In "Big is Beautiful?" (March 2007), Marie Dennis rightly says that more must be done to help the millions of people living in poverty around the world. But she also makes some inaccurate generalizations about the World Bank and development in general.
Dennis' criticism centers on the international financial institutions' preoccupation with macroeconomic liberalization, at the expense, she says, of the poor. IFIs do often place too much emphasis on macroeconomic stability. Two decades after the well-documented failures of structural adjustment, low inflation and balanced budgets are still too often ends per se. 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.
And rarely have these policies meant forcing states to abdicate any regulatory role or to gut social or environmental protections. As my colleague Todd Moss points out in his book African Development, "Instead, they were … 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."
While the Bank is certainly a major player in development, it is not the only player, and it is not all-powerful. At best, outsiders such as the Bank help to enable internal change in developing countries. So in this sense IFIs are the victims of Dennis' unreasonable expectations. The impact of IFIs should be evaluated and constructively criticized. But critics should consider the good work these institutions have done and the complexity of helping the poor escape poverty.
Center for Global Development, Washington, D.C.
Marie Dennis replies: