this view was informed by McNamara’s involvement in Vietnam as US Secretary of Defense, his convictions were strong and his zeal the stuff of which Bank legends are made. Despite the accusations of “Vietnam guilt” levied against McNamara’s strong moral convictions about development, the convictions stood, and McNamara succeeded in finishing what Woods had started: turning the Bank into an international development organization.

The changes made by McNamara were both rhetorical and in policy. It can be argued, however, that during McNamara’s tenure, the rhetorical changes were infused with his driving moral arguments against poverty, while the policy changes were often made to amplify the sheer volume of lending. McNamara pushed for greater equality to lessen relative poverty within countries by encouraging investment not only in growth though industrialization but also in agriculture and social services, making the range of activities for which the Bank should lend much broader. He abandoned the restrictions on lending to state-owned enterprises, and began to fund public utilities, manufacturing and mining firms, and agricultural enterprises. Each of these new target areas would help reduce poverty by increasing the state’s capacity to come to the aid of its impoverished citizens – and would also mean increased lending from the Bank. McNamara, like Woods, felt that the extent of the difficulties faced by the developing world necessitated a much higher volume of Bank lending. He set a target of doubling Bank lending, and despite the Bank treasurer’s protest vis-à-vis his resignation, McNamara increased Bank lending from less than $1 billion in 1968 to more than $12 billion in 1981. During his thirteen-year tenure, he lent more than $77 billion in total. He tripled the size of the Bank staff in three years, and set annual lending targets for each country with which the Bank was engaged in loans – a practice which persisted beyond the McNamara period, and is still used today.[58]

There can be no doubt, however, that McNamara’s time at the Bank was a revolutionary departure from the Bank’s beginnings. In the “gestation”[59] period of his first term, McNamara’s impassioned calls for more attention to poverty far outstripped the policy changes that were being undertaken,[60] but it was during this period that the concept of “poverty lending” was being formulated and that the weight of poverty alleviation as a policy objective was concretized. Various policy tools were proposed during this time, most notably McNamara’s work on population control, but a cohesive policy that would have a measurable impact on poverty rates never materialized in these first few years. McNamara’s most famous proclamation of his early years in office was his 1968 assertion at his first Board of Governors meeting that “trickle down” macroeconomic theory was not working, and that increases in national income were not being redistributed. By the early 1970s, this had become conventional wisdom, but it would be again reversed as the 1980s approached. McNamara’s famous 1973 Annual Meeting speech at Nairobi presented the first viable policy program aimed at reducing poverty – lending for smallholder agriculture. In addition, McNamara proposed to change the way in which developmental success was to be measured, so that program impact on what McNamara termed the “absolute poor” could be more readily measured. This change was more fully fleshed out with the 1974 publication of Redistribution with Growth,[61] but was forgotten quickly in the shadow of McNamara’s agricultural reform plan. The Nairobi speech was one of McNamara’s most impassioned, and brought the rhetoric of poverty reduction to previously unseen levels. He charged that the developed world’s acceptance of the existence of absolute poverty (a term he used often to refer to the poorest 40 percent of the world’s population) was equivalent to a failure of civilization.[62] For the first time, set a tangible target for poverty reduction: the eradication of absolute poverty by the end of the 20th Century.

In 1976, the debate over the definition of “basic needs” and its implications for poverty reduction strategy began. Overtaking the development community, the basic needs debate sought to address the ways in which policy could secure things such as food and health, while some proponents argued for the extension of the definition of needs to include shelter and clothing, and even human rights and security. The essential premise of the basic needs approach, as defined by the Bank through Paul Streeten’s First Things First[63] was the procurement of material needs regardless of earning capability. As Kapur, et al. put it, “if ‘redistribution with growth’ consisted in giving each person a fishing rod…basic needs would be ‘an approach that enables the poor to earn or obtain their basic needs.’ That is, with or without a fishing rod, food would be guaranteed.”[64] McNamara was insistent on the necessity of both growth and basic needs procurement, and his refusal to compromise, together with the muddy definition of basic needs throughout the late 1970s, hindered the issue’s development from theory to policy. In addition, the economic climate of the 1970s found little evidence of productivity gains from education and health improvements, leaving the basic needs issue with only a moral leg on which to stand. By the beginning of the 1980s, the increasing instability of the world economy, coupled with McNamara’s departure from office, served to table the issue throughout the next decade. But its emphasis on basic education and health attainment would lay the foundation for the reemphasis on direct poverty alleviation of the early to mid-1990s.

Ideological Reversal: Clausen and the Creation of Structural Adjustment Lending

The 1980s brought severe setbacks to the role poverty reduction was to play in development strategy.[65] With the election of Margaret Thatcher in 1979, Ronald Reagan in 1980, and Helmut Kohl in 1982, the governments of the Bank’s major donor countries made a decided shift to the right. In this environment, US President Ronald Reagan appointed to the Bank Presidency Alden Winship Clausen, the former head of the Bank of America, the second largest private bank in the US. Clausen made clear from the beginning that poverty alleviation was far from a focal point of his agenda. Clausen then chose Anne Krueger, now a deputy Managing Director of the IMF, as his chief economist, and Krueger made clear her ideological congruence with the Reagan administration’s supply-side, market-oriented policy stance. When the debt crisis occurred following the Mexican default of 1982, the Bank, boasting a hugely expanded lending capacity thanks to McNamara, rushed to help developing nations service their private debt. “This had the effect,” points out Caufield, “of converting short- and medium-term developing country debt held by private banks to long-term debt held by the Bank.”[66] As the stability of the world economy waned, stabilization and adjustment came to the fore of Bank policy. Creating the institutional framework for the “Washington Consensus,” Clausen’s Bank decided that the solution to the economic instability of the developing world was to provide large balance-of-payment loans on the condition of dramatic fiscal and monetary reforms. Together with the IMF, whose job was currency stability, adjustment programs were created that were to take no longer than five years and that would stabilize developing economies so that they might get back on the correct track of longer-term development strategy.

Turkey, not surprisingly, became the first recipient of a Structural Adjustment Loan (SAL) from the Bank, despite not having completed its stabilization program with the Fund. Indeed, “the Turkish program became a prototype for the [Bank’s] structural adjustment series,” making a brief case explication pertinent here.[67] With the Iranian Revolution and the Soviet invasion of Afghanistan haunting the political climate of the region, the direction that the Turkish state might take was of considerable concern to the Western powers. Assuring a free-market economy in Turkey was of utmost importance to the Bank’s major donors, who, in the midst of the Cold War, had an eye constantly to Soviet expansion. From 1980 to 1984, Turkey would receive five SALs that totaled $1.5 billion.[68] By 1984, however, Turkey had not met its adjustment goals. Given that one of the main tenets of the adjustment program was its short-term nature, the Bank created a new type of adjustment loan, this one targeted at individual sectors of the economy and appropriately named the Sectoral Adjustment Loan (SECAL). From 1985 to 1988, Turkey received another $1.4 billion in SECAL loans.[69] When, in 1983, the military government was replaced with a civilian democracy, the now-accountable government had been forced to deal with the public disquiet about the continuous currency devaluations and the subsequent declining real wages that had been the backbone of the SAL program. This caused the government to seek alternative methods of funding social programming, which succeeded only in driving up public expenditure and undoing much of the budgetary adjustment as it was being performed. The clever way in which the government shouldered their expenditures through extrabudgetary funds kept this debt off of the Bank’s accounts, and thereby kept the Bank content with their program.[70] Meanwhile, the Turkish government had accrued by 1995 $70 billion in foreign debt, the service of which accounts for one-third of export earnings in the country. When, in the mid-1990s, inflation began to rise again, the Turkish government was forced to cut half a million jobs, cut wages by 15 percent, and devalue the lira to a point where the US dollar was worth, in 1994, some 900 times what it had been in 1979.^.[71] It’s important to note that Turkey’s case was not anomalous for the adjustment-focused 1980s. The Bank’s official history points out three other similar cases in the early SAL period: the Philippines, Ghana, and Colombia. All four countries were experiencing political turmoil under dictatorships or prolonged civil war. Indeed, the Bank’s seeming affinity for carrying out structural adjustment under the supervision of dictators spawned an academic debate in the development community about the relationship between autocratic rule and adjusting liberalization.[72]

Given the experiences the people of many countries were having with structural adjustment, the world climate in which the Bank was operating was becoming increasingly vocal in their opposition to Bank activities. As put in the Bank’s official history,

External criticism surged after 1985, much of it centered on the austerity of the adjustment effort. The most resounding objection came from the United Nations Children’s Fund, which published a collection of papers in 1987 under the title Adjustment with a Human Face. These papers were case studies of the “social costs of adjustment,” that is, of worsening health, education, employment and incomes in countries undergoing economic adjustment.[73]

The initial response to this criticism, first by Ernest Stern, the Vice President for Operations, and then by Anne Krueger, was one of denial – adjustment programs, said Stern publicly, were good for the poor, as they unburdened agriculture from price distortions. The goal of the “shock” of structural adjustment was to get the adjustment over with before opposition could be mobilized, and to restore confidence in the economy very rapidly.[74]But developing countries were faced with rising inequality, lower real wages and an erosion of funding for social programming in areas such as health and education, not to mention mixed results with their macroeconomic adjustment programs. Fiscal austerity squeezed social spending out of many budgets. It was in this climate that plans such as Ghana’s Program to Mitigate the Social Costs of Adjustment (PAMSCAD) were created to offset the harm being done by structural adjustment.[75] Funded by multilateral donors, including UNICEF, PAMSCAD was largely a failure. Whether this is a result of programmatic shortcomings or of the institutional inability to overcome the social setbacks of structural adjustment is subject to debate, but the PAMSCAD experience raises important questions about the feasibility of cushioning structural adjustment with secondary, social programming.

Poverty Back on the Rhetorical Map: Conable and Bank Restructuring

Barber Conable, a Republican Representative from New York with a rich understanding of congressional politics, was chosen as a successor to Clausen in 1986. His main task, from the outset of his tenure, was to improve the image of the Bank, which, under the hard-line supply-side direction of Clausen, had come to be seen by the world as being anti-poor. In his 1987 Annual Meeting speech, he formally “rededicated” the Bank to the “fight against poverty,” and subsequently set about on a massive reorganization of the staff structure.[76] The convergence of the rededication to poverty and the reorganization of staff – similar to that which happened under McNamara – was not simply a coincidence. By switching the roles of Moreen Qureshi, formerly the Senior Vice President for Finance, and Ernest Stern, who had been Chief of Operations, Conable loosened the reigns on structural adjustment lending, which had been held under the fairly tight supervision of Stern prior to the reorganization. A deconcentration of control over structural adjustment took place, with more regional authority extended under Qureshi. This created what Kapur and his colleagues refer to as an expansion of the “adjustment umbrella.” [77] Not only was adjustment being stretched beyond balance of payment issues to growth promotion, but the waters of poverty reduction and social sector reform were beginning to be tested by the Bank. At the beginning of Conable’s term in 1986, the Operations Evaluations Department (OED) stated publicly, “SALs were never intended to and are not an appropriate instrument to address directly the longer-term actions need for poverty alleviation.”[78] This defense, however, was quickly replaced by the new Conable rhetoric, beginning with the 1987 speech Annual Meeting speech, followed the establishment of the Task Force on Poverty Alleviation, and culminating in the 1990 WDR, which focused on world poverty.

The new Vice President for Economics and Research, Stanley Fischer, replaced Anne Krueger and was quickly won over on the topic of poverty alleviation. It was Fischer who gave the final okay to the selection of poverty as the focus of the 1990 World Development Report. The findings of the report advocated that the Bank not abandon the growth-oriented policies of the preceding decade, but that they be combined with poverty oriented lending, to soften the blows of adjustment. As put by the Bank’s official historians,

[The WDR’s] “dual” strategy for poverty alleviation was, in effect, a compromise, combining poverty-targeted and even welfare lending with a reemphasis on growth and trickle-down. It conceded that adjustment could indeed have “social costs,” justifying compensatory interventions and subsidies, but reaffirmed the central role of economic growth.[79]

This sentiment, which would define the next half decade of the Bank’s stance on poverty, came on the heels of the relative failure of an earlier Conable effort at reorienting the Bank toward poverty reduction. In 1987, Conable had created a Task Force on Poverty Alleviation and had given them the mandate of writing a report on the status of poverty alleviation as a policy instrument at the Bank. The report, published in May of 1988, made three main recommendations: First, there should be created for each borrower country a “core poverty program” (CPP) that outlined the nation’s strategies for attacking poverty; second, the Bank should undertake poverty-oriented program loans, drawing on the experience of structural adjustment lending programs; third, the Bank should seek additional concessional funding, creating a “Special Poverty Fund” earmarked for poverty lending purposes. The report and its proposals were not well received within the Bank. Ernest Stern, then Vice President for Finance, was of the opinion that creating different “special approaches” to lending in specific areas such as poverty or the environment would weaken the Bank’s “management control and reduce the response flexibility.” [80] The Legal Department then vetoed the poverty-oriented lending concept, saying that the Articles of Agreement held no authorization for such lending and additionally that the question of the judiciousness of paying a government to adopt pro-poor policies was a difficult one, at best. Despite these internal criticisms, the 1990 WDR was framed along the lines of the task force recommendations, and the Preston presidency followed in the footsteps of the Conable redirection.

