Las Am��_ricas

Arrested Development


Well, it’s almost that time of year again, when the World Bank releases its World Development Report (WDR), typically a slick, fat tome written as if its audience had the education and critical thinking capability of a fourth grader. The WDR comes complete with eye-catching graphics and heartwarming anecdotes about, for example, Vietnamese peasants who, through innovative international financing, have successfully transitioned from their soggy lives in the rice paddies to challenging career opportunities in toxic plastic tinting or wig assembly. Or, more likely this year, about entrepreneurial Bolivian social workers, formerly buried in a stifling and costly bureaucracy, now using their severance pay to form prosperous cooperatives for child minding and elder care. The World Bank’s publication of these propaganda pieces each year highlights its uniquely privileged place in the alleged development world–a place that allows the Bank simultaneously to design and impose economic and political policies in borrowing countries and then assess the catastrophic results as if it had nothing to do with them.

Let’s see now. Why, here’s a copy of last year’s World Development Report: Building Institutions for Markets just lying around. Suppose we take a look at the advice we all received for 2001/2002 and check how it worked out, shall we? First of all, to tackle the issue of markets, we learned that we have to ask the relevant questions:

Q. What makes market activity rewarding and possible for some and not others? Why are some markets inclusive and integrated, allowing benefits to flow to the poor as well as the rich, the rural people as well as the urban? [Why, we might ask instead, if some markets are channeling benefits to flow so fluidly to the poor, are the lucky poor in the stream still poor?]

A. Markets work if they have rules, enforcement mechanisms, and organizations promoting market transactions. Extremely diverse, these institutions transmit information, enforce property rights and contracts, and in so doing they give people the opportunity to engage in fruitful market activity.

Q. Where do such market institutions come from? [How about, Mommy?]

A. States or communities can build them.

Oh boy! That is just super! Except that, with assistance and advice from the World Bank, the International Monetary Fund (IMF), and the Inter-American Development Bank (IDB), states have been supposedly working as directed on institutions for markets since the 1990s in Latin America. Latin American countries have introduced markets into finance, telecommunications, health care, social security, education, energy generation, and water services for the better part of a decade. Nonetheless, a public opinion poll conducted by the IDB in 2002 turned up the ugly fact that 63 percent of those surveyed believed that their countries had not benefited from the spread of markets into what had previously been considered public services. Why not, asked the IDB. After all, after privatization output per worker increased 46 percent in Argentina, 45 and 92 percent in Brazil and Chile, respectively, 92 percent in Mexico, and 112 percent in Peru. Sounds like the institutions supporting markets are working fine.

The Bankers are puzzled. “Why,” they ask, “with all this good news, are Latin Americans so unhappy?” Because of the devastating impact on unemployment: up 40 percent in Argentina, 10 percent in Brazil, 23 percent in Colombia, 36 percent in Mexico, and 55 percent in Peru since 1993.

Which brings us to the topic of this year’s WDR: Making Services Work for Poor People. Having flogged policies that pried open protected markets and having pressured governments into privatizing, decentralizing, and deregulating, the Bankers noted that there is an alarming flood of poor people floating around. Argentina provides the most dramatic example: over 50 percent of the population is now poor–living on less than $2 a day–compared to about 25 percent five years ago.

After aggravating the contagion of unemployment and spreading it throughout the region with budget cuts and privatization, after handing basic services over to private companies that raised prices and rates with little or no control, the Bank will now instruct governments on how to make sure that the newly-indigent get adequate education and health care, so that they are not trapped in poverty. According to the Bank, poverty is a thing that you do not want to get trapped in, and, the draft report says, it’s easier for you to get out if markets are introduced into community and social services, as well as everything else.

But wait, we say. If markets haven’t worked well in other sectors, where they could conceivably be appropriate, why insist on imposing them in social sectors and basic services, where factors other than simple cost/benefit ratios presumably ought to count for something?

