The World Bank was formed at the Bretton Woods Conference in July 1944. Following its initial role for developed countries in the aftermath of World War Two, the World Bank took on responsibility for fostering growth in the less developed economies. The Bank has always emphasised economic reform above social and political factors - an emphasis which is apparent in the policies they have implemented.
The World Bank's implementation of structural adjustment policies to a number of developing countries has had a profound effect on the way in which these countries operate in the global economy. World Bank policies have become infamous for their dedication to the neo-liberal agenda. In the context of developing economies the ideology of neo-liberalism suggests the presence of a hidden hand in the market. This “golden straitjacket” increases prosperity for developing countries at the expense of increased inequality, encourages a lack of government oversight, increases levels of Third World debt, maintains widespread poverty and imports inflation due to massive amounts of overseas export expenditure. Of course, the neo-liberal agenda instigated by the World Bank in the 1980s is controversial in a number of ways, and has sparked, at times, vitriolic criticism from economists from most ideological viewpoints.
Firstly, the ideology of neo-liberalism agenda places all blame for market failure at the hands of state intervention. This is borne from the entrenched belief that capitalism can operate in a perfect manner if only it be allowed. By implication, discrepancies which occur are attributed to interventionist policy by governments or by the reluctance to fully embrace the programmes that are adopted. While this theory seems to work counter to the conventional wisdom that government intervention is required in some instances to prevent economic meltdown, the WB in the 1980s seemed reluctant to acknowledge this, and instead concentrated upon the construction of a powerful rhetoric about the powers of free trade to overcome the inherent backwardness of the African. Moreover, the crude imposition of these programs as paradigms of development ignored the fundamental observation that the environments which these programmes impose on the African states are vastly different from those experienced by present day developed countries whilst they were in similar stages of development.
The World Bank's SAP was borne out of confidence in neo-liberal economic policies. Hanhel (1999) provides a simple summary of the World Bank's policy prescriptions for developing economies. He describes them to be based upon four fundamental principles. The first two are monetary and fiscal austerity - tightening the money supply and reducing fiscal stimulus. These policies are remarkably similar to those which would be recommended to an overheating economy - not generally a problem experienced by those trapped in poverty. The third principle involves the privatisation of public enterprises. This acts to reduce the power of the state. The final and possibly the most infamous principle is Financial Liberalisation. This involves the removal of restrictions on the flow of international capital and the removal of barriers to trade.
The universality of the neo-liberal programmes adopted through SAPs frequently ignored the subtler aspects of how a given market functions in its natural climate. In many cases free market policies result in the over-reliance on single export crops. The export of single crops made these countries especially fragile in the notoriously volatile market of producer-oriented goods. Moreover, if the production of these single crops are heavily reliant on exogenous factors (for example weather conditions) then markets and income can become particularly volatile and unpredictable. Coupled with this, the ideology that liberalisation inevitably led to a “trickle-down” effect, which furthered development in the infrastructure of the country was widely demonstrated to be false. As a consequence of exporters and speculators shifting extremely large amounts of money overseas there was little demonstration of this effect in African countries. A pertinent example of which is found in Somalia where at the height of the banana plantations over 75% of money fell eventually into the hands of exporters.
In fact, while modernisation programmes would create profits for investors keen to exploit the free market and cheap labour conditions of these African countries, little regard was shown for the workers on the plantations. In Somalia, for example, the SAP increased levels of child labour on banana plantations, and had substantial effects on traditional export routes as modernisation programmes served to generate what was effectively seen as a new slave trade. Unfortunately, these negative consequences are not particular to Somalia.
In response to the debacle of the 1980s, the World Bank has significantly altered the rhetoric of its policies. However, the genuine impact on their policies has been a source of contentious debate. Rather than taking an acutely Reaganite stance on the neo-liberal agenda, the World Bank has shifted its focus to issues of citizenship and ownership of resources. These alterations appear motivated by an attempt to stymie corruption and conflicts of interest where donor intentions are distorted by political institutions. While the concentration on ownership, stakeholders and African customers has an apparent sheen of greater respectability the essential neo-liberal premise that free trade fuels greater levels of modernisation and development is still present. By taking a more moderate stance, the 1990s reform agenda by the World Bank acts essentially to flatter the victims of economic exploitation while, retaining essentially similar adjustment programmes. The criticism levelled against the World Bank's policies in Africa, appear to be, in the most part, justified. The great majority of countries that have adopted the structural adjustment programme suggested by the World Bank now suffer from extreme levels of indebtedness, mismatches in power relations between wealthy foreign bureaucrats and investors and domestic “stakeholders”, increased levels of inequality, poverty and instability. Whilst these economic failures are clearly not all attributable to World Bank policies, their continual and crippling presence suggests that the successes of the World Bank's agenda of neo-liberalism are indeed scant on a global basis and virtually non-existent in African countries.
Overall, the criticisms of the World Bank originate from a variety of angles: from the ideologies of neo-liberalism, which to many critics are seen as flawed to a fundamental degree; to the institutional flaws and inconsistencies in World Bank ideology over the past 50 years; to the inability for African markets to acclimatize in such a radical way to trade under liberalization programmes; to the negative effects that the golden straitjacket has had on the social wage, inequality and poverty in African countries. Additionally, studies have also shown the World Bank's ignorance of the particular ways in which certain markets have managed to function for many years. This ignorance of traditional Afro centric approaches is also a significant factor as it assumes that all countries operate according to the same principles of trade - the lack of scope for the neo-liberal agenda to incorporate historical, cultural or sociological idiosyncrasies also offers considerable scope for criticism.
Accordingly, this dissertation aims to investigate the ways in which the World Bank's structural adjustment programmes have generated criticism for their policies, and the angles from which many critics of World Bank policy attempt to advise the advocates of neo-liberal politics. In addition, the dissertation will also look at the significant alterations that have been undertaken as a result of this widespread criticism, and will look at the flaws inherent to the structural operation of the World Bank in general.
The existing literature includes a great deal of critical material about the World Bank and the history of its relations with Africa. In recognition of this large body of existing literature this study has been conducted in two parts - the first of which provides a brief and general analysis of the critical views available on the World Bank. The large quantity of these criticisms, coupled with the high level of interest in World Bank policy will aim to shed light on the validity of the numerous criticisms levelled at the World Bank and more specifically its structural adjustment programmes. This analysis will highlight criticisms of various types, including the structural flaws of the World Bank, the ideological flaws of neo-liberalism, and the difficulties peculiar to African countries. This general analysis will cover many of these key issues.
The second part of this study involves a closer analysis of the specific trends found in one particular African country and the effects that World Bank policy has had on the political and economic institutions that operate there. By choosing to consider Somalia in particular it is hoped to highlight many of the micro-level and state-based factors that emerge and which sceptics of World Bank policy see as a major flaw. The concentration on the specificities of a single national economy, should allow many of the more general trends to be skirted in favour of a more subtle and in-depth analysis. The collated study of the literature available will allow us to see the extent to which criticism of, or support for World Bank policy in the 1980s onward, possesses any validity or credence. The results of this study will, hopefully, provide a suitable summary of the myriad views and opinions available on the World Bank and its controversial policy decisions regarding Africa and the developing world in general.
A frequent accusation directed at the World Bank has been that their reform agendas are merely reflective of the economic and political trends of the US political and institutional elite. It is often argued that the Bank should instead be encouraging the undertaking of reforms which would result in profound changes in the relationship between the developed and the developing world rather than simply imposing the fashionable ideologies of the developed world. The Bank's response to criticism has often been superficially based, and considerable resources are devoted to rebutting and / or partially assimilating the more popular ideas of other institutions and documents (Cornia et al., 1987; Hutchful, 1995; Zack Williams, 2000; Berger and Beeson, 1998, Udall, 1998). Contrary to the potential defence that these alterations demonstrate a capacity to adapt to economic developments in a profound way, many critics of World Bank suggest that the adoption of a succession of political theories and ideologies serve simply to mask significant problems regarding current policy (Harrison 2001, 540-1). In addition, The World Bank has been criticised for becoming too reliant upon powerful political institutions, and being forced to alter its rhetoric in order to appeal to the sentiments of these powerful political institutions (Stern and Ferreira, 1997; Stein, 1995) while, at the same time, doing nothing to change the fundamentals behind its operational programmes. In addition, The World Bank often takes credit for instituting social and political reforms despite expressing opposition to its implementation at the time. Moore (1999) looks at the bank's complicity in the Tanzanian statist model. The work highlights how, despite professing an anti-statist ideology, the Bank later stressed that they were the principal champion of these reforms when they subsequently turned out to be relatively successful.
The World Bank has been regularly criticised for its inability to fundamentally alter the essential tenets of its economic theory and to critically evaluate empirical evidence in anything other than a selective and pseudoscientific manner. This lack of consistent policy evaluation will most likely be inhibiting the bank's ability to resist the temptation to respond to incentives to impose policy not in the best interests of the recipient states. Frequent criticisms of the neo-liberal project in general come from many sources and angles. More targeted criticisms of the World Bank look at its historical inconsistencies. Campbell (1989), Caufield (1998), Elson (1994) and Harrison (2001) look at the manner in which the continual persistence of indebtedness, and the resultant impacts it has on concepts of ownership, power, control and class, impact in various ways upon the countries that are indebted. Mkandawire & Soludo (2000) explore in terms of their social impacts the bureaucratic effects of large levels of external debts and the relative neglect of the specificities of states themselves. The authors emphasise the importance of including the African states in the formation and implementation of the reform policies, thus allowing a more specific reform policy package to be created. These factors are also studied in the context of the skewed political motivations that drive these universal social changes (Nunberg 1990, 18-19; Hutchful 1994, 583; Domingo 1995). These studies serve to engender a climate of corruption and confusion in the political institutions of developing countries.
As a response to many of these crises and complaints in the developing world concerning power and ownership, many of the reforms instituted by the World Bank in the 1990s sought to expand upon notions of citizenship and ownership. Concentration on ownership attempts to negate the foreignness of reform programmes by allowing domestic governments the ability to relate to Structural Readjustment Initiatives as though they were their own (Klitgaard 1995: 9-14; Nunberg 1990: 11). The relatively simplistic neo-liberal agenda of the 1980s is epitomised by the Berg Report's simple strategies for economic growth (World Bank 1980) and the notion of the “golden straitjacket”, as coined by Friedman (1999). The new World Bank reforms feature, at least in a superficial sense, greater focus on participatory democracy in developing countries and an emphasis on more participatory forms of democratic politics in developing countries that appear to be designed to empower rather than alienate the populous from appropriating these strategies of change. The effects of foreign ownership should not be underestimated in an appraisal of the conditions of acceptance; widespread bureaucracy has, according to Harrison (2001) created a society rife with resentment, and the extortionate number of expatriate bureaucrats in lucrative advisory jobs jar against the crushing poverties and difficulties experienced by the domestic working classes: Harrison (2001) comments:
“In the late 1980s, some 100,000 expatriates were working in sub-Saharan Africa in various technical assistance schemes funded by international agencies - a greater number than at independence” (533).
Indeed, the World Bank's ahistorical approach to economic theory overlooks many of the more prescient and idiosyncratic factors in the neo-colonial argument concerned with sociological and broader cultural factors. The ideology behind this shift towards increased citizenship preserves the main functions of the liberal agenda without alienating its victims. Piccioto (1995) equates modern notions of citizenship with theories of institutional economics that are primarily centred around the individual and actions that serve his own selfish interests. This aligns the neo-liberal agenda with an ideology that full social participation by all “stakeholders” will ensure the most beneficial results because of the World Bank's moves toward facilitating this demand for better services (Paul, 1992).
The attempts to reconcile the idiosyncrasies inherent to many African states with a cogent neo-liberal agenda based on the notion of free trade has encountered many problems which can be attributed either to the World Bank or to the states themselves. Reconciling the strategies of the World Bank with the governments of Africa has been difficult because, in general, the political economies of Africa have a number of entrenched abnormalities. The economies of Africa were largely created by colonists, and later given to members of the African ruling classes who were defined by their authoritarianism and by the power that global markets and external actors had on them (Szeftel, 2000). In addition Harrison (2001) comments that “Most African political economies are characterized by a strong unity of private and state power.” (Harrison 2001, 540).This strong unity is directly eroded by SAP and WB ideology. In addition, the World Bank and its neo-liberal agenda, even after the participatory reforms instigated in the 1990s, fails to comment on the inner workings of African states with any degree of potency or consistency. Attentions to notions of class difference between African social organisation -described by Dia (1996) as affective, and the tenets of a 'modern' kind of social organisation, are also not paid. Of course, the denial of the importance of class and culture in the neo-liberal discourse of the 1980s served to create a number of schisms and problems in reconciling these two radically different methods of social organisation. This failure to comment on issues of class in their reform programme and focus instead on customers and stakeholders may serve to explain many of the obfuscations that result from World Bank analyses of current events, such as Bhatnagar and Williams (1994: 180) and Gregory (1994), which seem to bizarrely overlook the current conditions of war (in Somalia) in favour of a positive outlook on the economic reforms that have been instituted by the government.
One of the main programmes instigated by the World Bank has been an attempt to reduce corruption in the relationship between African political economies and large stakeholders in the process. Corruption in these relationships, existing due to the differences between donor's expectations and the realised results of the cash injections, has always been widespread as an inherent consequence of the ‘Principal-agent' relationship problem. Bayart (1993) and Bayart et al. (1999) look at the ways in which governing elites can subvert the initial designs of donors to suit their needs. This has led to discussion that African countries can still control internal state politics despite overwhelming pressures from external agents (Clapham 1999; Reno, 1993). This implies that the World Bank needs to be more realistic in their policies with regards to the economic, political and social environments in which they are operating. The anticorruption program by the World Bank focuses on programmes of training (World Bank 1995), but predictably do not focus on deeper issues related to ownership, indebtedness and the corrupting influences of unfettered neo-liberalism beyond the flattering sheen of “participatory” ownership.
The civil war in Somalia and the inability of the World Bank in preventing it is widely cited as one of the main arguments against the reforms. Broadly speaking, views on whether the World Bank was responsible for the economic crisis and the collapse of Somali politics can be split into three main camps. The first of which - the orthodox neo-liberal argument - implies that the economic collapse was a consequence of the poorly executed and badly managed public policy across Africa (World Bank 1980, 1989; Sender and Smith 1984; Lofchie 1987; Commins 1988; Weissman 1990; Rimmer 1990). This theory is widely known as the “internalist” theory of widespread economic failure. The theory argues that the political elite were responsible for the economic crisis that occurred in Africa in the 1970s and that the solution is a decrease in state involvement and an uncompromising belief in the neo-liberal tenets of neo-liberal structural readjustment policies. The second view is more centrist in its approach and was adopted by UNICEF in their report (Cornia, Jolly and Stewart 1987) that later proved to be highly influential on World Bank policy. In this report, UNICEF point out that the SAP has a highly adverse short-term effect on the social wage and looks to identify a series of ways in which the damaging effects of the SAP can be mitigated. It is, however, important to note that this view does not categorically dismiss the central liberal arguments behind SAP. The third view is that the Somali and broader African economic crisis were caused by flaws inherent to the basic principles of SAP, and consequently its implementation is detrimental to the economic development and survival of the African state (Payer 1982, 1975; Bello, Kinley, and Elinson 1982; Helleiner 1986; Hutchful 1987; Bassett 1988; Hamilton 1989; Loxley and Campbell 1989; ECA 1989; Bernstein 1990; Mustapha 1992). This view encompasses a broad range of criticism on all aspects of the SAP. It is argued that a combination of heavy export-related production, marginal multiplier effects on staple goods, cycles of debt related to increased export of goods, and the undemocratic basis by which organisational power is distributed, all led to the development of the African crisis.
It is widely acknowledged that one of the central issues of the African crisis is the substantial debt that these countries are in as a result of SAP. As the creator and instigator of the SAP the high levels of debt belonging to the African state raises concerns of the World Bank's response to and role in the African crisis. Harrison (2001) comments that:
“All of the countries which implemented these programmes are severely indebted, and are presently in a situation whereby they must satisfy the main international finance institutions (IFIs) that their policy reform generally is appropriately oriented towards economic liberalisation in order to receive further loans or debt rescheduling” (532).
While the 1990s reform agenda takes a conveniently flattering look at the role of citizens, customers, stakeholders and concentrates on issues of ownership, empowerment and African autonomy, it does not change the fundamental condition of indebtedness of African countries - and of course, if these questions are eschewed in favour of rhetorical discourse (as Harrison suggests), the likelihood for profound change seems desperately unlikely.
The next section will look in detail at Somalia as a specific example of an African state. A critical review of the literature pertaining to the World Bank policies enacted there will be undertaken. In particular, the analysis will look at papers from both sides in an attempt to reconcile the two. It will also look at whether the World Bank reforms of the 1990s is likely to change the condition of African states and their ability to either modernize in a fashion advocated by the more idealistic neo-liberals, or eschew the stringent controls that have, according to some critics, resulted in economic turmoil and devastation.
Detailed Analysis: Somalia
The SAP was instituted in the 1980's based upon the neo-liberal premise that it would aid the economic development of the entire wealth distribution according to the “trickle-down” effect. The “trickle-down” effect implies that wealth created for the more prosperous will subsequently work its way down to poorer individuals in society. In other words the SAP was introduced in the 1980's under the premise that economic liberalisation would result in the social and economic development of the entire nation state. This case is presented by Woodward and Stockton (1989) in their analysis of the Somali export industry which, they argue, served to facilitate a boom in banana exports. According to the report, this was entirely the result of the World Bank programme. Moreover, the program, they argue, solely assisted the seller of the fruit rather than the buyer of it. Consistent with the authors' views these conclusions reflect the prevalent ideologies of the SAP. By liberalising the Somali markets according to the mandate of the SAP, thus providing these markets with the opportunity to penetrate markets in developed countries, the authors argue the World Bank served the requirements of the country and facilitated a necessary stage in the development process that assists all members of Somali society. However, many of the facts that operated behind the crisis have been ignored. Significantly, Woodward and Stockton ignore levels of invisible trade in their analysis. This is particularly problematic in the case of Somalia as in a developing state trade patterns are much more likely to be less traceable through government and statistical organisations. In fact, the impacts on this trade that the SAP had were varied and unpredictable from the WB's ideological standpoint.
Another one of the major oversights of this hypothesis appears to be in the form of class divisions inherent to Somali culture. These class divisions work to inhibit the ideals of this trickle-down culture. While Somalia undoubtedly benefited from the loans, investments and knowledge of investors through loans in the short-term, the export deficiency that this led to, compounded by a non-sustainable and non-humanitarian series of privatization policies, did not cause significant shifts in the stability of the economy as a whole.
Woodward and Stockton (1989), for example, comment that the banana industry facilitated a “development boom”, but they do not highlight the specificities of this boom, nor do they look in any detail at the long-term impacts of market deregulation on the domestic economy. Samatar's (1993) study helps us to fill in many of the gaps that led to a widespread crisis in IMF and World Bank policy. Such a policy crisis was borne from the long-term poverty and insecurity which resulted from a government's decision to implement the policy changed recommended by SAP policy. Raike aptly employed the term - a “modernization of poverty”. Samatar discusses the extent to which the World Bank's policies are flawed in this respect. Samatar suggests primarily that the liberalization and investment in the banana economy led to increased profitability for the banana industry which by reversing previous negative production trends, resulted in slightly increased profits for local producers. While this evidence is supportive of the SAP, other factors prove highly critical of the political policies enshrined in the neo-liberal doctrines of the World Bank. For instance, the notion that liberal reform stimulates the internal economy was found, in this case, to be false. On the contrary 75 percent of earnings from exports were realized by overseas exports. This suggests that the policy of SAP did not facilitate growth, but rather served as another example of neo-colonialist and exploitative policies designed to extract labour and resources from the African economies and shift them overseas. Whilst in economic terms this can be argued to be an improvement, the improvement was only marginal. Moreover, the increased levels of dependence on foreign speculators and investors, coupled with a lack of opportunity for reinvestment due to extortionate amounts of money being extracted from the Somali economy into overseas investors made the long-term prospects of improvement bleaker still.
In addition, the profitability of the banana industry depended almost exclusively on child labour, in which children were paid less than 10 cents a day. Advocates of SAP argue that this merely represents a stage in the development and modernisation of an economy, - providing the least detrimental alternative in terms of modernization strategy. Such subjective ethical issues can be problematic where there is a need to consistently evaluate economic policy, particularly in those situations where short-term sacrifices may be made in order to realise long-term benefits. Many critics of the uncompromising neo-liberal policies which remain neutral to ethical issues beyond the crude advancement of economic well being, suggest that the Somalian crisis could have been avoided or lessened if greater focus was placed on the very issues of citizenship, ownership and autonomy that the World Bank now advocates (UNICEF 1987).
The effects of SAP on reinvestment and modernization in Somalia is generally concluded by the existing literature to have been negative. Dependency on exporters and on investment extrinsic to the country deprived Somalia of a significant resource for reinvestment. In addition, exchange rate effects due to export / import mismatches serve to devalue the domestic currency in relation to exported economy. This has the effect of driving up levels of debt owed to speculators, investors and, of course, the World Bank itself. Indebtedness continues to be a troubling issue in current World Bank strategy and is one of the main focal points for criticism of World Bank policy. Despite this, the official line of argument tends to skirt the issue in favour of more ephemeral cultural and rhetorical issues.
Furthermore, Samatar argues that the foreign investment program and the banana industry in Somalia refutes the general tenet of the World Bank SAP strategy - namely, the tenet that “liberalization leads to development”. While the World Bank has reacted in some respect to the moderate policies for change suggested by UNICEF, development programs in areas such as Somalia need to extend their influence to matters of sustainability, to improving the standard of living for workers and increasing equality. The neo-liberal agenda of the World Bank, while efficient at enhancing economic growth in the short-term, broadens the gap between rich and poor, both within a country and between countries.
In 1992 both the Somali modernisation programmes and banana plantations were destroyed as a result of the civil war. Such a substantial deterioration in economic and political stability induced overseas exporters to withdraw from the market, thus further exacerbating the crisis experienced by the already poverty stricken Somali plantation workers. Liberalization, in this case, allowed the collapse in confidence of foreign exporters to further penetrate into Somali markets. Furthermore, an analysis of the economy conducted by Little (1992) suggests that it was the supporters of the World Bank's SAP strategy who were the ones left most vulnerable during the “current apocalyptic conditions” (94). He argues that “those traders who have become agents of large, export-oriented merchants focussed on a single market suffer most, while traders based in small villages and involved in both domestic and export markets have sometimes prospered” (94). As such, it can be interpreted that the broad economic programmes of structural adjustment have had a wholly negative effect on traders who became dependent on them. This could be argued as being the result of a difficulty in adapting the World Bank's programs of free trade to cater to the nuances of individual economies Because the neo-liberal treatment of economy derives from notions of perfect competition, it is essentially mathematical rather than historically or socially based. Consequently the SAP strategy is not resilient enough to imperfect situations and instead demands total adherence to policies that, under the tumultuous conditions of Somali economics, are virtually impossible to achieve. The impacts of economic reforms are always dependent on the particular forms of social capital found in the targeted economy. Fundamental differences in the workings of economic and political institutions, markets and even individual relationships can have dramatic consequences on the outcomes of imposed policies. Little (1992) comments that “economic differentiation among livestock merchants makes it difficult to generalize about trader behaviour without paying attention to differences in scale, access to markets and position in the market chain” (94). Because the SAP strategy, both prior to and subsequent to the reforms instigated in the 1990s, depends upon a top-down approach that does not take into account the subtle variances between economies, success at implementing economic policy on a general level is likely to remain problematic. In addition, the reluctance to distinguish between different class structures, preferring to refer instead to a simple business / customer dichotomy also enshrines current neo-liberal thinking in systems more appropriately attuned to more sophisticated Western markets.
The peripheral effects of trade modernization on the delicate systems of trade that had developed over the centuries in Somalia were more or less ignored by the main issuers of new modernised export policy. This was a direct consequence of the ideological proclivities of neo-liberalism that could not allow a study of historical processes on grounds that it would contravene the notion of the centrality of the economy. Various journals have commented on the effects that this has had, as well as the seasonal subtleties and variance of livestock production. Following the collapse of the overseas export market for banana plantations, many Somali's were forced to return to traditional trading routes, notably exporting livestock overseas to Saudi Arabia and other Middle East countries (Little 1992, 97), drawing attention especially to the middlemen that operated before, during and since the disastrous trade liberalisation policies that failed to cushion the blows of civil war and political collapse in the 1980s and 1990s.
Unfortunately, the World Bank has not proven to be successful in its attempts to instigate its neo-liberal agenda across African countries in terms of economic or social development. In fact, the heavily export-driven economies that it suggests will flourish providing that government intervention remains low, union membership and other inhibitive factors to the free circulation of mass produced trade are avoided, and exporters are allowed free reign over the production facilities in the region are among those which have fared least well. While Somalia benefited in the short-term and in a marginal way from the investment strategies incorporated, and profitability increased, this was quickly found, as it was in most African countries, to be unsustainable. Ghosh (1997) suggests the following:
“that the consequences of WB enforced SAPs have been disastrous for most developing countries has been documented by many experts: no one denies that living conditions have worsened in most countries pursuing WB inspired SAPs” (2575).
It is possible that the modernization programmes initiated by the World Bank, which according to Harrison (2001) focus on promoting an agenda of “liberal populism” will have a different effect. The WDR of 1997 predictably points to an alternative chain of events which led to the crises in countries that undertook SAP-related endeavours most fervently. They argue that “At the limit, as in Afghanistan, Liberia and Somalia, the state has sometimes crumbled entirely, leaving individuals and international agencies trying desperately to pick up the pieces” (2576). Here, predictably, the blame for the series of SAP-inspired economic collapses are put onto the state. The state is therefore being held accountable for the economic collapses despite the imposition of destabilising mechanisms which eroded state power in favour of the individuals (customers) and international agencies (businesses). Of course, levels of government spending have sharply decreased in countries that have adopted the neo-liberal agenda espoused by the WB. Supporters of the World Bank's policies suggest that the current situations of these countries are consequences of a lack of economic and political prudence on the part of the countries themselves.
Results and Findings
The scathing criticisms of the World Bank and its neo-liberal agenda are widespread and occur on both sides of the traditional right-left political spectrum. Following the initial criticisms of the Bank's neo-liberal tenants, later criticisms expanded to cover a myriad of different perceived strategic failures by the Bank to react to significant failures entrenched in the neo-liberal project as a whole.
Primarily, the World Bank has been criticised for demonstrating inherent structural flaws. Its ideological stance has significantly altered throughout the 50 years since its inception. These ideological shifts have often echoed that of the developed world and their approach to general economic management. These ephemeral ideological shifts have occurred despite the World Bank professing to be an apolitical entity devoted exclusively to alleviating poverty. This inconsistency inherent in the bank is demonstrative of the many ideological influences that the bank places itself under. The demonstration of these influences highlights the ideological links that the World Bank has to the governing elites in developed countries. Indeed, this link, which resides in the faith it instils in the neo-liberal project, has been demonstrated by a number of critics of World Bank policy. Furthermore, structural flaws can be located in the undemocratic and inconsistent series of structural shifts that have served to periodically undermine the Bank's authority as a figurehead for poverty reduction in developing countries. In particular, the shift from the favourable aid conditions of the 1970s to the harsh SAP policies of the 1980s occurred without any significant interim or adjustment period. This, coupled with the election of the 39th President of the United States of America, Ronald Reagan - famed for his political touting of liberal economic policies, is suggestive of a reactive rather than a proactive approach to poverty alleviation. This places the World Bank in the position of effective subservience to US foreign interests. While flexible adjustment to conditions is undoubtedly a necessary prerequisite in adapting to flaws, many critics have argued that these changes are too radically aligned to US foreign policy and neo-liberal corporate interests to have any validity in reducing poverty in developing nations. Further criticism implies that the policy alterations by the Bank were simply a toothless and rhetorical response to criticisms that do not approach the central issues inherent to the current neo-liberal angle of the WB's policies. While 1990s reforms attempt to reconcile notions of trade liberalism with domestically oriented concerns regarding citizenship, in an attempt to reduce corruption, the changes in perception do nothing to change the central and fundamental problems inherent to the World Bank's approach to aid; notably, World Bank papers avoid the issue of debt, of balance of payment deficits, and of ethical and sustainable approaches to modernization programmes. While it is important that the World Bank focus on issues related to state autonomy, ownership and citizenship, the more pressing matters of extortionate Third World debt, increased inequality in global markets are effectively skirted around by the institution, on grounds that it cannot possibly jeopardise many of the central tenets of the neo-liberal agenda simply because the policies have been demonstrably and repeatedly shown to facilitate and exacerbate economic collapse.
