The Common Good
March 2007

Perpetuating Poverty?

by Lindsay Morgan | March 2007

In "Big is Beautiful?" (March 2007) Marie Dennis rightfully observes that more must be done to help the millions of people living in poverty around the world.

In "Big is Beautiful?" (March 2007) Marie Dennis rightfully observes that more must be done to help the millions of people living in poverty around the world. But while her argument surely strikes a chord with a socially-conscious audience, she also makes some inaccurate generalizations about the World Bank—and development practitioners in general—that should be addressed.

Dennis' criticism centers on international financial institutions' (the International Monetary Fund and World Bank) preoccupation with macroeconomic liberalization at the expense, she says, of the poor. This criticism suggests that these institutions (especially the IMF) were set up for something other than what we now expect them to deliver. The IMF was supposed to help manage currencies and provide some liquidity in cases of balance of payment problems in the immediate post-World War II era. Currencies are now predominantly floated (i.e., market-influenced), and, one could argue, the original purpose of the institution is no longer a major concern. But as a bureaucracy hoping to maintain itself, it has slowly expanded its mandate in order to remain relevant. The Bank's mission ("a world free from poverty") is still relevant, and it is certainly a major player in development. But it is not the only player, and it is not all-powerful. At best, outsiders like the Bank help to enable internal change in developing countries. So in this sense, IFIs are the victims of Dennis' unreasonable expectations.

But IFIs do often place too much emphasis on macroeconomic stability. Two decades after the well-documented failures of structural adjustment (especially in Latin America), low inflation and balanced budgets are still too often ends in and of themselves. But this does not mean that efforts to achieve macroeconomic liberalization are wholly misplaced or actually serve to perpetuate poverty—as Dennis suggests. Rampant inflation, for example, overwhelmingly hurts the poorest in society. In Zimbabwe, life is much harder for the poorest precisely because macroeconomic bungling has pushed inflation over 1,700 percent. One may argue that the IFIs have been too heavy-handed in pursuing such objectives, but to suggest that their efforts are somehow malevolent is simply wrong.

The author's main argument is about the top-down approach to development. She criticizes the idea that improvements at the top—lowered tariffs, etc.—will help individuals at the bottom by pointing to the many individuals who, after years of pushing this agenda, are still poor. But as my colleague Todd Moss points out in his book, African Development, rarely have the economic liberalization policies promoted by donors meant forcing states to abdicate any regulatory role or to gut social or environmental protections. "Instead," he writes, "they were [and are] a set of policies thought necessary to help countries emerge out of their economic doldrums based on the conclusion that state policies themselves were one critical source of the problem. And structural adjustment was not a complete failure. Macroeconomic management has visibly improved almost across the board. For example, nearly every country in Africa has tamed inflation (which is probably the single greatest tax on the poor)."

Dennis is right that a failure of the development community is thinking too narrowly about what works. That's why the Center for Global Development explores constructive alternatives to the conventional wisdom, like payments for progress on development goals and advanced market commitments for vaccines, and we base our policy recommendations on evidence from the field about what works. I find the author's lack of developed alternatives—other than microfinance, which is itself an unproven mechanism for lifting people out of poverty, she sites no other alternatives—a major weakness in her piece.

Lastly, Dennis writes that the views of outside groups were ignored by the Bank. In fact, in 1998, the World Faiths Development Dialogue was created to facilitate a dialogue between the faith community and the international development institutions. It was successful in bringing people together and creating space for different views, approaches, and criticisms. It should also be noted that the report Dennis cites was produced by the Bank itself. That the Bank has a means for critiquing itself speaks to its commitment—by improving its work—to improving the lives of the poor it serves.

There is no question that the impact of the IFIs' work should be evaluated and constructively criticized. But that criticism should recognize the enormous amount of good work these institutions have done, and the enormous complexity of helping the poor escape poverty.

Lindsay Morgan
Publications associate, Center for Global Development

Marie Dennis, director of the Maryknoll Office of Global Concerns, replies:
I appreciate Lindsay Morgan's comments, but the point of my article was that impoverished people need policy space to develop their own alternatives. Maryknoll missioners can attest to the wisdom and creativity found in local communities around the world. Well-intentioned or not, the World Bank and other international players have narrowed the economic playing field for poor countries to the tremendous benefit of a very few. The consequences for people on the margins have been devastating.

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