The chief author of the report has an explanation. He is fond of likening the provision of healthcare and education to shopping for a sandwich. Choice and competition must be part of the process in order to ensure that the customer/patient/student gets the best possible deal. For example, if you go into McDonald’s, ask for a Big Mac without pickles, and the resentful, inefficient slowpoke cashier tells you that you’re getting pickles whether you like it or not, you–as a free agent–can slog down the street to Burger King, where the service personnel are so motivated to make a sale that they behave in a more appealing, attractive, and effective manner. You get a pickle-free hamburger, no problem, Burger King makes money, the cheerful sales associate gets promoted to franchise manager, McDonald’s goes out of business and the surly burger seller loses her job and goes back to the slums where she belongs. (Because it is a sensitive multicultural institution, the World Bank modifies the WDR to include samosas, saltenas, and shoo-mais in its example.)

So, it’s the same with health care! Get it? “Clinical care is unlikely to be effective without client power but, because of the gulf in knowledge between the doctor and patient, is also a service that the client is least able to monitor. Nevertheless, strengthening the power of clients through demand-side subsidies and co-payments can go a long way towards improving these services for poor people.”

It’s simple. If every transaction is based on the naked cash nexus, then poor people can hold the “provider” accountable.

Give me a physical and hold the blood test. I’ll have a large valium and a shot of morphine, please. The same with education. Like, how much for a B plus?

Also water services. “Separating the policymaker (government) from the provider (Bechtel) and providing the policymaker incentives to monitor the provider, can improve service outputs. Devolving responsibility to local governments and the private sector and increasing community participation in financing are elements in achieving this separation.”

Well, actually this is a little different. There is only going to be one provider in this case, no matter what. But encouraging the provider to be efficient by firing as many people as possible and raising water rates will enable the provider to make a lot of money, which the provider will ultimately re-invest in the water system, improving outputs, and spreading wellness throughout the Third World.

Unhappily, there are still a few kinks in this plan. The provider, being a shrewd capitalist instead of a charitable institution, notices that the profits he has accrued by allowing “increased community participation in financing” could be invested more rewardingly in some high-concept arbitrage arrangement between Euros and U.S. dollars than in the renovation of some decrepit water pipery in Tegucigalpa. Using his instantaneous international capital transfer informatics system and his crack accounting division in Hong Kong, he shifts the revenues from last month’s Tegucigalpa water bills into an account in the Caymans and plays the currency markets for a bit. The Honduran government can’t stop him because the IMF and the World Bank made it lift capital controls as a condition of granting the loans it needs to cover the gaps in the public revenue stream that resulted from the sale of the telephone system, also at the insistence of the World Bank.

The whole problem, according to this year’s draft report, with getting services to work for poor people is that the workers now providing these services ignore and mistreat poor people. They don’t like poor people because–are you ready for this? Poor people have no money. I am not kidding. They really don’t. So doctors, nurses, clerks, teachers, firemen, mailmen, etc. feel free to abuse them. Also, according to the WDR, to neglect them, run away from them, steal from them, and trick them.

Unlike the World Bank, of course, which frequently invites poor people in for tea.

Not really. The WDR argues that public workers must be held accountable to poor people in order to get them to do their jobs. The best way to accomplish this is to fire them from the cumbersome public institutions that now employ them, eliminate such miserable salaries as they now enjoy, and rehire some of them on tenuous, cheapskate, short-term contracts through large private companies or through small-scale, sandwich-shoppey operations that they put together themselves. As a result, these workers will be accountable to the poor because they too will be poor.

And this is actually what is happening. It explains the dramatic increases in output per worker, the collapse in formal employment, and the appalling levels of poverty all at once. The most astonishing thing about the whole policy is that it is a more-or-less unmitigated disaster and has been for at least 15 years. Even economically, it’s starting to look like a dead loss for the Banks. The IDB has just lent $1.5 billion to the government of Argentina to provide monthly $50 stipends to keep what used to be the middle class from suddenly starving to death. The IMF made the country a loan in January to pay the interest on the government’s IMF loan. This is like charging your Master Card payments to your Master Card. It isn’t even a clever Ponzi scheme. If you or I tried this, we would be arrested for fraud.

But not the World Bank. Why is that? Why does everybody but the Bank have to be efficient, competitive and accountable?

What about this idea for an alternative WDR: Holding the Bank Accountable? It would be a relatively slim volume; unfortunately, we don’t have many illustrative anecdotes we can use.

Gabriela Bocagrande writes about multilateral misfeasance for the Observer.