Global Poverty Reduction: A new social paradigm?

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1 Development, 2006, 49(2), (62 66) r 2006 Society for International Development /06 Global Poverty Reduction: A new social paradigm? Dialogue FRANCINE MESTRUM ABSTRACT Francine Mestrum 1 looks at poverty reduction in relation to the major trends of the poverty reduction policies of international organizations. She presents an overview of economic and social development policies before 1990 together with a brief overview of structural adjustment policies and a critical analysis of the emergence and the conceptualization of poverty in the She concludes with a critical analysis of Poverty Reduction Strategy Papers (PRSPs) and the Millennium Development Goals (MDGs) raising questions for the third world and for rich countries. KEYWORDS World Bank; United Nations; PRSPs; MDGs; economic policy 1990: A watershed year for poverty The World Bank put poverty high on the international agenda in1990 when it published its first major report on world poverty ( In the same year, the United Nations Development Programme (UNDP) published its first report on human development ( creating big hopes for a new conceptualization of development. Until 1990 development had been mainly concerned with economics. The United Nations (UN) had certainly been publishing its reports on the social situation of third world countries, from 1950s onwards, but poor countries themselves were never very interested. For them, the main objective was to bridge the income gap between poor and rich countries, in order to have a political level-playing field that would allow them to take part in decisions on world matters. Social questions did receive some attention in the 1960s and 1970s, but they were not a priority. And poverty was a concern, but the solution to it came in terms of development, economic and social development.what changed in1990 was a switch to poverty as the priority concern and the solution to it became poverty reduction. Development according to the United Nations Development thinking of the1960s and1970s was strongly influenced by the UN, where the newly independent countries enjoyed a majority. The General Assembly adopted Development (2006) 49(2), doi: /palgrave.development

2 Mestrum: Poverty: A new paradigm? several important resolutions, the decades on development, a resolution on the economic rights and duties of states, and a resolution on a new international economic order. At that time, development was largely seen as a national programme of collective emancipation, mainly thanks to economic growth and social progress. If we look at the demands of poor countries, we see industrialization as a priority, together with fair trade, fair prices for their commodities, transfer of technology, a share in the services sector, control on multinational companies and more development aid. If we look at the proposals for social progress, we see a redistribution of incomes, universal social security schemes, a right to work and the planning of integrated societies. Clearly, poor countries looked at rich countries as the model to follow. It never worked, and there are many reasons to explain this failure. Nevertheless, there was economic growth and there was social progress. Much more than there is today. And States played an important role. The economic crisis of the 1970s and 1980s Everything changed in the 1970s and 1980s. The economic crisis that began after the tripling of oil prices and after the end of the Bretton Woods agreements had huge consequences for third world countries. In 1982 Mexico was the first poor country to stop the payment of its external debt service followed by other Latin American and African countries. The solution offered by the IMF and the World Bank was to reschedule external debts in return for a structural adjustment. These programmes ^ later dubbed the Washington Consensus ^ were more political than economic and introduced major neo-liberal reform programmes in all poor countries. They included budgetary discipline, a reorganization of public expenses, tax reforms, financial liberalization, export-led growth and competitive rates of exchange, trade liberalization, attracting foreign direct investments, deregulation of economic sectors and of the labour markets and the protection of property rights. The social consequences were dramatic. Governments had to dismiss thousands of civil servants, national industries went bankrupt, real wages collapsed and social services disappeared. In 1986, UNICEF published its first harsh criticism of structural adjustment and called for an adjustment with a human face. The response of the 1990s The poverty reduction strategies and the human development programme of 1990 can be seen as an attempt to take into account these criticisms. Both these strategies soon revealed their weaknesses. First, human development was meant to introduce a paradigmatic shift in development thinking. Economy and GDP ceased to be the major concern in order to give priority to social questions, such as education, health, life expectancy, gender equality and political freedom. Although the annual reports of the UNDP remain a rich source of interesting statistics on inequality, the organization soon decided that extreme poverty would be its main priority. So, instead of enlarging the development concept, it in fact reduced it to mere poverty reduction. Second, the conceptualization of poverty, of poor people and of poverty reduction strategies at the World Bank, revealed that this poverty focus did not mean the end of the Washington Consensus. On the contrary, poverty reduction policies seem to be the consensus topic that allows for continuation of neo-liberal reforms. First, the World Bank has developed its discourse on poverty and on poor people without any empirical data. There were no credible statistics in The World Bank speaks of the past ^ from 1960 to 1980 ^ as having been very successful, both in terms of economic growth and of social indicators. All the same, it proposes to introduce a radically new policy of poverty reduction. However, if development efforts have been successful, why is there a new policy needed? There was no data to back up these claims and therefore no empirical reasons for the World Bank to change its strategy to focus on poverty. 63