Preston, The Post-Wapenhans Bank and NGO Influence

On the heels of the Bank’s development of this “dual strategy,” Lewis Preston was appointed Bank President in 1991, and immediately declared that poverty reduction was the Bank’s “overarching objective.”[81] Indeed, a report issued in September, the month Preston was appointed, declared, “The basic mission of the World Bank and the core of its assistance program is the reduction of poverty. The Bank's overall mandate to promote development arises from this fundamental imperative.”[82] Despite this continuation of this rhetorical commitment, however, Both Preston and Stern, whom Preston appointed Managing Director,[83] wanted to reemphasize the importance of growth for development. But the early 1990s saw two important incidents that had serious repercussions at the Bank – first, the collapse of the Soviet Union in 1991, and second, the commission of the now infamous Wapenhans report,[84] which found that more than a third of the Bank’s project were failures by their own standards.

The collapse of the Soviet Union created a new category of developing nations – the transition economies. The new set of problems and issues that the transition economies created overtook the Bank’s efforts at poverty alleviation. The Bank that had begun the decade an institution whose stated “overarching objective” was the reduction of poverty was now an institution for “helping borrowers reduce poverty and improve living standards through sustainable growth and investment in people.”[85] This represented a significant setback to poverty reduction as a direct policy focus, as the Bank’s 1995 annual report declared that the main function of the agency was the promotion of “social and economic progress in developing nations by helping raise productivity.”[86]

It has been argued, however, that much of the orientation toward ensuring raised productivity and economic progress was a result of Bank chagrin over a series of public relations scandals during Preston’s tenure. The now infamous 1991 Summers memo,[87] the Morse Commission Report,[88] and the 1992 Portfolio Management Task Force report, colloquially known as the Wapenhans report (named after Bank Vice President Willi A. Waphenhans, the report’s main author), all created significant public relations scandals at the Bank, the last being the most widely cited and criticized. Originally an internal document, the Wapenhans report was leaked to the press and caused a worldwide stir among NGOs and borrower governments, “call[ing] into question the effectiveness of project lending, the very signature of activity at the World Bank.”[89] The report stated that, according to the Bank’s own criteria, a full 37.5 percent of Bank projects were rated unsatisfactory by the OED – up from 15 percent in 1981. The report continued that the Bank was not enforcing 78 percent of its terms of loan conditionality and that the pressure to guarantee loan approval was eclipsing the Bank’s ability to monitor its performance and secure satisfactory results. Bank critics, such as Caufield, cite the continued use of lending targets – quantitative objectives assigned to staffers for the individual countries with which they work that dictate the desired level of bank lending to be completed – as a cause of such institutional neglect. Caufield points out that under McNamara, when the targeting program was first initiated, “40 percent of all IBRD loans were pushed through in the last two months of the fiscal year, a pattern that continues to this day.”[90] Bank managers, on the other hand, point to other causes for the findings of the Wapenhans report. Most importantly, they point out the internal limitations of evaluation, both institutionally and ideologically – according to what standards should the results be judged? To whom could the Bank compare itself? Should a two-thirds success rate be considered admirable? While there are no clear answers to these questions, the Wapenhans ordeal represented “a landmark in the [Bank’s] history, as much due to the external attention as to any new revelation.”[91]

In July of 1993, the Bank published “Next Steps – A Program of Actions,”[92] a document detailing the Bank’s reactions to the recommendations of the Wapenhans report. The document outlines 86 actions that the Bank should take to improve performance. Critics, such as Caufield, have pointed out that more than two-thirds of these “actions” consist of “preparing reports or conducting studies” and that the few action-oriented “actions” are “so vague as to be nearly meaningless.” One recommendation calling for the publishing of a report on environmental policies, she points out, was a task the Bank had been performing annually since 1990.[93] Beyond “Next Steps,” however, the Bank took additional measures to calm the ever-increasing inflow of external criticisms. In August of 1993, the Bank created a new information disclosure policy, and in September, they established an Independent Inspection Panel to investigate charges that they had not followed their own procedural rules in the creation of policy. In 1994, the Bank issued a statement welcoming development dialogue in the midst of the “50 Years is Enough” coalition’s campaign for Bank and IMF abolition. As Preston neared the end of his term, he was faced with a Bank that was both forced to be increasingly transparent and that had to confront a level of external criticism never before seen. The intensity of criticism, combined with the overwhelming nature of the collapse of the Soviet Union, steered bank policy and rhetoric away from poverty for the Preston term. As the Bank slowly adjusted, however, and began to incorporate some of its critics demands into its internal structure, the Bank again found space to talk about poverty. And in James Wolfensohn, they found a President willing to do just that.

Wolfensohn and the Rhetorical Revolution

In February of 1995 it was announced that Preston had been diagnosed with cancer. Shortly after his death in May, James D. Wolfensohn took office as the ninth president of the Bank, determined to finish the job Preston had started in reforming the Bank’s image. Wolfensohn found himself facing increasing pressure for reform not only in response to growing NGO and donor criticism, but also in order to secure continued IDA replenishment – which was threatened by a lack of congressional faith in the accountability of the Bank. From the start, Wolfensohn was determined to project the image of a changed Bank. In his initial annual meeting address, he asserted to the Board of Governors:

One thing is clear: we must continue to act – so that poverty will be alleviated, our environment protected, social justice extended, human rights strengthened and women [sic] rights advanced, all the cause of a more just and peaceful world. We must ensure that our organization functions at the highest level to achieve these goals.[94]

While Preston stressed in his first annual meeting address the need to increase the efficiency of investments and of Bank operations, Wolfensohn, in contrast, affirmed “I have learned that the real test of development can be measured not by the bureaucratic approval process, but by the smile on a child’s face when a project is successful.”[95] The crux of his speech, however, was in laying the groundwork for what would become his “strategic compact” approach – an attempt to foster the creation of Bank “partnerships” with NGOs and both donor and recipient governments. In order strengthen Bank accountability (a serious concern for the Bank, as the US congress held so much power over IDA replenishments and was skeptical as to the extent of Bank accountability in a post-Wapenhans Report environment) Wolfensohn proposed that the Bank needed to be a better partner in the field of development. “To be a good partner,” he stressed, “we must be ready to listen to criticism and respond to constructive comment…I want to have a Bank that is open and ready to learn from others and that holds itself accountable.” He pointed to the ways in which the increasing criticism from outside had created a “climate of resistance” within the Bank, and admonished, “There is no place for arrogance in the development business.”

In the creation of what he called “the New Bank,”[96] Wolfensohn gradually introduced, over his next few years, the ideas that would become the central tenets of the 1999 Comprehensive Development Framework (CDF). By February of 1996, Wolfensohn had created the World Bank Participation Sourcebook,[97] a massive 280 page document that was intended to serve as a reference for the methodologies of fostering participation in development projects. It is in this volume that attention is first drawn to “learning what poverty means to the poor” – providing the impetus for the Bank’s “Voices of the Poor” study that would inform the 2000 WDR. The 1996 annual meeting speech furthered Wolfensohn’s commitment to partnerships and introduced a “new paradigm” for development that stressed the “social underpinnings” of the development process and called for a “broader, more integrated approach” to development. The World Bank, he said, was an “institution…on the move.” [98] In November, the Trust Fund for the Heavily Indebted Poor Countries initiative was formally established, and the HIPC Implementation Unit created at the Bank. The main tool of the HIPC initiative is the forgiveness, for those countries for which the burden of debt is “unsustainable,” of some portion of IDA debt when it comes due.[99] The first debt relief package was awarded to Uganda in April of 1997. Then, in his 1997 annual meetings address, Wolfensohn expanded his notion of participation and broad inclusiveness so far as to say “Development requires much too much sustained political will to be externally imposed. It cannot be donor-driven.”[100] Thus, Wolfensohn provided impetus for the “nationally-owned” mandate for poverty reduction strategies – one that would be central to the CDF, and especially the PRSP.

In addition to attempting to soften the world’s image of a harsh, uncaring Bank, Wolfensohn also had to contend with an increasingly begrudging US Congress, whose powerful members were overtly skeptical of the Bank’s accountability and ability to stem corruption within its ranks and on its projects. On July 16, 1998, the Bank suspended three staffers because of allegations of what the New York Times called “kickbacks and other wrongdoing.”[101] The next day, Senator Mitch McConnell, chair of the Appropriations Subcommittee on Foreign Aid, said in a letter to Wolfensohn that he found allegations of internal corruption at the Bank “shocking,” and threatened that the Subcommittee would withhold funding the impending IDA replenishment. Less than a week later, the Appropriations Committee approved the $800 million replenishment, but made the disbursement of the replenishment conditional upon the completion of an audit by the General Accounting Office.[102] Wolfensohn’s responses to the allegations – which had serious consequences not only for the immediate funding of the IDA, but also for the long term credibility of the Bank itself – were swift and direct. In September, two Bank staffers were fired for embezzling trust funds. In October, the Oversight Committee on Fraud or Corruption Involving World Bank Staff, created two months prior to McConnell’s public criticism of the Bank, was expanded to include the oversight of all allegations of fraud, both within the staffs of the Bank Group and in association with Bank-financed contracts. In addition, there was established a 24 hour worldwide hotline for corruption allegations. Of the 156 calls made to the hotline by early 2000, 66 did not result in investigations. Of the 90 that did, 2 investigations have been “completed and closed,” 47 were investigated and determined to be unsubstantiated or not involving Bank funds, and 41 were in the process of being investigated as of April of 2000.[103] In January of 1999, Wolfensohn appointed nine new members to his managerial staff, and announced an Anti-Corruption Action Plan for the Bank.[104] By October of 1999, Wolfensohn had permanently denied eligibility for World Bank contracts to more than a dozen firms in the US, Canada and Italy.[105] For all of Wolfensohn’s actions, however, the 2000 report on World Bank corruption by the General Accounting Office concluded that, “significant weaknesses still exist in each of the key components of the Bank’s management control system,” and recommended that the Treasury Secretary monitor Bank anti-corruption progress and report to Congress annually. [106]

At the height of his efforts to stem corruption at the Bank, Wolfensohn announced the creation of what he called the “Comprehensive Development Framework,” a “tool for governments to take a long term view of their development needs.”[107] The explicit purpose of the CDF is the more effective implementation of poverty alleviation programs though a broadened understanding of the means of development, a more inclusive process of policy creation, and a greater emphasis on country ownership of policies. With a eye to the political climate in which the Bank found itself in January of 1999, the Bank also stressed that the CDF would “create synergy and complementarity, and reduce overlapping and waste” in Bank projects – thereby not only broadening the scope of the Bank’s role in poverty reduction, but additionally reasserting the Bank’s commitment to fighting corruption. It was with this announcement that the Bank’s new approach to poverty reduction was institutionalized, and within this framework that the 2000 World Development Report was written and the Poverty Reduction Strategy Paper Initiative created.

Poverty Reduction Today: The 2000 WDR and the PRSP Program

The Nature and Extent of Change in Stance

The two most illustrative manifestations of the Bank’s new approach to poverty reduction are the 2000 World Development Report: Attacking Poverty and the Poverty Reduction Strategy Paper program. What follows will provide an analysis of both. First, I intend to examine not only the content of the 2000 WDR, but also the process through which it was written. While the Report itself presents some seemingly revolutionary ideas, an examination of the writing process reveals that the Bank may not be as ready to depart from the standard view of development as the Bank’s new rhetoric might have you believe. After examining the shift in Bank language in detail, I turn to the manifestation of Bank policy change: the PRSP. First, I undertake an examination of the PRSP’s central mechanisms and its main objectives, as laid out in the Bank’s Poverty Reduction Strategy Paper Sourcebook, a work-in-progress guide to the PRSP process. I will then examine two of the ten completed PRSPs – Mozambique and Honduras – in an attempt to demonstrate the ways in which the papers continue to serve the Bank’s meta-policy, despite the degree of national ownership involved. I will conclude from the study of both the WDR and the PRSP guidelines and examples that while the image of James Wolfensohn’s Bank may be on the move, its policies, and the ways in which US interest continues to influence them, are all but standing still.

The 2000 World Development Report: The New Language of Poverty

The 2000 World Development Report, subtitled Attacking Poverty, is the ambassadorial document of the Bank’s new stance on poverty reduction. “In response to deepening understanding of the complexity of development,”[108] the Bank has reworked the nuances of its poverty reduction rhetoric in a way that not only accommodates the criticisms levied at the Bank’s previous policy-oriented lending, but also expands the role of the Bank beyond that of lender and macroeconomic analyst to that of purveyor of development knowledge at large. Somewhat paradoxically, even while the Bank attempts to expand the scope of its development knowledge, it attempts to shift some of the agency of development – not only from the Bank to the borrower countries, but from the Bank directly to the poor in those countries. Building on the 1999 Voices of the Poor initiative, the Bank has even created an area of expertise in “what the poor think about poverty,”[109] and included in the Report are examples of some of the 60,000 interviews undertaken for the Voices study. The crux of the Report, however, focuses on the World Bank’s new, three-fold strategy for poverty reduction through “promoting opportunity, facilitating empowerment, and enhancing security”[110] for the poor. These three ideas expand greatly upon the Bank’s previous treatment of poverty’s causes and consequences, and are the center of the Bank’s new poverty rhetoric.

The Poverty Agenda of the 1990s: Harnessing Labor, Making Social Services More Efficient

The language of the 2000 WDR is in stark contrast to that of the 1990 WDR, which also focused on the Bank’s role in poverty reduction. The Bank of the late 1980s and early 1990s was, as shown above, an institution struggling to publicly reconcile its focus on adjustment-oriented policy lending and its need to reform its image in the eyes of global Bank critics. This reconciliation is attempted through the 1990 WDR, as evidenced by its “two-part” strategy of poverty reduction:

A review of development experience shows that the most effective way of achieving rapid and politically sustainable improvements in the quality of life for the poor has been through a two-part strategy. The first element of that strategy is the pursuit of a pattern of growth that ensures productive use of the poor’s most abundant asset – labor. The second element is widespread provision to the poor of basic social services, especially primary education, primary health care, and family planning.[111]

The program they advocate, then, combines an increased focus on labor-intensive growth with the provision of programs to support “investment in human capital.”[112] Given the saliency they place on transfers despite an environment of tight fiscal prudence, the Bank foresaw a potential conflict between the interests of the poor and those of the non-poor in developing countries, and asserted that their strategy would “be more likely to be adopted in countries where the poor have a say in political and economic decision making.”[113] In which countries the Bank considers this to be the case is unclear, as they admit that “political power tends to reflect economic power.” The report the goes on to detail the ways in which higher taxes and redistributive programs have adverse effects on national saving and gross national product (GNP). It concludes, therefore, that the most efficient and effective way to reduce poverty is through the promotion of labor-intensive growth, as it has the least negative effect on the consumption per-capita of the non-poor and the greatest positive effect on the consumption per-capita of the poor. The transfers they advocate, then, are for those unable to participate in the benefits from labor-intensive growth, despite their call for social services to be “widespread.” The Report deals extensively with the problems faced by the poor given their inadequate access to social services such as education and health care. They spend precious little time, however, fleshing out ways in which developing countries can improve the provision of these services for the poor, and how they can finance these improvements. The solution they propose would have governments concentrating on the provision of primary health and education, while fostering a greater reliance on the private sector to provide higher-level health services and education. In this way, the Bank has made improvements in the social infrastructure compatible with the fiscal austerity of structural adjustment – the perfect solution in the policy environment of the late 1980s and early 1990s.

The 2000 WDR: Expanding Definitions, Engendering Partnerships

The 2000 WDR embodies a rhetorical revolution for the Bank. Its opening paragraph makes reference to the vulnerabilities, powerlessness and lack of freedom experienced by the world’s poor. Compared with the 1990 WDR, in which the opening paragraph addresses the aggregate economic achievements of the 1980s, this is a striking change. The 2000 WDR reasserts the need to increase poor people’s opportunity to participate in the gains of economic growth. But, unlike the 1990 WDR, it does not end with this contention. As a result of the Voices of the Poor study, and perhaps as a response to the lack of solution in the 1990 WDR to the problem of political powerlessness, the 2000 WDR also conditions development progress on the empowerment of the poor and on increases in their security. Together, the opportunity-empowerment-security triumvirate drives the Report and serves as the basis for important changes in the way the Bank talks about poverty reduction.

The first, and perhaps most comprehensive, change in Bank rhetoric is the expansion of the very definition of poverty. While the Report “accepts the now traditional view of poverty…as encompassing not only material deprivation (measured by an appropriate concept of income or consumption) but also achievements in education and health,”[114] it goes beyond this simple definition, and attempts to include other forms of deprivation that include vulnerability, voicelessness, exposure to risk and powerlessness. By including these dimensions of poverty in a broadened definition, the Bank rightly asserts that policies to address poverty will necessarily be more broad-based. The second major change comes in solutions to the problem of persistent poverty. While growth is still central to the Bank’s strategy, there is recognition on the part of the Bank that policies that address the multifaceted nature of poverty will increase the speed and depth of reduction. “The evidence confirms that economywide growth improves the incomes of poor people – and in the longer run reduces nonincome poverty,” they write, but “public action has to go beyond investing in social services and removing antilabor biases in government interventions in the economy.”[115] There must be a focus on increasing returns to assets, as is emphasized in the 1990 WDR, but these returns must come to more than labor. The Bank outlines five types of assets the poor have – human, natural, physical, financial and social – and details the ways in which returns to these assets must be both increased and sheltered from volatility. This is done, says the Report, through the promotion of opportunity, empowerment, and security.

Increasing opportunity for the poor is not a new part of the Bank’s poverty reduction strategy, and so it is not surprising that the least innovative language of the WDR is found in this section. The affirmation that “the evidence shows that on average countries that are open to international trade and have sound monetary and fiscal policy and well-developed financial markets enjoy higher growth” comes as a surprise to no one.[116] The Bank’s goal of “making markets work for poor people”[117] is achieved through “a range of actions” undertaken by the state, “complemented by market mechanisms, civil society and the private sector, [thereby] increasing the benefits to poor people.” [118] This sounds not unlike the language of the privatization focus of the 1990 WDR. There are, however, some new ideas on increasing opportunity. One important new section gives attention to small-scale enterprise promotion and the creation of small-scale insurance schemes, something that could potentially have tremendous impact on the rural poor. As a whole, however, the promotion of opportunity has not changed greatly in the past decade – the prevailing wisdom still focuses on “market-friendly reforms” and the continued relevancy of the Washington Consensus.[119]

Empowerment, the next important tool for the Bank’s new strategy, focuses on reorienting governance so that poor people can exert greater influence on the political systems that shape their lives. “Efforts are needed to make state and social institutions work in the interests of poor people,” says the new framework, because “governments are often more responsive to the concerns of elites than to the needs of poor groups.”[120] The focus, then, is on improving governance and eliminating barriers to political influence, including gender and ethnicity discrimination. This could be difficult territory for the Bank, whose charter mandates that the organization remain non-political, but the impetus behind the initiative is clear. In a political environment highly suspicious of corruption within the Bank and its projects, it follows that the Bank would make the affirmation that “more detailed processes of accountability” are necessary and that the “building [of] administrative and regulatory capacity” is crucial.[121]

Enhancing security, the final component of the Bank’s new strategy, is achieved through the reduction of risk due to economic shocks, natural disasters, and ill health. “As the voices of the poor cry out, [poverty] means dreading the future – knowing that a crisis may descend at any time, not knowing whether one will cope.”[122] Improving the security of the poor has implications both for households and for institutions. Reducing the volatility of the market, providing health insurance and old age pensions, and establishing microfinance programs all fall under the guise of increasing the security of the poor. Through supporting the asset building process and strengthening institutions of security, poor people can better manage their risk – “and supporting the institutions that help poor people manage risk can enable them to pursue higher-risk, higher-return activities that can lift them out of poverty.”[123] It is in this section that fall some of the new smaller-scale, more complex approaches to development, such as microfinancing and the promotion of small-scale entrepreneurial activity. Bank endorsement and promotion of these types of activities could prove instrumental in fighting poverty in the developing world. If improving security can go beyond the provision of safety nets, as conceived in the 1990 Report, then this is one area where the Bank’s new stance could make a tangible difference. If the promotion of security enhancement remains at the level of stabilizing the economy, liberalizing trade and providing safety nets to cushion shocks, little progress will be made in this area.

Overall, the 2000 WDR maintains that development is highly dependent upon rapid growth and “market-friendly” reforms. Despite the seemly prodigious shift in addressing the roots of poverty, the Bank is far from magnanimously embracing a wholly new approach to development in the world’s poorest nations. The Report clearly states that while it “proposes a more comprehensive approach, priorities will have to be set in individual cases based on resources and what is institutionally feasible.”[124] The programs undertaken as a result of this Bank initiative are all to be executed without “undercut[ting] competitiveness”[125]and keeping in mind that “a more pro-poor liberalization is not necessarily a slower one,” for “moving fast can create more opportunities for the poor.”[126] This results in a situation in which traditional Bank meta-policy is cushioned by protective social measures, rather than reformed to reduce the adverse impact that structural adjustment was proven to have in the past.

The State-Vector Axiom at Work: The Writing of the 2000 WDR[127]

Even in attempting to reshape the discourse of development, the substance of the 2000 WDR subtly reinforced the hegemony of Bank meta-policy. There was, however, nothing subtle about the influence of US interests in the process through which the Report was written. As made public by Robert Wade, the events that marked the writing of the 2000 WDR created a public relations scandal that called into question the autonomy of the Bank and brought to the surface the extent of US influence in the shaping of Bank policy and stance. What follows is a condensed chronology of the events that shaped the final publication of the Report and an analysis of their significance with relation to the reinforcement of Bank meta-policy and the possibilities for change at the Bank. To understand the significance of the events that transpired during the course of writing the WDR, however, it is first necessary to understand the significance of the WDR itself, in the context of both the Bank and of the development community at large. The flagship publication of the Bank, the WDR is published annually and serves as an important point of reference for mainstream development discourse. With a circulation and a budget far outstripping that of any other multilateral report on development,[128] the WDR has considerable potential to shape discourse and policy. The Director of each WDR project is chosen by the Chief Economist of the Bank, and approved by the President. The staff who prepare the report are chosen by the Director and the Chief Economist and typically work for some 12 to 18 months preparing the report. Drafts are circulated within the Bank for comment and to member governments and interested non-governmental actors. The Bank is cautious to maintain an image of independence for the WDR, as it is supposed to present scholarly, empirical findings on a particular topic, and not serve as an advocacy document for Bank policy. This independence, however, has proven highly problematic. As Wade puts it,

The WDR is both a research-based document and a political document, in the sense that as the Bank’s flagship, its message must reflect back the ideological preferences of key constituencies and not offend them too much, but the message must also be backed by empirical evidence and made to look “technical.”[129]

The reconciliation of the ideological tendencies of the Bank’s powerful members and the empirical findings of the report can be, unfortunately, significantly painful. Such was the case for the 2000 WDR.

In March of 1998, Joseph Stiglitz, who had been serving as Chief Economist of the Bank since early 1997, selected Ravi Kanbur, a Cornell professor and former Bank staffer, to direct the upcoming WDR on poverty – a document that would complement the Bank’s Comprehensive Development Framework and hopefully reflect the new direction in which Wolfensohn was attempting to push the Bank. An economist Wade describes as “sympathetic” to this new direction – something most development economists in the Anglo-American tradition were not – Kanbur was a logical choice for the Director position.[130] The fact that he was a British-educated Indian and a professor – not an American, and not a current Bank staffer – helped to strengthen the WDR’s image as independent of the Bank. Kanbur quickly began to undertake extensive research for the project, including the facilitation of the Voices of the Poor initiative, a broad-based research project that surveyed some 60,000 people in poverty-stricken nations. By January of 2000, the first draft for circulation – known in Bank jargon as the “red cover” draft – had been completed and was submitted for review.

