Surjit S Bhalla: Profiting from poverty - II

Intellectual honesty and change are needed at the World Bank?is Mr Wolfowitz up to it

I have had a number of responses on the World Bank numbers""can I assure the readers that the WB poverty numbers have been accurately reproduced (yes, I can""I have only used World Bank data), and more importantly, how come other researchers, especially from India, are not challenging the poverty numbers.

On the latter reality, I have two responses. First, the World Bank-led super NGOs provide lots of money to researchers to do research, and especially to do research on poverty.

So some analysts are hesitant to rock the boat, to bite the hand that feeds them, etc. Second, (and this is an India-specific disease), Indian intellectuals are generally loath to see poverty decline""it gives them sleepless nights if the poor are actually benefiting.

It is as if they will have less reason to intellectualise, and therefore be in "demand", if the poor were to become less poor.

Besides India, there are serious problems with the World Bank poverty numbers for that other large country, China. Despite GDP per capita growth of close to 7 per cent a year, or 40 per cent over the five years, rural poverty in China increased from 25 per cent in 1996 to 27 per cent in 2001! (Urban poverty stayed the same at less than 1 per cent).

So growth up by an average of 40 per cent and the bottom quarter of the rural population has an absolute loss in consumption. Ahem. Maybe China should undervalue its currency even more.

Regional comparisons with the Philippines and Vietnam also reveal the WB estimates to be bizarre. For example, in 2001, per capita consumption in the Philippines was about 40 per cent more than China, and Chinese per capita consumption was about 50 per cent higher than that of a Vietnamese.

The distribution of consumption was about the same in China and Vietnam, with the Philippines distribution being decidedly worse. Yet, the WB figures for poverty in 2001 in Vietnam are zero (actually, only 2.1 per cent of the population!), China 17 per cent, and the Philippines 15 per cent.

Vietnam at 2.1 per cent and China at 16 per cent poor, and the Philippines being twice as rich yet having seven times the poverty rate""if you buy these comparative statistics, you are ready to buy a Nixon-used car.

There are several other strange conclusions that emerge from the World Bank poverty stable. Given this strangeness, if "corporate governance" rules had applied in the realm of research, then one would have expected other large NGOs""like the United Nations and the Asian Development Bank""to at least attempt to reproduce, if not challenge, such bizarre estimates.

Yet, (I can vouchsafe from my own experience as well as that of several others), these super NGOs not only do not challenge the "supremacy" of the World Bank, but rather ensure that any criticism of the inflated global estimates get censored, suppressed, eliminated, etc.

For example, a large 18-country study commissioned by the ADB reached considerably less bizarre conclusions on Asian poverty than the ideological and/or self-serving priors of the senior researchers and executives at the ADB (see the more than 500-page report "The End of Asian Poverty?", only available at www.oxusresearch.com and one with no mention of it on the ADB website).

One senior ADB official stated in defence of the ADB censorship of "The End of Asian Poverty?": "Our jobs depend on removing poverty; what will happen to our jobs if there is no poverty left to remove?"!

Large poverty numbers mean good jobs, and even better money for the rich bureaucrats. The circle of reason is as follows. Assume for a moment that growth takes place and poverty declines at a pace considerably slower than that warranted by the growth.

In such a circumstance, we would all advocate the following three actions. First, research the problem and identify the reasons for the slow decline in poverty.

Second, identify the policies which should be implemented. Third, identify the executing agencies for successful implementation. So the beneficiaries are the super-NGO researchers and administrators at super NGO bureaucracies.

The Kafka circle is complete""show that poverty has not declined, then get funds to study bad growth and worse poverty reduction, then recommend changes, then study poverty.

There is a simple theorem in economics""most of us all the time and some of us most of the time act in our own self-interest. This DNA resides in individuals, and in organisations which employ individuals. Think about it""who stands to lose, if in the name of helping the poor, one actually fudges and increases the number of the poor? You cannot deny that it is for a noble cause, a cause one can wear on one's khadi sleeves.

Only good can come of it""the rich countries will pay more to help the poor, as they should. More analyses of poverty will be undertaken, and the cardinals of poverty at the World Bank (and the UN and the ADB) will be in even greater demand for their expertise.

The bureaucrats who lend money for poverty will now have more money to lend, and to hire more people, and to have greater (self) leverage.

In the meantime, the guilt of a zillion do-gooders is alleviated as they sleep soundly at night, knowing that they have marched for the poor of the world.

Who loses from this poor skullduggery? The poor in Africa who need help the most. By inflating the worldwide numbers, the poor in Africa get less attention, and development aid, than they should.

The World Bank-estimated poor in India and China in 2001 are 580 million; the entire population in sub-Saharan Africa is close to 675 million.

Why not divert all the India-China aid to Africa? True, the World Bank would become an African Development Bank, and perhaps our pro-poor elite there does not feel respectable helping only black Africa, rather than all of humanity.

But isn't the ego loss of the poverty elite worth the gain in actually helping the genuine poor?

The World Bank has technical expertise of a calibre unmatched anywhere in the world. These smart professionals can help advise all the non-African economies and get paid for their services.

The money so collected, from not so poor nations like India, China, Egypt, Brazil, etc. should also go towards Africa. Yet as more money is spent there, one should worry, as Prof. Bhagwati has eloquently pointed out ("Increasing Foreign Aid: How to do it right," OECD Observer) about the absorptive capacity of poor African economies to effectively utilise all the aid that should be coming to them in a "new" Wolfowitz-led World Bank.

By cleaning up the poverty act, he can bring intellectual honesty, and accountability, to the super-NGOs. By dedicating the mission of the World Bank to Africa, he will help the genuinely poor. Honesty and change are needed at the World Bank""is Mr Wolfowitz up to it, or will bureaucracy win, as always?

ssbhalla@gmail.com