3 Development 49(2): Dialogue 64 Secondly, the World Bank sees poverty reduction as being in the common interest of the international community. Poverty is the pivot for a whole series of other, interrelated problems such as population growth, environmental degradation, migration flows, etc. While at the same time condemning poor countries for not having good governance, the World Bank and the IMF have ensured that poverty reduction falls within the competence of the international organizations, thus making it easier to impose their reforms. This strategy poses major problems for autonomous national policy responses. Thirdly, at the level of social policies, poverty reduction implies the dismantling of social security and minimum wages, said to be only in favour of privileged workers who do not really need them. At the level of economic policies, neo-liberal policies are continued and the integration of poor countries in the world market is favoured. Poverty reduction is only linked to education and health services, major elements in the development of human capital. Fourthly, in the international discourse, poverty is associated with women. They are said to be the poorest of the poor. However, there are no statistics on the income poverty of women. However, the association of women with poverty has two consequences. First, women are not a target group for poverty reduction strategies, but are part of the strategy itself. Secondly, it allows for poverty being defined as discrimination. Indeed, for the World Bank and the UNDP, poverty is never defined as an income deficit, but it is a multidimensional reality with a strong subjective content. In the World Bank report of 2000, poverty became a matter of vulnerability, lack of voice and lack of empowerment. The Human Poverty Index of the UNDP does not mention income policy at all. In synthesis, the analysis of the poverty discourse of the 1990s shows that is was made possible and even necessary in order to give legitimacy to the policies of international organizations, to give governments an alternative to their national development policies and to give globalization a human face. In fact, this poverty discourse puts an end to economic and social development seen as a national emancipatory process. Development, according to the poverty discourse, is reduced to economic growth and that is to be achieved, on the one hand, by the globalization of the world economy, and, on the other hand, by the integration of the poor into the market place. Consequently, the national level ^ and the developmental state ^ disappears. Poverty reduction strategy papers (PRSPs) Poverty Reduction Strategy Papers are the documents that poor countries have to write for the World Bank and the IMF in order to have their external debt rescheduled or to have cheap loans. Based on the principles of ownership and participation, they have created big hopes for a different poverty policy. Unfortunately, 5 years after their introduction, their analysis shows a grim picture. Ownership by poor countries is very limited, since the World Bank and the IMF have to approve the documents, and it is easier to conform directly to their demands. Most countries admit that talks with the World Bank significantly modified their original policy programme. Participation is also rather limited, though different from one country to another, and only rarely does it involve trade unions or national parliaments. The analysis of their content shows a continued neo-liberal focus. Analyzing 42 PRSPs, in 38 of them,privatizationisaskedfor,in27of42prsps, the privatization of water services is asked for, in 26 of 42 PRSPs, investment policies are said to be deregulated, in 40 of 42 PRSPs, there are measures of fiscal stringency. In fact, PRSPs are policy documents for neoliberal reforms in poor countries. They concern all policies and all sectors. The only thing they never mention is the way in which poor people can try to earn a living wage. The millennium development goals (MDGs) The MDGs 2 were first proposed by the OECD in 1996 and were proposed as a development programme for the 21st century. In 2000 they were