The reaction to this first draft was overwhelmingly negative. While the red cover version recognized the importance of economic growth, it attempted to move beyond the simple reinforcement of already common knowledge, and push the development discourse envelope by bringing in new ideas. The original draft had the order of the sections as empowerment first, then security, and only then opportunity, “highlighting the first two over the more growth-oriented section on opportunity.”[131] The section on empowerment itself was highly controversial and received much criticism, with one reviewer questioning, “why is this stuff being given priority over growth?” and another asserting “the Bank should not be in the business of empowerment.”[132] The original section on security had advocated the creation of safety nets prior to macroeconomic adjustment, rather than simultaneous with free-market reforms, as had been the conventional wisdom. The report stressed the dangerous nature of widening income inequalities and argued that these inequalities would have negative impacts on growth – a stance that diametrically opposed the mainstream views that either a) inequalities had no impact on growth patterns or b) that inequality strengthened growth through creating incentives to take risks. The red cover draft also made the point that liberalization of markets – in goods, services and capital – was not automatically good for the world’s poor, and in some cases had had negative consequences. The draft even argued for significant attention to the cases in which capital controls had had positive results and called for their use “normal instruments of economic management in developing countries.”[133]

To critics, most significantly the US Treasury, the draft was unacceptable. The Treasury’s comments, which “read like marching orders,”[134] called for more emphasis on the acceleration of growth, greater attention to the promotion of free markets, and less attention on the widening nature of income inequality and that inequality’s negative impact on growth. “Treasury Secretary [Lawrence] Summers said in a speech at about this time that discussing poverty reduction without emphasizing economic growth and free markets was like Hamlet without the Prince.”[135] Clarity of message, they said, was extremely important. “The Bank’s core message to its borrowers is that openness is good for the poor. Academic-style qualifications only serve to blur the message.”[136]

As criticism of the draft peaked with the Treasury’s comments, Kanbur’s support at the Bank suffered a serious blow as Joseph Stiglitz was forced to leave. In November of 1999, Stiglitz had resigned as Chief Economist of the Bank, under intense pressure from the Treasury, but had been kept on as a special advisor to the President. In a New York Times article at the time of his resignation, Stiglitz was quoted as saying that there was an “intellectual gap between what we know, and what is still practiced” and that “remaining silent when people were pursuing wrong ideas would have been a form of complicity.”[137] Stiglitz’s comments in the article harangued the Treasury Department and the IMF for their continued support of Washington Consensus ideology. It was this line of thinking that had made Summers skeptical of Stiglitz early on. With the Treasury’s de facto veto power over the decision to keep Wolfensohn on for a second term, Summers made his support for Wolfensohn essentially conditional upon Stiglitz’s resignation.[138] Stiglitz stepped down as Chief Economist and assumed his post as special advisor. Then, in April of 2000, Stiglitz published an article in the New Republic laying much of the blame for the East Asian Crisis at the feet of the Treasury and the IMF.[139] Summers immediately called Wolfensohn and insisted that all ties be severed between Stiglitz and the Bank. Stiglitz was called into Wolfensohn’s office, and in a tense meeting, Wolfensohn expressed his and the Treasury’s discontent with Stiglitz’s actions. While Stanley Fischer, first deputy Managing Director of the IMF, told his staff that Wolfensohn had agreed to fire Stiglitz, the Bank’s External Affairs office simply stated simply that that Stiglitz’s position had been abolished.[140]

With Stiglitz gone and Treasury pressure mounting, Kanbur had no choice but to concede the reorganization of chapters for the next draft, known as the green cover. He was also forced to make substantive changes to his overview, as well, which, according to Wade, he later tried to take back.[141] After meeting with Wolfensohn and the Managing Directors in May, all of whom urged him to go further in the Treasury direction, Kanbur understood that the Report was taking a significantly different trajectory than he had intended. In the face of significant pressure from the Treasury, without the support of Stiglitz, and with less support from Wolfensohn than he had foreseen, Kanbur was faced with two equally unappealing options. First, he could continue to push the text further from the red cover version to reconcile it with Treasury criticisms, thereby undermining the thrust the entire document. On the other hand, he could keep the report in its January form and have the Bank distance itself from it, and “sweep it under the carpet.”[142] The only choice, as he saw it, was to publicly resign as the Report’s Director. By doing so, he would force into the open the nature of Treasury influence and his dissatisfaction with it, thereby calling into question the independent nature of the Report.

In the end, the Bank was forced to reject some of the Treasury comments to maintain some image of independence, and the report went forward with much of the original content intact. There were, however, three significant changes made. Within the new structure of the sections, a chapter was added to the opportunity section that stressed that growth was good for the poor. The chapter on making markets work better for the poor was given a “stronger finance twist,”[143] and the suggestion that safety nets be created as preconditions for market reforms was changed to advocate the simultaneous creation of safety nets and adjustment programs. As Wade puts it, “the January draft’s emphasis on the hazards of quick market reforms was softened [and] the emphasis on benefits strengthened.”[144] The third change made was to overhaul the extensive section on capital controls and the Malaysian and Chilean experiences with them. The message was diluted from a severe criticism of the role of capital markets in the East Asian Crisis to the level of advocating a “cautious approach” to financial market liberalization. The Malaysian experience was cut altogether, and there was stress added that capital controls should be only temporary measures that served to eventually allow for the complete freedom of financial markets.

These changes had the effect of doing what the Treasury had earlier warned against: sending mixed signals and “blurring the message.”[145] Many of the changes made in the Treasury direction are inconsistent with other messages in the report, such as the inclusion of a box outlining the policy objectives of the Washington Consensus directly followed by the statement, “Even when market-friendly reforms have succeeded in delivering growth, the effects on the incomes of poor people have varied.”[146] Overall, despite the fact that it did not fall directly in line with the Treasury’s comments, the WDR was changed significantly by the influence of the Treasury. As Kanbur tried to edge away from the Bank’s US-influenced meta-policy, he found himself reigned in by the power of the Treasury, who first forced the resignation of Stiglitz and then left him with little choice but to leave. Despite the fact that the language used in the Report makes a significant departure from previous Bank policy, a close reading and an analysis of the writing process reveal that for all of its new rhetoric, very little about the Bank’s dealings with poverty is “on the move.”

The PSRP: Whose voice is heard?

If the World Development Report best represents the Bank’s new stance on poverty reduction through rhetoric, then the Poverty Reduction Strategy Paper program embodies it in policy. As the representative policy of Wolfensohn’s “New Bank” and the Comprehensive Development Framework, the PRSP program is the tangible embodiment of the recent shift undertaken at the Bank. Again, however, the change in Bank stance begs the question: just how much has changed? Does the PRSP represent a significant departure from the way in which the Bank previously addressed poverty reduction strategy? What follows will be an examination of the Bank’s expectations for the PRSP program: According to the Bank, what should a PRSP look like? What should it include? With whom should a government consult to assure broad participation in the creation of a strategy? Following this introduction to the nature of the PRSP, I will detail its implementation in two cases. Honduras and Mozambique, two of the ten countries that have completed PRSPs, serve as excellent examples of the extent to which the PRSP program represents a new direction for the Bank. Important in this analysis is a consideration of the relative bargaining power of the actors involved: those attempting to influence the policy from above, such as the Bank and the Fund, and those attempting to influence it from below, such as non-governmental organizations and other civil-society actors, including the poor themselves. I conclude that the PRSP, as a policy framework, has changed very little, and that even with a changed rhetoric about participation and consultation, the bargaining power of the actors involved remains as it has always been – skewed toward the influence of the international financial institutions.

The Nature of the PRSP: Characteristics and Expectations

The PRSP program was launched in September of 1999 as a joint IMF/World Bank venture that seeks to create a context for poverty reduction strategy in countries eligible for IDA and Poverty Reduction and Growth Facility (PRGF) funding.[147] The construction of an acceptable PRSP or an Interim PRSP (I-PRSP), which is reviewed and approved by the boards of the Bank and the Fund, is now a prerequisite for IMF and IDA concessional lending and HIPC debt relief. Because aid is now conditional upon participation in this program, I-PRSPs are expected from those countries that have not mobilized the resources to created fully-fledged PRSPs, laying out what the important parts of the full PRSP will be. The most salient characteristic of a PRSP is that it should not only seek to understand the roots of poverty in a given country and create policy to address poverty’s causes, but, following with the Bank’s new emphasis on partnerships and empowerment, the paper must be nationally-owned and participatory in nature. I-PRSPs are not held to the same standards of participation and consultation that PRSPs are, given the limited timeframe in which they must be developed, but they are expected to contain plans for participation. An initial progress report[148] from the joint staffs of the Fund and the Bank suggested that the notion of ownership had been positively received and well implemented in those countries pursuing PRSPs and Interim-PRSPs. They attributed most of the progress, however, to already existing linkages between civil society and government in those countries which had submitted I-PRSPs and full PRSPs.

The complete expectations for Poverty Reduction Strategy Papers are laid out in a public, work-in-progress document known as the PRSP Sourcebook. Available online through the Bank’s website, the Sourcebook is an evolving document that attempts to address all aspects of the PRSP process, from the methodologies of measuring poverty, to macrostructural and economic issues, to the ways in which countries can address gender and environmental issues and promote human development. The only chapter which remains unavailable is, interestingly, the chapter on pro-poor growth. Other than this section, the absence of which is significant, the Sourcebook presents a comprehensive resource for PRSP creation. The preface to the document lays out the Bank’s expectations for a successful PRSP:

An effective poverty reduction strategy would be expected to: (a) be prepared by the country; (b) focus on faster and broad-based economic growth, which requires macroeconomic stability; (c) reflect a comprehensive understanding of poverty and its determinants; (d) assist in choosing public actions that have the highest poverty impact, which are fully costed and prioritized consistent with institutional and fiscal constraints; and (e) establish outcome indicators that are set and monitored in an open and transparent way. [149]

The notable aspect missing from these expectations is the explicit mention of participation, an element that is elsewhere important. For example, in the Joint Staffs Assessment papers (JSAs) that are presented to the boards of the Bank and the Fund, the first category of analysis is the extent of participation in the formation of the PRSP, asserting that the notion of participation is central to the idea of country ownership.[150]

Even without an explicit emphasis on participatory processes, however, the objectives of the program are clear. While the PRSP is to be nationally owned and focus on the amelioration of poverty through an understanding of its causes and consequences, it should also detail the country’s structural adjustment policies and those safety nets that will accompany them. The PRSP, then, nests a continued focus on structural adjustment in the context of an explicit understanding of poverty’s determinants. The Bank could not be more explicit about their goals for the PRSP program, asserting in the Sourcebook that “the objective is to encourage low-income countries to reduce poverty by focusing on a renewed growth-oriented strategy.” The ownership aspect of the PRSP process, then, exists to “improve the poverty impact of expenditures financed by external partners and the effectiveness of technical advice.”[151] The extent to which this program can then be considered the flagship of the “New Bank” is, therefore, questionable. The notion of PRSP as a tool to increase the effectiveness of already existing development policies speaks to the question of the bargaining power of actors involved in PRSP creation. Even if participatory processes are broad-based and consultation with civil society substantive, the core of the poverty reduction program remains in the pursuit of rapid economic growth as prescribed by the Bank and the Fund. This has lead to the creation of a dichotomous consultation environment that does nothing to alter the fundamental balance of bargaining power, and that pits “voices from below” against “voices from above.”

Voices from Above

The Bank and the Fund have said in numerous contexts that their participation in formulating papers should be limited, as extensive involvement in the creation of PRSPs could undermine the nationally-owned nature of the papers. In other places, however, the Bank and the Fund have intimated that in the areas in which they have expertise, they should be all but exclusively consulted. The Bank stresses that the consultations that they and the Fund provide to national governments “are not intended to determine the shape of the final strategy, or to detract from country ownership of the strategy, but to provide input to the policy debate in a transparent form.”[152] This input, however, covers the entirety of the policy-oriented expectations of the PRSP. The Bank proposes that it is in the best position to “take the lead in advising on the design of poverty reduction strategies, including the necessary diagnostic work such as poverty assessments, the design of sectoral strategies, institutional reform, and social safety nets,” while the Fund stresses that it will “advise governments in areas of its traditional mandate, including promoting prudent macroeconomic, exchange rate, and tax policies.” In areas where both the Bank and Fund have expertise, “such as fiscal management, budget execution, budget transparency, and tax and customs administration,” they will “coordinate closely.” As if this consultation did not already infringe significantly on the nationally-owned nature of the PRSP, the Bank suggests that “before a poverty reduction strategy is completed, World Bank and IMF staff will meet with country authorities to discuss the emerging strategy.” [153] With the Bank and the Fund “taking the lead” in the development of nearly all of the policy aspects of the PRSP, the extent to which the PRSP policy can be seen as nationally owned is questionable. The Bank and the Fund have noted, however, that the framework for consultation put forth in the formulation of a PRSP will constitute a change in roles, from creators of policy and conditionality to one of simply consultants and advisors. Because the PRSP must ultimately be approved by the boards of the Bank and Fund, however, their interests will be heavily weighted in the research and design of a given country’s PRSP, despite the fact that their input comes in the form of consultations and not mandates. So long as a developing nation finds that they remain dependent on those institutions from which they are seeking consultation, they can expect that the “advice” that they receive will be implicitly binding.

