Posts Tagged ‘World Bank’


The history of capitalism is actually a combination of two histories: it’s a history of employers attempting to hire workers and develop new technologies to make profits and expand the reach of capitalism; it’s also a history of workers banding together to improve wages and working conditions and imagine ways of moving beyond capitalism.

The World Bank’s World Development Report, currently in draft form, comes down firmly on the side of employers and their historical role.

The theme of the 2019 report is the “changing nature of work.” As envisioned by the reports authors,

Work is constantly being reshaped by economic progress. Society evolves as technology advances, new ways of production are adopted, markets integrate. While this process is continuous, certain technological changes have the potential for greater impact, and provoke more attention than others. The changes reshaping work today are fundamental and long-term, driven by technological progress, globalization, shifting demographics, urbanization and climate change.

Beneath the typically lofty but vague rhetoric, the two trends that haunt the report are the increasing gap between the top 1 percent and everyone else and the jobs that will be eliminated with the use of automation and other labor-saving technologies—leading to “rising concerns with unemployment, inequality and unfairness that are accompanying these changes.”



So what does the World Bank recommend for beleaguered workers, who are falling further and further behind the tiny group at the top and whose job prospects are threatened by new technologies?

Here, the World Bank reveals which side of history it’s on. It goes after the kinds of protections workers have long fought for, in both developed and developing countries, but which the world’s employers consider onerous and that make the price of labor power too high. In particular, the World Bank focuses on “high minimum wages, undue restrictions on hiring and firing, strict contract forms” that make workers both costly to hire and difficult to dismiss. In other words, the World Bank recommends exactly what employers have always wanted: flexible labor markets.

Rapid changes to the nature of work put a premium on flexibility for firms to adjust their workforce, but also for those workers who benefit from more dynamic labor markets.

That’s what the World Bank offers to the world’s employers (“flexibility”), coupled with an empty promise to the world’s workers (“more dynamic labor markets”).

But, as even the World Bank recognizes, such changes would leave the world’s workers even more destitute than they are right now. That’s why they shift the focus to a discussion of a a “new social contract. . .to promote fairness and equality of opportunity for people and firms.”

Possible elements of hypothetical social contract could include: (i) creating jobs; (ii) investing early in human capital; (iii) taxing platforms and superstar firms; and (iv) introducing basic income guarantees.

Once again, it’s exactly what private employers want—more workers with additional skills, a redistribution of monopoly rents, and a minimum income for their workers—as long as employers themselves don’t incur any additional costs. Employers retain their control over the surplus, and therefore over both jobs and workers. And the changes proposed by the World Bank promise them even more surplus as they use new technologies and change the nature of the work that is done for them.

What remains intact in choosing the employers’ side of history is that work, however much it is envisioned to change, is still done by employees for their employers. Governments and the rest of society are then charged with the responsibility of cleaning up the mess left by employers, including the dearth of required jobs and the mass of workers who are too impoverished and insecure to satisfy their own needs.

The idea that the worlds of technology and work are quickly moving far beyond the control of employers—well, that’s the side of history the World Bank remains incapable of comprehending.


This post is for all those dedicated activists and teachers, such as mfa, who are committed to teaching about and creating the conditions to eliminate global poverty and economic injustice.

I have been writing of late about utopia—for example, with respect to classes and the right to be lazy.

But the world economy today represents exactly the opposite, a dystopia of extreme poverty for hundreds of millions of people (768.5 million in 2013 according to the World Bank, or 10.7 percent of the global population).


And as Angus Deaton reminds us, those struggling to survive in conditions of extreme poverty aren’t just “over there,” in the Third World. Notwithstanding the focus of the World Bank-sponsored campaign to eradicate extreme poverty and the ubiquitous appeals on behalf of the needy in poor countries, a large portion—approximately 14 million people—live in wealthy countries—some 5.3 million in the United States alone.

Is there any more damning condemnation of contemporary economic institutions, in both the North and the South?

But wait, there’s more.

We’re talking about hundreds of millions of people living—barely—on less than $1.90 a day!