4 Mestrum: Poverty: A new paradigm? adopted by the UN Millennium summit and have since then become the major priority of all multilateral and national development organizations. Millennium Goals are not a policy for the eradication of poverty. They only aim at halving extreme poverty between 1990 and In fact, by changing the references (the proportion of extremely poor people and 1990 instead of 2000), extreme poverty only has to be diminished by19 per cent. If we reach the first MDG, there will be 210 million extremely poor people less in Extreme poverty is poverty that kills. It is a death sentence according to Kofi Annan and Jeffrey Sachs. Today, the World Bank counts 1.1 billion extremely poor people. Half of the population of developing countries is poor. With the MDGs, all these people will remain poor and will continue to die. My second criticism concerns the MDGs total delinking with development policies. It should be clear that in countries with more than 50 per cent of poor people it is simply impossible to reduce poverty without economic and social development. Poor countries should have an opportunity to develop their productive capacities, to develop an internal market, to give purchasing power and social protection to their populations. On the global level, development aid should be replaced by stable redistributive mechanisms managed by the UN. With neo-liberal policies, it is impossible to reduce poverty. Today s policies of the World Bank and the IMF create more poverty than they can solve. Privatization, liberalization and deregulation all are at the root of poverty and should be stopped if one wants to really eradicate poverty. What can the MDGs do for the tens of thousands of textile workers in Bangladesh who are loosing their jobs? What can the MDGs do for thousands of Mexican farmers who are faced with the import of cheap maize from the US? What can the MDGs do for the thousands of migrants who wait at Europe s door in Morocco or die on its beaches in the South of Spain? Facing realities Today, poor countries still pay more than US$ 200 billion every year to the rich countries, more than they receive. If the terms of trade of African countries would be identical as in 1980, African countries would now be 50 per cent richer. Growth is now slower than it was in the period 1960^1980. If it had remained at the level of that period, Latin America s income would be twice as high as it is now. Today, 54 countries are poorer than they were in In 21 countries, the Human Development Indicator is falling. In 37 countries, poverty is rising. In 55 countries, GDP has diminished between 1980 and And development aid is shrinking. We have to wonder where we are going and where we want to go? How long can we continue to lower the level of our ambitions for development cooperation? We urgently need to have new social and economic development programmes. We urgently have to take into account some old ideas on social and economic rights.we urgently have to take into account some new concerns, like climate change. Iknow perfectly well that we cannot and should not go back to the old ideas of the 1960s and 1970s.We live in a different kind of world and need a different kind of ideas. Nevertheless, Ialso believe that some of the old concepts are still valuable, like the importance of state interventions, the importance of some degree of planning progress, the idea of policy autonomy and of economic and social rights. We have some international organizations, like UNCTAD and the ILO that continue to underline some basic ideas of development. Ithink we should listen to them and give people indeed decent work, and give poor countries indeed policy autonomy. It is impossible to develop nations or to develop people. They necessarily have to do it themselves. That is the main lesson we should have learned in the past 50 years. The new social paradigm and Western Europe Clearly, poverty reduction strategies are not meant to give development a social dimension. On the contrary, they require a dismantling of the existing social protection and want to replace it by a kind of risk management in which poor 65

5 Development 49(2): Dialogue people and markets have a more important role to play than states. The ideas that the World Bank is promoting on poverty and social protection are not only intended for the poor countries. They also concern Europe, and Europe is also faced with reforms of our social model. Some reforms are necessary, because society has changed and because people s needs have changed. The poverty approach in poor countries can help us to understand what is possible and what is in line with our social model and what is not. The role of the state is central in this discourse. Neo-liberals make a difference between the scope of the state, the different sectors in which it can operate, and its strength. Neo-liberals want a state with little scope and much strength. States must be able to promote competition, to protect property rights, to protect human rights, to protect the rule of law. That is where states have to be strong. But States do not have to organize a social security system, or protect social and economic rights. They only have to help the extremely poor people have access to the market. For neo-liberals, social protection is risk management, and risks, according to them, cannot be prevented. Our current European social model implies a protection against the market and a decommodification of certain goods, like education and health. It implies social citizenship and a fight against inequalities. According to the World Bank, social policies are meant to help people have access to markets. It is a matter of civil rights, of citizenship in its liberal sense. It is not social citizenship. We need to challenge the thinking that underlines reforms and Europe and that of the World Bank and the Washington Consensus. Poverty reduction policies of the World Bank are not social policies. They are completely in line with the neo-liberal reforms that put markets first. Notes 1 This article is based on a speech delivered by Francine Mestrum at the International Day for the Eradication of PovertyVrije Universiteit Brussel Conference on Development 17 October See Development 48.1 for a detailed discussion on the MDGs. 66

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