Voices from Below

Consultations from institutions with financial interests in growth are sure to come unsolicited to national governments, and given their weight, they will be taken into account rather readily. The consultation of NGOs and civil society – including labor and rights-based advocacy groups – might not be so readily accepted, or indeed even sought. In an effort both not to be restrictive and not impose direct political conditionalities, the Bank and the Fund have decided that there should be no official minimum standard for participation in the process of PRSP creation. They say that “the PRSP should provide an account of the main aspects of the participatory process adopted in its formulation,”[154] and review this account in the JSA submitted to the Boards. While the original intention of the Bank and the Fund was not to make a judgment as to the adequacy of a participatory process, in practice the JSAs have made numerous recommendations as to the extent of participation, and found some to be more successful than others.[155] Concerns surrounding the lack of participation required for I-PRSPs have been numerous. Given the time constraints of the I-PRSP, the Bank and Fund require only that governments outline their plans for future participation in the full PRSP. Some international NGOs, highly critical of the participatory process, point out that “this implies that a government can lay out the agenda and timetable for the full PRSP [in the I-PRSP]…without any input from civil society.”[156] As of this writing, only ten countries have completed full PRSPs, while 42 others are still at the I-PRSP stage. This participation loophole has serious consequences for the future of participation in those 42 countries, as well as those who have not yet begun the process. As the very standards for their participation are created without that participation, civil society organizations could see their ability to influence the PRSP severely limited before the PRSP is even written.

Even if civil society is allowed to participate in the formulation of the PRSP, it does not necessarily guarantee that civil actors will be able to have any effect on actual policy. A Bank/Fund review of the PRSP process points to high levels of discontent as to the extent of participation:

Concerns have…been expressed by civil society groups as to whether governments are limiting participation to information sharing and consultation, and whether civil society can extend its role in the decision making process beyond targeted poverty reduction programs to the macroeconomic policy and the structural reform agenda, especially trade liberalization and privatization.[157]

Mirroring the program itself, writes one NGO critic, “participation seems to be viewed as a means for ensuring more efficient implementation of programmes rather than as a right or a means to improve policy content.”[158] In the September, 2000 progress report on PRSPs, the Bank cites examples of parliamentary approval of PRSPs and of “direct consultation with the poor,” but makes no mention of the involvement of anyone other than the Bank in the actual creation of policy. The report then goes on to acknowledge NGO pressure to make civil society an active participant in policy formulation, and admits that this has not yet happened, and that the current structure lacks broad-based support for policy change. [159] A more recent progress report makes similar findings, indicating that

while the patterns differ across countries, [civil society organizations] that were out of favor with the government; local government officials; private sector representatives; trade unions; women’s groups; and direct representatives of the poor are among the groups that have not always been fully involved in the PRSP process.[160]

The concern remains as to whether the “voices from below” can exert influence on policies that fall within the expertise of those who constitute the “voices from above.”

Voices in Practice: The Cases of Mozambique and Honduras

The cases of Mozambique and Honduras can be especially informative in an examination of the extent to which the PRSP constitutes a change in policy for the Bank. Two of only ten countries to have completed and submitted full PRSPs, Mozambique and Honduras have additionally undergone the JSA review process, something only six other countries have completed. Beyond the functional viability of the two cases, however, there are interesting similarities and differences between the two cases. The ways in which the differences effect – or don’t effect – the macroeconomic needs of the countries are, in particular, important. Honduras, situated in Central America, has long been a Bank Borrower, and was in fact the first recipient of an IDA credit, in 1961.[161] Mozambique, on the other hand, located in Sub-Saharan Africa, has only been a member of the IBRD and the IDA since 1984, and only began receiving Bank assistance in 1985. Both countries, however, took part in the flurry of structural adjustment lending targeted at Sub-Saharan Africa and Latin America in the late 1980s.[162] The two make for an interesting comparison structurally, as well. While both have poverty rates hovering around 70 percent, Honduras fares significantly better in many other indicators, such as life expectancy, infant mortality, illiteracy and primary school enrollment rates.[163] GDP growth in Mozambique, however, has been around 8 percent for the last five years, while growth in Honduras has been only around 3.2 percent, only slightly above the population growth rate.[164] Despite all of these differences, however, the macroeconomic strategy that the two papers lay out are strikingly similar.

Mozambique

Mozambique’s PRSP, known by its Portuguese acronym PARPA, is based on “promoting human development and creating a favorable environment for rapid, inclusive, and broad-based growth.”[165] As put in the JSA, “the public action strategy of the PARPA emphasizes economic growth, public sector investment in human capital and production infrastructure, and institutional reform to improve the enabling environment for the private sector investment.”[166] Health, education, governance, infrastructure development and agricultural development join macroeconomic and financial management as the “fundamental” sectors targeted by the PARPA, while things such as social programming, housing policies, job creation policies and programs to reduce vulnerability to natural disasters make up what the PARPA calls “complementary” sectors.[167] The government asserts that,

“It is obvious that the poor do not automatically benefit from good ‘macroeconomic statistics.’ Therefore, the strategy must ensure that the structure of growth favors the poor. This will be achieved by increasingly allocating public resources to programs, which strengthen the capacities of, and opportunities for, the poor.[168]

This reallocation can only be done, the PARPA reads, if growth targets are met. “Only modest improvements can be achieved through a reallocation of public expenditure and efforts to increase revenue,” reads the PARPA. “Rapid growth can provide material benefits and better public services to the poor, which would otherwise be impossible to achieve.”[169] Thus, the PARPA makes improvements in social sector strategy not only simultaneous with macroeconomic reforms, as advocated in the revised WDR 2000, it makes them conditional upon growth. The PARPA goes on to point out that Mozambique has “significant” imbalances in both trade and budget, which are both covered by “extraordinary external support” and that this means that the exercise of “prudent levels of budgetary expenditure” are necessary.[170] Given the necessity of fiscal prudence, the expansion of health and education, two of the fundamental areas the PARPA cites as instrumental to poverty reduction, will have to be financed externally, thereby only complicating the imbalances the PARPA describes. While Mozambique intends to address its social sector issues through the PARPA, they are budgeted mainly through concessional aid. Given that in recent years, up to 50 percent of government spending and 75 percent of public investment has been financed by external aid,[171] the continued focus on social spending financed by aid represents little change in the national economic strategy. The crux of Mozambique’s poverty reduction strategy then, lies in facilitating growth to strengthen the base from which social spending can then be allocated. Addressing the multifaceted nature of poverty in the short run will rely on aid, rather than on policy changes within Mozambique. The government even goes so far as to say, “in many ways, policies to promote economic growth and human development are one and the same thing.”

This strategy, perfectly in line with the structural adjustment thinking that has been the basis of Bank policy for decades, can hardly be considered a vehicle for a “new” approach to poverty reduction. It becomes all the more problematic when the question of participation is added. “Mozambique has a centralized government tradition,” points out the JSA, “that tends to approach participation primarily as information dissemination and consultation on prepared documents.” [172]

An Overseas Development Initiative review of the Mozambican process found that “Neither the parliament nor the political parties have been brought into the participatory process…[and] participation by NGOs, the private sector and religious bodies in the PARPA process has been fairly limited.” It goes on to say that, “generally, awareness among civil society institutions about the content and role of the PARPA is low,” and “even some umbrella NGOs at the central level have barely heard of the PARPA.”[173] The JSA review finds that representatives of civil society organizations “would have appreciated more advance planning of the process,”[174] and the ODI report recommends that, “a more comprehensive approach will need to established in the future to secure a full participatory process in both the design and the monitoring of the PARPA.”[175] Enthusiastically, however, the JSA praises Mozambique for the degree of national ownership the PRSP embodies. “The document has been wholly produced by the government, with virtually no donor support,” stresses the JSA.[176] In a country that has been undertaking Bank and Fund led structural adjustment programs since 1987, however, their ability to replicate one and draw upon their past experience fun should not be surprising. Overall, the combination of lack of policy innovation, continued emphasis on growth as a precondition for nationally-led (rather than internationally funded) social sector targeting, and the lack of comprehensive participation lead me to believe that little has changed in Mozambique with regard to poverty reduction strategy.

Honduras

The Honduran PRSP was largely influenced by the government’s attempts at reconstruction after the tragic destruction of 1998’s Hurricane Mitch, which left more than a million and half people displaced, destroyed much of the country’s infrastructure, and caused an estimated 3.8 billion dollars in damage, roughly 70 percent of the country’s GDP.[177] GDP growth fell significantly in 1998, and was negative in 1999, but had rebounded by the writing of the PRSP, with 2000 figures at roughly 5 percent.[178] Despite this extreme setback in national economic stability, however, the Honduran PRSP has objectives that are strikingly similar to those of Mozambique:

The fundamental objective of the PRSP is to reduce poverty significantly and sustainably, based on accelerated and sustained economic growth whose benefits are distributed more equitably through greater access by poor people to the factors of production, including the development of human capital, and to social safety nets.[179]

It is important to note, again, the time frame for the actions of poverty reduction. As with the Mozambican case, not only is the provision of broader access to opportunity made conditional upon higher levels of growth, but the provision of safety nets is, as well. Despite the paper’s focus on macroeconomic adjustment as the agent of poverty reduction, however, the paper concedes that while the long-term goals of adjustment will be congruent with poverty reduction, in the short-term, “while the economy is being reoriented, some measures can have negative effects on vulnerable groups.”[180] The PRSP goes on to detail the ways in which stabilization and liberalization measures have had, over the past decade, adverse effects on the poor population. Then, following a section on fiscal prudence, the paper points out that “the dilemma for Honduras is that society demands a higher level of social spending, which is financed mainly by fiscal revenues and loans from external financing sources, which later have to be repaid with greater tax collections.”[181] It goes on to note, however, that, “the dynamism of social expenditure has been restricted by the size and rate of growth of GDP, by the volume of fiscal revenues, and by restrictions imposed by obligations such as payment of the foreign debt.”[182] These two statements imply that reaching the government’s social spending target of 50 percent of total expenditure faces some serious constraints, mostly due to the problems of debt repayment. Despite this, however, the government plans to finance the programs laid out in the PRSP, which will cost an estimated 2.7 billion dollars, mainly through government resources freed up by debt relief and through the procurement of “additional resources from the international community.”[183] Even the JSA sees this as a dangerous proposition, and recommends that Honduras, “develop alternative financing scenarios and clearer priorities that would be pursued in the event that external financing projections do not materialize.”[184] Again, as in the Mozambican case, the paper makes little innovation with respect to poverty reduction policy, continuing the tradition of growth-led poverty reduction that has long been a staple at the Bank.

This policy direction was not uncontested in Honduras, and there remains significant controversy about the nature of participation in the development of the PRSP. This document, however, is a drastic improvement over the I-PRSP, in which there was virtually no participation.[185] In fact, the stress on participation in this document can be seen as an attempt to address civil society concerns over the highly untransparent nature of the I-PRSP. An umbrella civil society organization in Honduras, INTERFOROS, took the lead in pressuring the government to address civil society concerns, as they withdrew their support from the government-supported Commission for Civil Society Participation and drew up their own, alternative PRSP.[186] As a result of this pressure, the PRSP outlines in detail their participatory process and its results, and the JSA praises the process as creating a “better understanding and integrating into the strategy the priorities and demands of the general population and the poor.”[187] Despite this, however, the JSA points out that some civil society organizations in Honduras have “rejected the final PRSP as a document which does not reflect a national consensus.”[188] External reviews of the process confirm this. A review by the Irish NGO Trócaire points out that parliamentary participation in the process was extremely limited, and characterizes the nature of consultation as “parliament…receiving power point presentations on the document as it was on its way to Washington for…approval.[189] Additionally, Trócaire notes that “representatives [from both multilateral agencies and donor countries] were present at all technical meetings to discuss the document and is most consultation meetings at the national and regional levels.”[190] The result, as they point out, is that civil society organisations in Honduras have concluded “that macroeconomic policy formulation continues to be dominated by the conditions imposed by the [IMF and the World Bank]…with the social development policies elaborated under the PRSP remaining the poor relation.[191] Clearly, members of Honduran civil society do not feel that their bargaining power has changed as a result of this process.