That’s the official World Bank number, updated in recent years from the original $1 a day and then $1.25 a day. But let’s put that number in perspective, in order to understand how low a threshold it actually is.

First, according to recent research by Robert C. Allen (pdf), $1.90 a day for people in Third World countries covers a consumption basket of food, a variety of nonfood items, and housing. But the devil, as always, is in the details. For food, we’re talking only 2100 calories a day (enough to allow people, beyond a bare minimum, “a more ample supply of energy to do the work that sustains society as well as raising children”), plus additional food (basically animal fat and vegetables) to meet recommended daily allowances of various vitamins and minerals (iron, B12, Folate, B1, Niacin, and C). That’s it in terms of food.* It all includes various nonfood items, such as fuel, lighting, clothing, and soap—but not education, medical, and other such nonfood expenditures. Finally, a housing allowance is calculated, which amounts to just 32 square feet per person.**

Calculate the total of those expenditures (using linear programming) and you end up with an extreme poverty line for people in Third World countries of only $1.90 a day. And the way the world economy is currently organized, it can’t guarantee even that miserly sum to hundreds of millions of people across the globe.

The second way of putting that number into perspective is to recalculate it for people in wealthy countries. Allen has done that, too. For the United States, it comes out to about $4 a day (mostly because housing costs are so much higher, and make up a much larger percentage of poor people’s budgets, than in the Third World).***

That means we’re talking about just $1460 a year for an individual or $5840 for a family of four.**** The way the economy is organized in the United States forces over 5 million people to get by on less than $4 a day.

Consider what those numbers represent—whether $1.90 a day in the Third World or $4 a day in rich countries like the United States—and there’s no doubt, for hundreds of millions of people, we’re living in an economic dystopia.


*Thus, in Sri Lanka, the so-called Basic diet would consist, per person per year, of the following: 309 pounds of rice, 108 pounds of beans and lentils, 77 pounds of eggs, 9 pounds of oil, and 99 pounds of spinach, cauliflower, or peanuts).

**As even Allen admits, “By the standards of rich countries, this represents extreme, and often illegal, overcrowding. Even illegally subdivided apartments in New York offer 5–10 square meters per person.”

***In Third World countries, about two-thirds of spending is on food, one quarter on nonfoods, and 5–10 percent on housing. The food share drops to one quarter in the United States, the nonfood share remains at one quarter, and the housing share explodes to half or more of income.

****The official poverty line in the United States is $34.40 a day for an individual, which comes out to $12,752 a year. According to that standard, 43.1 million Americans (12.7 percent of the population) are forced to have the freedom to live in conditions of poverty.


To read National Public Radio’s [ht: ja] article on the latest World Bank report on Poverty and Shared Prosperity: Taking on Inequality, you’d think the problem of global poverty was well on the way to being solved.

Is that just wishful thinking?

In terms of the headline numbers, the author of the article is correct:

In 2013, fewer than 800 million people lived on less than $1.90 a day. That’s less than 11 percent of the global population. As recently as 1990, about 35 percent of all people lived in such extreme poverty.

That means about 1.1 billion people rose out of extreme poverty.

But, before we get too excited, there are 3 key issues to keep in mind.

First, the World Bank itself follows the presentation of the numbers with a note of caution:

Although this represented a noticeable decline, the poverty rate remains unacceptably high given the low standard of living implied by the $1.90-a-day threshold.

That’s right. The threshold is a miserly $1.90 a day, an update taking into account inflation of the previous limit of $1 a day. If they used anything more reasonable—say, an absolute level of $5 a day or, even better, a relative level of 50 percent of mean income—the level of global poverty would be much higher.*


Second, while it’s never mentioned in the article, the actual focus on the World Bank report is inequality. And there the results are, at first glance, bewildering: global inequality has fallen while average within-country inequality is greater now than 25 years ago. But it can be easily explained: Rising incomes in China and India alone, given the size of their populations, have led to a reduction in between-country inequality. However, in many countries, the income share of the top income groups has been expanding—in the United States, of course, but also in Argentina, India, the Republic of Korea, Taiwan, and China. And in South Africa, the top income share roughly doubled over 20 years, to levels comparable to those observed in the United States!