Secondly, the World Bank has been widely criticised for the broader ideological stance it has undertaken since the early 1980s. The neo-liberal agenda, taken to such extremes, has had a large role to play in facilitating and engendering an economic and political environment that is prone to collapse. Many of the central foundations of the neo-liberal agenda have been repeatedly proven to be inconsistent with actual empirical evidence. The agenda has placed unjustified confidence in liberal concepts such as the hidden hand in the market - a hand deemed to flawlessly guide the economy's factors of production to their most efficient employment given the absence of government interference. In addition, neo-liberal concepts such as the golden straightjacket, the trickle-down effect and other liberal forms of trade are criticised following the way in which they have been implemented in a seemingly over-simplistic and exploitative manner. The paradigm of neo-liberalism also avoids many of the specificities of locale, culture, history and class. This is also a severely impoverished view of liberalism. The reduction of African cultures, with their inherent complexities, cultural norms and attributes, to programs of simple mathematical formulas of supply and demand is a crude over-simplification of the environment and as such produces unrealistic and consequently useless results. While the assumption that a single formula for success can be used in all circumstances is undoubtedly a convenient theory for an effectively unlegislated era of globalisation. Given that economic policy makers must work within simplified versions of reality (as the complexities of the real world are so numerous as to leave economic modelling unviable), a case can be made for imposing such simplified models on real economies as a 'least bad' solution. However, the inherent problems that result from merely superimposing this structure of free market capitalism onto volatile and fragile African markets has not proven to be successful in alleviating poverty. And while in some cases profits have increased as a result of modernization programmes and SAPs, the trickle-down effect lauded by advocates of neo-liberalism simply does not function in this context. Because with SAPs and other WB programmes power is almost entirely apportioned to foreign investors and the African ruling classes, workers do not reap any of the rewards that neo-liberalism promises. In addition, this focus on exportable goods has the effect of devaluing economies and increasing levels of indebtedness further. Also, the tendency SAPs and foreign investors have had towards promoting monocultures for export (such as in the Somali case with large scale banana plantations) have led to widespread food crises and difficulties for farmers when exporters leave the market due to unforeseen conditions. This focus on monocultures forces African countries into very volatile markets; while the beneficiaries of this neo-liberal agenda in developed countries can get produce at the cheapest rate available, the impoverishment of the African markets does not develop or modernise these markets at all. In fact, SAPs support child labour and exploitation of more vulnerable sectors of African countries due to the economic principles behind getting the cheapest labour available. The effect of the neo-liberal tendency to “modernize” developing nations has not led to sustainable economic development, nor has it even temporarily alleviated levels of poverty in these states. In fact, the collapse of the Somali infrastructure in the 1990s affected the plantation workers to the greatest degree, and banana plantations developed by foreign investors were more or less rendered defunct by the radical changes in market conditions.
Thirdly, until recently, the World Bank has not addressed problems concerned with large levels of bureaucracy and corruption between governing elites and investment strategies. While neo-liberalism is often defended because direct aid would lead to widespread corruption, the inability for this agenda to contribute to cultural, historical or class-based discourse on economics exacerbates levels of corruption as workers become ever more alienated from the processes of governance. Recent changes to this agenda seem to act more as a superficial reaction to rebuttals than to addressing the issues required for fundamental change. The focus on issues of ownership and autonomy is described by Harrison as “populist liberalism” and, according to him, lacks an authentic desire to address problems inherent to a neo-liberal agenda in favour of politicised rhetoric. He argues that the following statement offers a prescient analysis of the current trajectory of the World Bank in its attempts to reconcile its development agenda:
“The concept of participation should not just be limited just to disadvantaged people... focussing on disadvantaged people, as opposed to all people results in a class-based definition. It has been suggested that the core team drop the reference to popular and replace it with people, or participatory development” (Bhatnagar and Williams, 1994: 180).
This focus on rhetoric over action, it is hoped by the World Bank, will obfuscate the poor track record that the World Bank's central premise of liberalization has. This bureaucratic concern for linguistic minutiae over the widespread concerns of poverty alleviation is suggestive of a greater tendency to skirt the issues that appear to be irreconcilably flawed in relation to the World Bank's stated agenda for poverty reduction and developmental practice. Attempts to reduce corruption reside in the belief that the tenets of liberal populism will make everybody a customer of the state, which will make states accountable in a direct way to their customers. This degree of politicization, as advocated through widespread training programmes, does not offer any concrete solutions to the advanced state of bureaucracy that has led economies to adapt to conditions where expatriates control the policy of their countries. As such, notions of increased ownership will have to reduce the levels of expatriates stationed in these countries. As Harrison (2001) suggests, this may prove more difficult than it seems:
“This [situation] has allowed some [Tanzanians] to build blocks of flats to rent out mainly to expatriates, earning themselves thousands of dollars per month. This has subsequently made the execution of the policy to reduce the number of consultancies (on grounds of cost) particularly difficult as these consultant-bureaucrats defend their lucrative existing state of affairs” (540).
This complex and multilayered corruption has made decision making on the level of state investment strategy very difficult. The erosion of the widespread problems facilitated by neo-liberal policies enacted in the 1980s onward will prove extremely difficult to reconcile within the current ideological framework of slightly modified neo-liberalism.
The World Bank's policies pertaining to the development of the African states have received numerous criticisms from a wide variety of commentators. Despite the strength of the criticisms levelled at the fundamental tenants of the policies, the World Bank has attributed the failure of their policies to “external factors” or to a reluctance of the African states' governance to fully comprehend and support the World Bank's neo-liberal agenda. The state in this instance is used as a catch-all for problems with the modernization programme implemented by the World Bank, to the extent that the whole African project and its subsequent failure to fundamentally alter the conditions of production and Africa's role in the global economy has been blamed on African reluctance to embrace the tenets of the neo-liberal agenda itself. Of course, criticisms of the Bank's claims have been widespread. Implementations of WB policies have been demonstrably proven to actually increase rather than decrease poverty and dependency, rather than achieve the desired effect of alleviating it.