Conclusion: Old Wine, New Bottles

The history of the Bank’s treatment of poverty is a history of institutional survival. Where poverty has fallen on the Bank’s agenda has depended not only on the external political climate in which the Bank found itself, but on the internal pressures of the Bank as well. In the late 1960s, McNamara was not only shoring up the disappointing end to Kennedy’s development decade, he saw Bank survival as conditional upon the expansion of Bank lending. Then, in the 1980s, as worldwide economic instability devastated so many borrower countries, the Bank decided that in order to ensure the solvency of its borrowers and therefore maintain its ability to function, it would have to have increased say in the economic performance of borrower countries. Promoting rapid growth meant ensuring rapid returns on loans – and thus structural adjustment policy lending became equally as important as program oriented lending. The particular stance assumed by the Bank at this point in its history is the result of a combination of factors. The widespread dissemination of the Wapenhans report and the general disappointment with what was perceived to be poor performance on the part of the Bank created a climate of skepticism in donor governments and in the NGO community. This lead to increasing hostility on the part of the US government as to the efficiency of Bank lending, and created a situation in which IDA replenishment was extremely uncertain. Diverse groups of civil and political society were uniting to condemn the practices of the Bank, and critics on the right and the left were calling for the Bank’s abolition. By the mid 1990s, the Bank’s very existence was being called into question. Faced with a climate of intensifying criticism, the Wolfensohn Bank responded through expansion. By incorporating the many criticisms of Bank policy into their operations, and creating departments, working groups, consultative processes and sourcebooks, the Bank expanded its operational directive, and Wolfensohn’s “new Bank” was born.

But the core of Bank policy, and the ideology that drives it, was unchanged by the addition of new areas of Bank expertise. And the manifestations of “new Bank” policy prove this. The 2000 WDR, for all of its seemingly revolutionary rhetoric, is a watered-down treatise that expanded the definition of poverty – an incredibly important task, for sure – but then reemphasized the Washington Consensus and reasserted the primacy of growth as the engine of poverty reduction. Pressure from the US Treasury kept the Bank from diverting its focus too far from Bank meta-policy, which is driven by US hegemony in development theory. It is clear that the means of development have not changed, but the language with which the Bank addresses the ends has. The same is true for the Poverty Reduction Strategy Paper program, the main policy tool of the Comprehensive Development Framework. While countries are now required to address the multifaceted nature of poverty, their strategies for reducing it remain, on the whole, the same as they had been at the height of the structural adjustment period. Given the structure of participation, and the dichotomous nature of consultation, this is not surprising. The Bank and the Fund remain the key advisors on macroeconomic policy, while civil society is often consulted only on “social” matters and often is not consulted at all. As Bank and Fund assistance is conditional upon their approval of a PRSP, it is not surprising that the policies contained therein do little to challenge the traditional line of macroeconomic thought that constitutes Bank meta-policy. Despite the new framework, and despite an emphasis on increased participation, the bargaining power of the agents of development has not changed. It seems, then, that the “New Bank” is not actually promoting new policies, but rather repackaging old wine in new bottles.

Chapter 3

Poverty Reduction and Hegemonic Influence

New Rhetorical Ends, Continued Policy Means

There can be no doubt that the changes undertaken at the World Bank in the past five years bear great significance for the development community. A rededication of the Bank’s efforts to the cause of poverty alleviation reverberates throughout the donor governments, the borrower countries and the worldwide NGO community, generating dialogue and engendering change in the ways in which people think about poverty reduction. The Bank’s role in norm creation and dissemination is unparalleled within the mainstream development world, given the legitimacy afforded to the Bank’s staff of development experts. But, as has been shown in the preceding chapters, this legitimacy is clouded by the ways in which the interests of the Bank’s powerful members – particularly the US – underpin not only the policy decisions and actions taken, but the very source of Bank staff’s “expert” status. The conflation of autonomy with the ability to disseminate norms has deepened this legitimation, which, in my view, is not only faulty, but has had, and will continue to have, serious consequences for the people of the developing world.

For all of the Bank’s ability to shape development discourse through the conferral of objectivity upon their staff, the principles that dictate their “expert” status are not without their own subjectivities. The field of development has been highly politicized and its historical trajectory shaped significantly by Cold War politics. While the Bank asserts their apolitical nature by charter, the consistently market-oriented approach to their policies has strong political implications, which reverberate even today. Consider, for example, the case of the Bank’s East Asian Miracle study, introduced earlier. The Japanese EDs, concerned that the Bank was ignoring the lessons to be learned from their development experience, procured funding from the Japanese government to undertake a study of the underpinnings of the East Asian Miracle and the role of the Japanese state in their development successes. As told by Robert Wade, the emphasis on state-direction – what some saw as the very crux of the study – was slowly watered down and given qualifications as to the extent of the market interventions. The report that emerged stressed the “market friendliness” of the Japanese style of interventions – and conformed perfectly with Bank meta-policy. The forced resignation of Joseph Stiglitz and the firing of Ravi Kanbur tell similar stories. The claim that Bank policy – especially at the meta-level – is autonomously separate from political influence, then, is rather difficult to substantiate. The Bank has not only an ideological compulsion ensure that its policies remain within the parameters of its economic meta-policy; its very institutional survival depends upon continued adherence to this policy. This is true for two reasons. First, inconsistencies in Bank policy render it less cohesive as a force in the development community, and therefore make it appear weaker in the eyes of donor governments. Second, any policy that contradicts the conventional wisdom of the meta-policy calls the very accuracy of that wisdom into question. To challenge the wisdom of the Bank’s meta-policy is to challenge not only the principles upon which it was founded, but also to challenge the wisdom of its continued existence. This has been the core of movements such as the 50 Years is Enough initiative, and has certainly defined the abolitionist stance that many protesters who fall under the “anti-globalization” umbrella have taken.

Challenges to the Bank’s policy are, however, becoming more and more frequent, both from within and without. Pressure from within the Bank – such as the Japanese case, the Stiglitz resignation and the Kanbur debacle – and pressure from without – from global NGOs, borrower countries and from the protesters who clog the streets of Washington, D.C. annually now at World Bank/IMF meetings – has shaken the monolithic nature of the Bank, and has, as I have shown, been the impetus for the Bank’s recent broadening of agenda.

The new umbrella of development for which the Bank purports to be the leading source of knowledge now runs the gamut from health concerns to private sector development to attention to governance issues.[192] In James Sheehan’s “The Greening of the World Bank: A Lesson in Bureaucratic Survival”[193] Sheehan details the ways in the which the Bank has courted the environmental lobby and created an image of a “green” Bank concerned with sustainable development projects. Sheehan makes the case that global pressure from the environmental NGO lobby changed the face of the Bank’s stance on the environment, pointing out that “instead of devoting its resources to counter environmentalists, [the Bank] chose to co-opt them.”[194] This cooptation, in turn, has created a more pacific situation from both sides of the debate. “Environmental lobbyists remain critical of several World Bank projects, but, as they have become distributors and beneficiaries of Bank grants, they have grown more restrained in their criticism and more understanding of the Bank’s failures.”[195] The remarkable aspect of the Bank’s greening strategy is, as Sheehan points out, that “although it has won the acceptance of environmental groups, the World Bank has neither fundamentally reformed its lending practices nor radically changed the kinds of projects that receive funding.” Sheehan argues that the Bank’s rhetorical orientation toward “sustainable development” – what he calls a “vague term almost notorious for its lack of precise definition”[196] – is not only disingenuous given the complete lack of policy change, but could actually prove dangerous for the developing world, as criticism is silenced and accountability skirted.

This phenomenon is not limited solely to environmental issues, but has begun to occur in poverty reduction-related areas, as well, as Wolfensohn’s emphasis on partnerships has meant more and more bank funding for NGO projects. An important example is the involvement of Alex Wilks of the London-based Bretton Woods Project, a Bank watchdog group, in the creation and execution of the Voice of the Poor study that provided the backdrop for the 2000 WDR. Longtime critics of the Bank, the Bretton Woods Project’s involvement in the creation of the WDR is, in my view, highly problematic, and is illustrative of a phenomenon that has serious implications for the quality of dialogue between the Bank and civil society critics. According to a 1999 OED report, Bank funding for NGO projects is difficult to monitor and has mixed results – only 18 of 37 studied cases were rated satisfactory according to the Bank’s own standards.[197] The recommendation of the report is that the Bank should develop “strategic partnerships” with community and internationally based NGOs in order to more smoothly facilitate successful projects. In my opinion, the creation of such partnerships will amount to little more than the extension of Bank meta-policy direction to otherwise autonomous organizations. Those NGOs placed in such partnerships risk the kind of co-optation detailed by Sheehan in his “greening” piece.

Given the participatory and consultative nature of the PRSP mandate, this trend in Bank behavior could prove especially important for the new poverty reduction strategy. Given the difficulty faced by Bank insiders in influencing stance and policy – as seen in the Japan, Stiglitz and Kanbur cases – NGOs face the serious consequence of either having their findings muted by Bank editing processes, or their outcomes subtly influenced by the nature of the projects assigned them. A strategic partnership between the Bank and an NGO involved in PRSP creation narrows the “broad” range of consultation, especially if the NGO in question receives Bank funding for a particular project. This, in turn, has serious implications for the relative bargaining power of those involved in the process. If NGOs are increasingly developing strategic partnerships with the Bank, the weight of their bargaining power shifts away from the impacted communities and toward the policy-making influence of the Bank, making the Bank’s rhetorical orientation toward poverty reduction all the more divergent from its policy reality.

And that policy reality continues to be significantly different than its accompanying rhetoric. As has been shown, precious little has changed in the way in which Bank policy addresses poverty. While the term “structural adjustment” has been, for the most part, dropped from the Bank’s public vocabulary, policy-based lending and aid dependent upon the satisfaction of economic conditionalities continues to be an important tool for the Bank, comprising more than one-third of Bank lending in fiscal year 2000.[198] In the case of Honduras, the macro-level reforms they emphasize are consistent with Bank adjustment goals: the PRSP advocates exchange rate liberalization, trade liberalization (both domestic and international), interest-rate and financial sector liberalization, and fiscal reforms. In the descriptions of each, the Honduran PRSP admits that the short-term effect on the poor population can either be negative (such as in trade liberalization and exchange rate reform) or have no effect on the poorest of the population (such as fiscal reform). The case of Mozambique offers similar policies. The PRSP advocates lowering interest rates, liberalizing exchange rates, cutting public expenditure, reforming the financial sector, and promoting international trade. The JSA report cites as one of the highlights of the paper “an expanded justification or macroeconomic policy” relative to the I-PRSP and applauds the PRSP’s “stance of applying a strong fiscal adjustment strategy.”[199] Given that the government of Mozambique has set a target 8 percent growth rate for the achievement of its poverty reduction goals, the structural adjustment undertaken will have to continue to be broad-based and rapidly implemented. This could, as has been seen in the past, have extremely negative consequences for the country’s poor. Combined with the need for an overhaul of public expenditure, the Mozambique case offers a near perfect incidence of the traditional Bank-style policies that were the subject of such debate in the late 1980s and early 1990s.

For all of its new rhetoric and seeming inclusion of a broadened range of issues, the New Bank is, at its core, an attempt to make the “Old Bank” function with better efficiency and effectiveness. I would argue, however, that the Bank’s very structure stands in the way of that goal. Because of the hegemony of Bank meta-policy, it has systematically excluded alternative development ideas, either by editing them out of Bank research or rendering them ineffective through the continuation of the very policies whose effectiveness needs improvement. By perpetuating the “voices from above” versus “voices from below” dichotomy in the PRSP program, the Bank is effectively undermining its own goals. If, as the Bank posits, adjustment policies will be more successful with a better sense of national ownership and an increased participatory process, then one of two directions must be pursued. Either the influence of the Bank and the Fund – given added weight through conditionality – needs to truly be scaled back, or the meta-policy that currently dictates Bank operations needs to be reformed. This can be achieved, argues Robert Wade, by allotting greater power to other member states, and diminishing the influence of the US. “The Bank would be a better development agency,” he writes, “if people from other states, with knowledge of other (social democratic, developmental state) forms of capitalism had more influence over what the Bank says and does.”[200] It is only when this is achieved that any real change can be registered in Bank policy. Until there is a shift of power within the World Bank, and the hegemony of the current US lead meta-policy is dismantled, changes made in language and policy organization will continue to be all but cosmetic.