Finally, we need to understand what is actually causing the reported declines in global poverty and inequality. The World Bank singles out five countries—Brazil, Cambodia, Mali, Peru, and Tanzania—as the best performers. And here the NPR article is just plain wrong. The policies the World Bank itself cites are the following “building blocks of success”:

prudent macroeconomic policies, strong growth, functioning labor markets, and coherent domestic policies focusing on safety nets, human capital, and infrastructure.

This is exactly what one would expect from the World Bank: more growth—in other words, business as usual—will solve the problems of poverty and inequality.

The Peruvian example (based on reading the World Bank report and the background research papers) is particularly instructive. The “remarkable” improvement in living conditions among the poor and bottom 40 percent mostly occurred through the labor market (which explains about three-quarters of the reduction in extreme poverty).

What does that mean? Extreme poverty in Peru declined because more people, men and women, joined the labor market. Some left rural areas and migrated to cities; others exited the informal sector and went to work for larger enterprises. In both cases, more Peruvians were forced to have the freedom to sell their ability to work to someone else and, as a result, received more cash income in the form of wages—and then, of course, could use those wages to purchase more commodities.

So, as far as the World Bank is concerned, more Adam Smith development—a faster growing wealth of the nation—was both a condition and consequence of expanding the labor market and reducing poverty. The World Bank’s much-vaunted “shared prosperity” is just another name for more markets and more people working to make profits for a tiny group of employers at the top.

That’s the key point the article missed and the reason the World Bank, in the report, is so keen on celebrating the progress toward achieving the goal of eliminating extreme poverty by 2030.


*In fact, in a World Bank research paper, Shaohua Chen and Martin Ravallion (pdf), compared absolute and relative measures and found “a simultaneous rise in the numbers of relatively poor, alongside the fall in absolute poverty.”



We always talk about $2 a day (the World Bank’s cutoff point for poverty around the globe) as if the problem were “over there” (e.g., the fact that nearly half the world’s population, 2.8 billion people, survive on less than $2 a day).

That’s nice.



Except, according to CBS Moneywatch [ht: ja], a growing number of American workers are struggling to live on just $2 a day.

The number of U.S. residents who are struggling to survive on just $2 a day has more than doubled since 1996, placing 1.5 million households and 3 million children in this desperate economic situation. . .

The measure of poverty isn’t arbitrary — it’s the threshold the World Bank uses to measure global poverty in the [developing] world. While it may be the norm to see families in developing countries such as Bangladesh and Ethiopia struggle to survive on such meager income, the growing ranks of America’s ultrapoor may be shocking, given that the U.S. is considered one of the most developed capitalist countries in the world.

A reader sent me a link to one of his new songs, a contribution to the project of creating a culture appropriate to imagining and creating a better world, including a better economy.

Lonnie Ray Atkinson’s songs also include “Economic Hitmen” (with TSOL and Zep Hurme) and “How We Gonna Make Wall Street Pay” (with Anitek).

Banking on world health

Posted: 23 March 2012 in Uncategorized
Tags: ,

I know little of Jim Yong Kim, Obama’s nominee to head the World Bank, other than that he was cofounder (with Paul Farmer) of Partners in Health. But he’s not either Jeffrey Sachs or Larry Summers—or, for that matter, Robert McNamara or Paul Wolfowitz.

That has to represent some kind of step forward. . .

Jeffrey Sachs, aka Dr. Shock, has publicly submitted his application to be the head of the World Bank.

My quest to help end poverty has taken me to more than 125 countries, from mega-city capitals to mountaintop villages, from rain forest settlements to nomadic desert camps. Now I hope it will take me to 18th and Pennsylvania, to the presidency of the World Bank. I am eager for this challenge.

Not surprisingly, there’s nothing on his resumé admitting to the economic and social disasters his version of shock therapy created in Bolivia, Poland, and Russia.

Perhaps there is a method to the madness: his way of operating takes the focus away from the disastrous implications of the neoclassical economic theory he uses and places it squarely on Sachs himself.