Fundamentally, criticisms can be levelled towards the institution of the World Bank, and the structural flaws and inconsistencies that have characterised its somewhat reactionary stance since its inception over 50 years ago. Certainly, the series of rhetorical ideological U-turns, running in synchronicity to administrative shifts in the economies of the developed world do not give the impression that the World Bank operates as independently or apolitically as it suggests in its literature. Secondly, criticisms can be levelled at the broader ideological standpoints that the Bank advocates: namely, that adherence to a policy of complete trade liberalization lead to modernization and the development of economies. The widespread poverty and the increased differential between the rich and poor strata of African (and global) society does not indicate any patterns of growth. Thirdly, the reform programmes initiated in the 1990s as a response to widespread failure and dissent do not address any of the fundamental issues of World Bank ideology - their brand of liberal populism fails to engage coherently with issues of debt, poverty, inequality, sustainability or ethics. Moreover, beyond the superficialities of political rhetoric, the neo-liberal platform of widespread privatization and one-size-fits-all SAP does not address any of the issues that neo-liberalism considers peripheral to its unequivocal faith in the free market. The new agenda for the World Bank does not contend with thornier issues of class or ethnicity, nor does it address local or geopolitical issues inherent to the successful operation of African economies. Montiel and Serven (2004) take a critical look at the success of fiscal, monetary and exchange rate policies implemented by the World Bank in the 1990's. They concluded that the poor growth performances and multiple crises were generally consequences of shortcomings in these policies:
“These shortcoming essentially concern the depth and breadth of the macroeconomic reform agenda, its attention to macroeconomic vulnerabilities, and the complementary reforms outside the macroeconomic sphere” (Montiel and Serven 2004)
The implicit assumptions that form the crux of World Bank ideology are not challenged. Economic models need to be appraised according to two fundamental criteria; how well the models predictions fit the realized outcomes when the policies are imposed, and how well the models assumptions fit those found in the real environments. In the case of the SAP as implemented on the African continent, the agenda does not fare well on either count. Moreover, despite widespread failure in the successful implementation of neo-liberal strategy across Africa, the World Bank continues to blame factors external to the control of the Bank, along with government intervention, unionisation and other protectionist measures used to stabilise the infrastructure when exports collapse. Overall, the myriad of criticisms levelled at World Bank policy since the 1980s continue to carry weight despite attempts to reconcile these rebuttals and criticisms; in fact, the World Bank's wholehearted belief in the neo-liberal challenge and the continued failure to address the negative outcomes of the neo-liberal paradigm serves as an indication of the degree to which the World Bank has failed to institute an authentic and provable platform for poverty reduction in developing countries. This serves to raise the question of the extent to which the World Bank now represents an outdated institution and whether in the fight against widespread poverty in the African states a new global institution is required to tackle the continuing humanitarian crisis.
Evaluation and Avenues for Further Research
This paper has looked in detail at the general effects of the World Bank in Africa, in terms of both its structural qualities and its ideological stance. In many respects, the paper provides a summary of criticisms and rebuttals toward the Bank's stance regarding African countries, and as such, there remains opportunity for more detailed analysis to be undertaken in a variety of fields. This is in many ways is reflective of one of the main fundamental flaws inherent within the World Bank's approaches to development policies. By taking a more individual approach to their policy recommendations to impoverished countries the Bank would most likely be better placed to develop reform agendas which addressed the difficulties faced by each economy.
One such avenue for further research involves the structural conditions of the World Bank and its relationship to other powerful institutions and international organisations. While this has been alluded to in this paper, a more detailed analysis of the relationship between the World Bank and NGOs, multinationals, political elites in developed and developing countries, and the citizenry on the whole would provide more potential insight. Economies function in a highly systemic manner and consequently the understanding of the dynamics of multiple relationships are required for efficient, effective policy formation.
Secondly, the ideological stance of the World Bank and its neo-liberal agenda could be viewed in greater detail. Whilst there already exists a substantial body of theoretical work in this field undertaken by a variety of economists from varying fields, a more in-depth summary of these views may assist in shedding a particular light on the perceived flaws of various economic theories.
Thirdly, this paper explored the myriad of discrepancies between policies enacted by the World Bank and geopolitical, cultural, historical and business-related idiosyncrasies inherent to the cultures upon which these policies were imposed. Although neo-liberal ideology is markedly unflinching in its appraisal of individual countries and their differences, a study of how these policies intertwine may shed more insight into the question of how to successfully modernize economies in the developing world in a strategic manner that takes into account existing trading conditions. In particular, the social capital existing in the various African states is argued by many leading economists to have a crucial impact on the results of economic policy. By not considering these crucial factors the World Bank is leaving the African states vulnerable to unpremeditated crises. This fundamental flaw in World Bank activity is in evidence in the continuing poverty throughout the African continent.
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