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[1] Wolfensohn, James, “Coalitions for Change,” Annual Meetings Address to the Board of Governors, September 28, 1999.

2 Wolfensohn, James, “People and Development,” Annual Meetings Address to the Board of Governors, October 1, 1996.

[3] While liberalism can be broken down into numerous variants such as trade liberalism, democratic structural liberalism and transaction liberalism, liberal-institutionalism is the most pertinent for explaining IO action. See Joseph Greico, “Anarchy and the Limits of Cooperation,” International Organization Vol. 42, No. 3 (Summer 1988).

[4] Two of the most important examples being Stephen Krasner, “Structural Causes and Regime Consequences: Regimes as Intervening Variables,” International Organization Vol. 36, No. 2 (Spring 1982) and William Ascher, “New Developmental Approaches and the Adaptability of International Agencies,” International Organization Vol. 37, No. 3 (Summer 1983).

[5] Evans, Rueschemeyer and Skocpol, eds. Bringing the State Back In (New York: Cambridge University Press, 1985).

[6] Ascher 1983.

[7] For this argument, he refers to Robert K. Merton, Social Theory and Social Structure (Glencoe, IL: Free Press, 1957), Peter M. Blau, Bureaucracy in Modern Society (New York: Random House, 1956), Harold Wilensky, Intellectuals in Labor Unions: Organizational Pressures on Professional Roles (Glencoe, IL: Free Press, 1956) and Wilensky, Organizational Intelliegence (New York: Basic Books, 1967).

[8] Ascher 1983, p. 418.

[9] Ibid., p. 427.

[10] Barnett and Finnemore make this point, as well, in “The Politics, Power and Pathologies of International Organizations,” International Organization, Vol. 53, No. 4 (Autumn 1999), p. 710.

[11] Ascher, 1983, p. 428-431.

[12] Ibid., p. 436.

[13] Barnett and Finnemore, 1999.

[14] Ibid., p 707.

[15] Ibid., p. 708.

[16]The ability to structure discourse implies the ability to change it. Knowledge structuring is, like norm diffusion, an active process that involves evolution, and therefore change. This is especially true for the evolution of poverty reduction discourse through the World Bank. For an extensive discussion of this evolution, see Ravi Kanbur and David Vines, “The World Bank and poverty reduction: past, present and future,” in Christopher Gilbert and David Vines, eds. The World Bank: Structure and Policies (Cambridge, UK: Cambridge University Press, 2000), Ravi Kanbur and Lyn Squire, “The Evolution of Thinking about Poverty: Explorations and Interactions,” in Meier, Gerald and Joseph Stiglitz, eds., Frontiers of Development Economics: The Future in Perspective (Washington, D.C.: World Bank/Oxford University Press, 2001), and much of Devesh Kapur, et. al., The World Bank: Its First Half Century (Washington, DC: Brookings Institution 1997.)

[17] Barnett and Finnemore, 1999, p. 710.

[18] The same is true, Barnett and Finnemore point out, of classifications at the World Bank. See Gran, Guy. “Beyond African Famines: Whose Knowledge Matters?” in Alternatives Vol. 11, pp. 275-296.

[19] Barnett and Finnemore, 1999, p. 711.

[20] Ibid.

[21] Ibid., p. 713.

[22] Finnemore, Martha. National Interests in International Society (Ithaca, NY: Cornell University Press, 1996). Of interest is Chapter 4, “Norms and Development: The World Bank and Poverty Reduction,” pp. 89-127.

[23] Ibid., p. 125.

[24]Ibid., p. 90.

[25]Ibid., p. 99.

[26] Kapur, Lewis and Webb, eds., The World Bank: Its First Half Century (Washington, D.C.: Brookings Institution, 1997), p. 219.

[27] Ibid.

[28] See for example, Joseph Greico’s “Anarchy and the Limits of Cooperation A Critique of the Newest Liberal Institutionalism,” International Organization, Vol. 42, No. 3 (Summer 1988), pp. 485-507. For a more basic approach to realism and its treatment of international organizations, see Kenneth Waltz’s Theory of International Politics (Reading, Mass.: Addison-Wesely, 1979).

[29] Wade, Robert, “Japan, the World Bank, and the Art of Paradigm Maintenance,” New Left Review I/217, May-June 1996, p. 16.

[30]Ibid., p.30.

[31]This is not to say that an IO’s mission must remain singularly unchanged throughout the course of the IO’s existence; maintenance can be either static or dynamic, but the mission for which the IO is founded and its guiding principles, such as its charter or constitution, will remain relatively constant.

[32]Wade 1996, p. 16.

[33]Ibid.

[34]Ibid., p. 15.

[35]Ibid., p. 16.

[36]Ibid., pp. 15-16.

[37]Wade, 1996, p. 31.

[38]Wade, 1996, p. 31.

[39] Ibid., p. 23.

[40]Ibid., p. 31.

[41] This may explain the lag time between McNamara’s original 1968 speech in which he introduced the poverty reduction emphasis and the actual execution of poverty reduction as policy, which did not occur until years later. For a fairly detailed description of the process, see Martha Finnemore, National Interests in International Society (Ithaca, NY: Cornell University Press, 1996), Chapter 4, “Norms and Development: The World Bank and Poverty,” pp. 89-127.

[42] Joseph Stiglitz and Ravi Kanbur are two highly important cases, both of which will be discussed in the following chapter. For more information, see Robert Wade, “The Making of the World Development Report 2000: Attacking Poverty,” World Development, Vol.:29, No. 8, (August 2001), pp. 1435-1441, and “US Hegemony and the World Bank: The Fight over People and Ideas,” Review of International Political Economy, forthcoming.

[43] De Vries, Barend A. “The World Bank’s Focus on Poverty,” in Griesgraber and Gunter, Eds., The World Bank: Lending on a Global Scale (Chicago: Pluto Press, 1996).

[44] These guidelines have no single, official form, but rather include a plethora of sources, most notably the speeches of James Wolfenson on the subject, the Bank document Poverty Reduction and the World Bank: Progress in Fiscal 1999 (Washington D.C.: The World Bank, 2000), and, most importantly, the PRSP Sourcebook, an online guide to the PRSP program, located at http://www.worldbank.org/poverty/strategies/sourctoc.htm. As of this writing, the sourcebook is near complete, with only the section titled “Pro-Poor Growth” yet forthcoming.

[45] Caufield, Catherine, Masters of Illusion: The World Bank and the Poverty of Nations (New York: Henry Holt, 1996), p 2.

[46] Kapur, Devesh, John Lewis and Richard Webb, eds, The World Bank: Its First Half Century (Washington, D.C.: Brookings Institution, 1997), p. 51.

[47] Ibid., p. 52.

[48] Kapur, et al., Chapter Three, “The Bank of the 1950s.” See especially page 86, table 3-1, “World Bank Development Lending before IDA.”

[49] Caufield, 1996, p. 66. See Weaver, James H., The International Development Association (New York: Praeger, 1965) p. 28.

[50] In 1996, for instance, Jesse Helms was the Chair of the Foreign Relations Committee.

[51] Caufield, 1996, p. 316-317.

[52] See Pearson, Lester B., et al. Partners in Development: Report of the Commission of International Development (New York: Praeger, 1969).

[53] Caufield, 1996, p 90.

[54] From the preface of the World Bank Annual Report 1966-1967. Quoted in Caufield, 1996, p. 91.

[55] Quoted in Kapur, et al., 1997, p. 181.

[56] Quoted in Oliver, Robert W., George Woods and the World Bank (Boulder: Lynne Rienner, 1995), p. 204.

[57] Caufield, 1996, p. 95.

[58] Ibid., p. 104.

[59] Kapur, et al., 1997, p. 233.

[60] Kapur, et al. point out that this lead Mason and Ascher to conclude that there was a significant departure between the rhetoric and the reality of the Bank practice of the day. The next few years would bring some significant change, but it is to be debated whether or not they would have changed this pronouncement. Mason and Asher, 1973, p. 732.

[61] Chenery, Hollis, et al., Redistribution with Growth (London: Oxford University Press, 1974).

[62] McNamara, Robert, Speech to the Board of Governors, Nairobi, Kenya, September 24, 1973.

[63] Streeten, et.al. First Things First: Meeting Basic Human Needs in Developing Countries (London: Oxford University Press, 1981).

[64] Kapur, et al., 1997, p. 265.

[65] Caufield, 1996, p. 143. Kapur, et al., however, point out that under McNamara, poverty lending in its strictest sense had accounted for about one-third of all Bank lending. In the period 1982-1987, those same types of programmatic loans were reduced to one-fifth of the Bank’s total lending. Kapur et al. argue that at least on paper, this change might not have been so significant. The rhetoric employed by Bank staff and management, however, tells radically different stories of each of the two periods. Kapur et al., 1997, p. 332.

[66] Caufield, 1996, p. 143/

[67] Kapur, et al., 1997, p 548. For a complete discussion of the Turkish experience in the 1980s, see Kapur et al., 1997, pp. 545-557, and Caufield, 1996, pp. 146-149.

[68] Caufield, 1996, p. 147 and Kapur et al., 1997, p. 549.

[69] Caufield, 1996, p. 147.

[70] Ibid., p. 148.

[71] Caufield, 1996, p. 148, and Kapur, et al., 1997, p. 556.

[72] “The obvious political question the Ghana case raises is the extent to which reform – and the Bank’s effectiveness in the promotion of reform – have rested on the authoritarian capacities and disposition of a reform minded government. Arguably, it took authoritarianism to launch the 1983 program in Ghana.” Kapur, et al., 1997, p. 585.

[73] Kapur, et al., 1997, p. 352. Reference is to Cornia, G.A. et al., Adjustment with a Human Face (London: Oxford University Press, 1987).

[74] Kapur, et al. 1997, p. 354.

[75] Ibid., p. 584-585.

[76] One of the greatest impacts of this reorganization was the consolidation of the hierarchical structure of the Bank. Conable created positions for four Senior Vice Presidents, who in turn chose their subordinate staffers, who in turn did the same. This, according to Caufield, “fostered rampant cronyism in the Bank,” and “creat[ed] what one observer termed ‘a Christmas tree of yes-men.’ ” See Caufield, 1996, p. 179 for further discussion.

[77] Kapur, et al., 1997, p. 531.

[78] World Bank, “Structural Adjustment Lending: A Review of First Experience,” Operations Evaluation Department (OED) Report 6409, September 24, 1986, p. 80.

[79] Kapur, et al., 1997, p. 370.

[80] Kapur, et al., 1997, p. 363.

[81] Preston’s address to the Board of Governors, Bangkok, Thailand, October 1991. Published in World Bank, The Momentum for Change: Lewis T. Preston at the World Bank, 1991-95, Addresses and Statements (Washington, D.C.: World Bank, 1995), p. 85.

[82] World Bank, Assistance Strategies to Reduce Poverty, Policy Paper 9953, September 1991, p. 5.

[83] Managing Director, the second-in-command to Bank President, was a position Preston created. Under Preston, there were three MDs. There are now, under Wolfensohn, four MDs, two senior Vice Presidents, 23 Vice Presidents and a Director-General of Operations Evaluation (OED).

[84] World Bank, “Effective Implementation: Key to Development Impact,” Portfolio Management Task Force Report, R92-195, September 1, 1992, submitted to the Board of Directors in December 1992.

[85] To mark the 50 year anniversary of the Bank, the report The World Bank Group: Learning from the Past, Embracing theFuture was published (Washington D.C.: The World Bank 1994). This citation is from the “Forward From the President,” p. 6, and is also listed as the Bank’s mission, available at http://www.worldbank.org/poverty/ mission/index.htm.

[86] World Bank Annual Report 1995, p. 4.

[87] This highly controversial memo, later described by Summers as an attempt to challenge conventional wisdom and encourage “rigorous thinking” among Bank staffers, encouraged the migration of polluting industries to developing countries on the basis of their being “vastly under-polluted.” It was published in the Financial Times and The Economist and caused a huge public relations stir at the Bank. It is, interestingly, not discussed in the Bank’s official history. For a good introduction, see Caufield, 1996, p. 258.