We’re back to Sachs’s enormous ego, which exposes almost anything he does to the suspicion that he’s in it mostly for the attention.

Like the International Monetary Fund, the World Bank gave Egypt a clean bill of economic health in 2010.

Since the appointment of a reformist Government in July 2004, Egypt has embarked on a reform path.  The reforms have been sustained until now (until the global crisis) and the Government has established a solid track record as one of the champions of economic reforms in the Middle East and North Africa region (MNA).

And what were these reforms?

Key reforms implemented over the last years include:

(i) Improved exchange rate management, building on the floating of the Egyptian pound and currency depreciation of 2003-04;
(ii) Reduction in import tariffs to a weighted average tariff of 6.9 percent (which puts Egypt at the lower end of the international trade tariff scale);
(iii) Rationalization of the tax system, including reduction of tax rates (highest corporate and personal rate is now 20 percent down from 32 to 40 percent) and improved tax administration (number of taxpayers rose from 1.7 million in 2004 to 2.5 million in 2006);
(iv) Improvements in budget management and controls (e.g., introduction of a single treasury account);
(v) Restructuring of the financial sector, to gradually disengage the State; and
(vi) Enhancement of the business environment

For the World Bank, the key was that Egypt had improved the cost of doing business.

Egypt is among the world’s 10 most active reformers for the fourth time based on the Bank’s 2010 “Doing Business” rankings. The country moved up to 106 from 116 among 183 economies worldwide in the overall ease of doing business ranking. Egypt made business start-up less costly, expedited the construction permit process, expanded the information available from the private credit bureau, and created commercial courts to speed up contract dispute settlements.

Like the IMF, the World Bank does mention lingering problems like unemployment (9.1 percent) and poverty (18 percent of the total population, 40 percent in rural areas). But, overall, it’s gung-ho about scaling up its program of activities “supporting the implementation of the ongoing reform program in a rapidly-growing Middle Income Country.”

What the World Bank fails to mention is that one of the conditions for “doing business” in Egypt has been repressing the population.

World Bank president Robert Zoellick [pdf] has announced that development economics, as practiced at the Bank, should be democratized. But who cares, if the Bank’s development practices remain the same?

To give him credit, Zoellick (George W. Bush’s pick to succeed Paul Wolfowitz at the Bank) makes a number of startling admissions. First, he notes the failure of mainstream economics with respect to the current crises.

Economics has contributed significantly to how we understand our world. But economics doesn’t always get it right. Indeed, it can get things spectacularly wrong, as we saw in the recent crisis when bad ideas led to bad results that we are all still paying for.

The Nobel Prize for Economic Sciences has been bestowed on many worthy honorees. But it has also been given to those whose love of mathematical models was based on heroic and unrealistic assumptions about humankind. An excellent physicist once observed that in physics, Nobel Prizes are awarded for being correct while in economics they are often awarded for being brilliant.

Second, he recognizes criticisms of the research culture at the Bank:

Yet we have also been criticized for the way research has sometimes been used to proselytize on behalf of Bank policy, without always taking a balanced view of the evidence or without expressing appropriate skepticism. And in keeping with much academic research, the Bank’s analytic work has often lacked broad-based transparency — not least amongst those who would be affected most by the policies derived from those analyses.

But the best Zoellick can come up with by way of reforms is the slogan “Open Data, Open Knowledge, Open Solutions.”

Today, the Bank remains the largest single source of development knowledge.

But knowledge must be opened to all.

In a world where there is no one, overarching, theoretical framework;

In a world where scholarship must be linked to practice;

In a world where developing economies have as much to share as developed;

We need to democratize and demystify development economics, recognizing that we do not have a monopoly on the answers.

We need to throw open the doors, recognizing that others can find and create their own solutions. And this open research revolution is underway.

It all sounds good. But, if the definition and strategies of development of the World Bank remain the same, who cares if they’re used and deployed in a more open, transparent manner?

Alternatively, how about really changing the practice of development at the Bank? Let the people who work in the factories, farms, and offices around the world own and control the Bank. Now, that would be a real form of democracy, one that we could bank on.