[88] The report criticized Bank handling of the Sardar Sarovar Dam project in India, and recommended that the Bank “step back” from the project given that “problems besetting the Sardar Sarovar projects are more the rule than the exception.” It found the resettlement and environmental costs of the project far outweighed its benefits, and that, additionally, the majority of the problems had been reported to managerial staff at the Bank and ignored. While funding was initially continued, the Bank pulled out of the project in 1995. Morse, Bradford et al. Sardar Sarovar: The Report of the Independent Review (Ottowa: Resource Futures International, 1992).

[89] Kapur, et al., 1997, p. 5.

[90] Caufield, 1996, p. 102.

[91] Kapur, et al., 1997, p. 42.

[92] World Bank, “Progress Report on the Implementation of Portfolio Management: Next Steps, a Program of Actions,” Publication 13756 (Washington, D.C.: World Bank, 1993).

[93] Caufield, 1996, pp. 260-261.

[94] Wolfensohn, James, “New Directions and New Partnerships: Address to the Board of Governors (Annual Meetings Address),” Washington, D.C., October 10, 1995.

[95] Ibid.

[96] Wolfensohn, James, “People and Development: Annual Meetings Address,” delivered to the Board of Governors, October 1, 1996.

[97] World Bank Participation Sourcebook, publication of the Department of Environmentally Sustainable Development, Report 15363 (World Bank: Washington, D.C., 1996.)

[98] Wolfensohn, James, 1996.

[99] This aid, however, like IDA lending in general, is dependent upon conditionalities There are three stages: in the first, the Bank and Fund determine a country’s eligibility for HIPC debt relief. Once the decision has been made that a country’s debt is unsustainable, the country must then implement structural reform policies, which are now embodied in the PRSP, to receive aid. The third stage, that of the “floating completion point,” sets a timeline for the completion of the debt-relief program, according to the needs determined in the first stage.

[100] Wolfensohn, James D. “The Challenge of Inclusion: Annual Meetings Address” Hong Kong SAR, China, September 23, 1997.

[101] Stout, David, “World Bank Suspends 3 Employees for Suspected Kickbacks,” New York Times, July 16, 1998 (Late Edition - Final, Section A, Page 6, Column 1).

[102] Entous, Adam, “US Senate to hold up World Bank Funds for Audit,” Financial Express, July 23, 1998, and Richard Stevenson, “Reports of Embezzling at World Bank Jeopardize U.S. Financing,” New York Times, July 18, 1998 (Late Edition - Final, Section A, Page 9, Column 1).

[103] United States General Accounting Office, National Security and International Affairs Division, World Bank: Management Controls Stronger, but Challenges in Fighting Corruption Remain, Report to Congressional Committees Number B-282152 (USGAO, Washington, D.C.: April 6, 2000), p. 11.

[104]USGAO report B-282152, p. 36.

[105] The nations cited in the Bank’s chronology are these three; however, there are entries in the document that do not disclose the nationality of some firms. World Bank Group Historical Chronology, 1990-1999. Online at http://archives.worldbank.org/.

[106] USGAO report B-282152, p. 32-33.

[107] World Bank, “World Bank President Proposes Comprehensive Approach to Development Effectiveness,” press release, January 24, 1999.

[108] World Bank, WDR 2000, p. 6.

[109] For complete information, including texts, on the Voices of the Poor initiative, see http://www.worldbank.org/poverty/voices.

[110] World Bank, WDR 2000, p. 6.

[111] World Bank, WDR 1990, p. iii.

[112] Ibid., p. 54.

[113] Ibid., p. iii..

[114] World Bank, WDR 2000, p. 15.

[115] Ibid., pp. 32-33.

[116] Ibid., p. 38.

[117] Ibid., p. 1.

[118] Ibid., p. 38.

[119] Ibid., p. 61-63. The Washington Consensus, as laid out by the Bank, is a series of 10 “market-friendly” reforms including privatization, fiscal discipline, and trade liberalization, among others. See World Bank, WDR 2000, p. 63, Box 4.1.

[120] Ibid., p. 39.

[121] Ibid.

[122] Ibid. p. 135.

[123] Ibid. p. 40.

[124] Ibid., p. 7.

[125] Ibid., p. 11.

[126] Ibid., p. 8.

[127] This section draws heavily on the work of Robert Wade and on conversations with Joseph Stiglitz. I thank them both for their instrumental help with this paper.

[128] Examples of these include the annual UNCTAD Trade and Development Report and the UNDP Annual Report.

[129] Wade, Robert, “US Hegemony and the World Bank: The Fight over People and Ideas,” Review of International Political Economy, forthcoming.

[130] Wade, Robert. “Showdown at the World Bank,” New Left Review 7, January-February 2001, p. 131.

[131] Ibid., p. 131.

[132] Ibid., p. 132.

[133] Ibid., p. 131.

[134] Wade, forthcoming.

[135] Ibid.

[136] Wade, Robert. “Making the World Development Report 2000: Attacking Poverty,” World Development Vol. 29, No. 8, August 2001, p. 1437.

[137] Uchitelle, Louis, “World Bank Economist Felt he had to Silence Criticism or Quit,” New York Times, December 2, 1999, p. c1.

[138] Wade, forthcoming.

[139] Stiglitz, Joseph, “What I Learned at the World Economic Crisis,” New Republic, April 17, 2000.

[140] Wade, forthcoming.

[141] Wade, “Showdown,” 2001, p. 134.

[142] Ibid.

[143] Wade, “Making…” 2001, p. 1438.

[144] Ibid.

[145] Wade, “Making…” 2001, p. 1439.

[146] World Bank, WDR 2000, pp. 63-64.

[147] With the creation of the CDF, the IMF decided to rename their Enhanced Structural Adjustment Facility (ESAF) the Poverty Reduction and Growth Facility (PRGF). This is the department of the Fund that participates in concessional lending initiatives and works closely with the IDA in formulating adjustment strategies and loan conditionalities.

[148] IMF and IDA, “Poverty Reduction Strategy Papers – Progress in Implementation,” prepared by the Staffs of the World Bank and International Monetary Fund, September 7, 2000. Online at http://www.imf.org/ external/np/prsp/2000/prsp.htm.

[149] World Bank, PRSP Sourcebook, Preface. Online at http://www.worldbank.org/poverty/strategies/ chapters/preface/preface.htm.

[150] See for example, IMF and IDA, “Mozambique: Joint Staff Assesment of the Poverty Reduction Strategy Paper,” August 28, 2001, and IMF and IDA, “Review of the Poverty Reduction Strategy Paper (PRSP) Approach: Main Findings,” March 15, 2002.

[151] World Bank, PRSP Sourcebook, Overview. Online at http://www.worldbank.org/poverty/strategies/ chapters overview/overview.htm.

[152] World Bank, Partners in Transforming Development: New Approaches to Developing Country-Owned Poverty Reduction Strategies, p. 7. Found online at http://www.imf.org/external/np/prsp/pdf/prspbroc.pdf

[153] Ibid.

[154] IMF and IDA. “Progress Report on Poverty Reduction Strategy Papers (PRSPs),” April 14, 2000. Online at http://www.imf.org/external/np/pdr/prsp/2000/041400.htm.

[155] The Bank originally stated in its PRSP Brochure (World Bank, “Partners in Transforming….” 2000) that the Joint Staffs Assessment would “include a description of the participatory process, but not a judgment as to its adequacy.” This has not been the case, as each of the eight completed JSAs makes reference to the adequacy of the participatory process.

[156] Wood, Angela, “The ABC of the PRSP: An introduction to the new Bank and Fund Poverty Reduction Strategy Papers.” Bretton Woods Project briefing paper, April 2000. Online at http://www.brettonwoodsproject.org/ topic/adjustment/abcprsp.html

[157] IMF and IDA, “Review of the Poverty Reduction Strategy Paper (PRSP) Approach: Main Findings,” March 15, 2002.

[158] Woods, “ABC…” April 2000.

[159] IMF and IDA, Poverty Reduction Strategy Papers – Progress in Implementation,” September, 2000. Online at http://www.imf.org/external/np/prsp/2000/prsp.htm.

[160] IMF and IDA, “Review of the Poverty Reduction Strategy Paper (PRSP) Approach: Main

Findings,” March 15, 2002, p. 9.

[161] U.S. Department of State, “Selective Chronology of the International Financial Institutions,” Economic Perspectives: an Electronic Journal of the US Department of State, Vol. 6, No. 1, February 2001.

[162] Kapur et al., 1997, p. 519.

[163] World Bank, “Country At-a-Glance” papers. Online at http://www.worldbank.org/data/countrydata /aag/moz_aag.pdf and http://www.worldbank.org/data/countrydata/aag/hnd_aag.pdf.

[164] Republic of Mozambique, Plan for the Reduction of Absolute Poverty (2001-2005), Final Version Approved by the Council of Ministries, April 2001, and Government of Honduras, Poverty Reduction Strategy Paper, September 2001.

[165] Republic of Mozambique, 2001, p. 3.

[166] IMF and IDA, Mozambique JSA, p. 4.

[167] Republic of Mozambique, 2001, pp 4-5.

[168] Ibid., p. 30.

[169] Ibid.

[170] Ibid, p. 76.

[171] Booth, David et al., PRSP Institutionalisation Study: Final Report, prepared for the Strategic Partnership for Africa, coordinated by the Overseas Development Institute, January 2001, chapter 7, p. vii.

[172] IMF and IDA, Mozambique JSA, p. 1.

[173] Booth et al., 2001, p. 9-10.

[174] IMF and IDA, Mozambique JSA, p. 2.

[175] Booth et al., 2001, p. 28.

[176] IMF and IDA, Mozambique JSA, p. 1.

[177] Government of Honduras, 2001, p. 18-20, and National Climatic Data Center, “Mitch: the Deadliest Atlantic Hurricane since 1780,” online at http://lwf.ncdc.noaa.gov/oa/reports/mitch/mitch.html.

[178] Government of Honduras, 2001, p. 20, and World Bank, “Country At-a-Glance” paper for Honduras.

[179] Government of Honduras, 2001, p. iv.

[180] Ibid., p. 30.

[181] Ibid., p. 32.

[182] Ibid., p. 36.

[183] Ibid., p. 104. The breakdown of the 2.7 billion is: 934 million in debt relief, 769 million in “disbursements for projects already underway,” 818 million in external financing, and 144 million in internal financing.

[184] IMF and IDA, Honduras JSA, p. 1.

[185] World Bank, meeting minutes, NGO PRSP Meeting, April 10, 2000. Online at http://www.worldbank. org/ participation/ngo10apr.htm.

[186] O’Neill, Sally and Maura Leen, “PRSPs – Policy & Practice in Honduras and Nicaragua,” Trócaire PRSP review document, January, 2002, p. 4.

[187] IMF and IDA, Honduras JSA, p. 2.

[188] Ibid. p. 3.

[189] O’Neill, et al., 2002, p. 5.

[190] Government of Honduras, 2001, p. 4.

[191] O’Neill, et al., 2002, p. 8.

[192] See http:// www.worldbank.org/html/extdr/thematic.htm for a list of “development topics” with which the Bank currently concerns itself.

[193] Sheehan, James, “The World Bank: A Lesson in Bureaucratic Survival,” Foreign Policy Briefing No. 56, April 12, 2000, (Cato Institute: Washington, D.C.: 2000).

[194] Sheehan, 2000, p. 2.

[195] Ibid.

[196] Ibid., p. 3.

[197]). Gibbs, Christopher, Claudio Fumo and Thomas Kuby, “Nongovernmental Organizations in World Bank-Supported Projects: A Review,” Operations Evaluation Department (OED) Sector Study 19061, 2/01/1999. (World Bank: Washington, D.C., 1999

[198] New IBRD/IDA commitments for FY 2000 totaled $15,276,000 USD, while combined “adjustment” commitments totaled 5,762,800 USD, nearly 38%. World Bank Annual Report, 2000, p. 1, and World Bank, Poverty Reduction and the World Bank: Progress in Operationalizing the WDR 2000/2001, Annex E, p. 59.

[199] International Monetary Fund and World Bank, “Mozambique: Joint Staff Assessment of the Poverty Reduction Strategy Paper” August 28, 2001, pp. 1-5.

[200] Wade, forthcoming.