Poverty on the rise

Dr Bharat Jhunjhunwala
President of the World Bank  Dr. Jim Yong Kim has proclaimed that the Bank would end extreme poverty by 2030. He fails to say that this will be accompanied with an overall increase in poverty. Objective of the World Bank is to take away the resources of the poor and provide them to the rich. It matters not that poverty increases as long as extreme poverty is contained. There is a critical difference between poverty and extreme poverty. Say, a prosperous farmer lost his land to a project supported by the World Bank. He was rich previously an was earning, say, Rs one lac per year. He has now become a wage labour and earns Rs 10,000 per year under MNREGA along with other poor people who were jobless earlier. This is fine with the Bank because “extreme poverty” of the jobless people has been contained. It matters not to the Bank that a prosperous farmer has been made poor in the process.
An example of this approach of the World Bank is its financing of the Vishnugad-Pipalkoti hydroelectric project in Uttarakhand. The negative impacts of the project are being borne by the poor people of the area. Blasting undertaken for making the tunnel is leading to the development of cracks in their houses. Landslides are causing loss of life and property. Migration of fishes is obstructed leading to loss of income from fishing. Sediments are trapped in the reservoir and local people are forced to buy sand from the plains.  Forests are submerged in the reservoir and people are deprived of grazing. The pilgrims are deprived of the pleasure of seeing a free-flowing river. All these impacts lead to an increase in poverty. On the other hand, the benefits from generation of electricity accrue to the rich people living in Dehradun and Delhi.
Myself along with some local people made a complaint to the Bank. We pointed out that the free-flowing river provides immense happiness to the pilgrims. The Bank Management had said that it was not possible to take this into account because “robust” estimates for the value of this free-flow were not available. The Bank preferred to use the blatantly false figure of zero as the value of free-flowing river instead of taking any of the many alternative estimates that were available. We complained that release of environmental flows was not adequate to conserve biodiversity because the migration path of the fish will still be obstructed by the dam. We complained that the project is likely to become a loss proposition in the coming times due to declining cost of solar power. The Bank refused to examine these issues because its objective of providing benefits to the rich was achieved by promoting the project.
Our Government is following these same policies. Government of India is being run by large Indian companies while the World Bank is being run by the Multinational Companies. There exists an unsaid alliance between these entities. The Government of India is closely connected with the World Bank while the Indian Companies have made alliances with Multinational Companies.
Addressing the joint meeting of the World Bank and the International Monetary Fund, Finance Minister Arun Jaitley requested the World Bank to raise funds from the global financial markets and lend larger amounts to the developing countries and enhancing the share of the developing countries in the voting pattern of the World Bank . Such cosmetic changes will hardly make any difference. More votes given to a pro-rich Indian Government will not help change the anti-poor policies of the Bank.
Finance Minister Jaitley suggested that the World Bank should focus on its role of “honest broker, convener and policy adviser.” That would be disastrous. The Bank would advise the Government of India not to take into account the happiness provided by free-flowing rivers; the loss of fisheries due to the obstruction made by dams; and the project becoming a loss proposition due to declining price of solar power. One must select the doctor with care. One loses his life if he selects the wrong doctor. Our people will lose their lives if we appoint the World Bank as the doctor of our economy.
The problem is not specific to India. A report by Truthout.Org tells that the World Bank affiliate International Finance Corporation gave a loan to a Honduran palm oil and snack food giant. The loan was made just five months after a 2009 military coup removed the democratically-elected president who sought labor and land reforms. The Bank rewarded the leaders of the coup instead of penalizing them. Human rights groups documented the murder of 102 people associated with peasant movements in the area where the borrower Company was operating. Many of the deaths are blamed on death squads composed of the Company’s private security.
During the early 1980s, the World Bank lent large amounts of money for the Chixoy Hydroelectric Dam in Guatemala at the time those countries were ruled by what Truthout.Org calls “bloody military dictatorships.” One of the results of the World Bank’s project was a series of planned massacres that left 440 Mayan Achi men, women, and children murdered.
The reforms being implemented by World Bank President Jim Yong Kim have to be assessed in this backdrop. The Bank is presently organized in geographical units. The World Bank office in India administers programmes in diverse areas such as agriculture, education, energy, mining, health and nutrition, and trade and competitiveness. Mr Kim is planning to organize it by different sectors. One Department will administer programmes in the field of education across the world; and another Department will administer these in the field of health. Another reform pushed by Mr Kim is to reduce the number of senior managers. Reducing number of senior managers will not help change the harmful policies. These changes are entirely cosmetic. It hardly matters whether the Vishnugad-Pipalkoti project is administered by the World Bank’s India Office by three managers as at present or by the World Bank’s global Energy Department by one manager as proposed. The policies that are implemented will be anti-people either way.
We must rethink the need for the very existence of the World Bank. A report by Bloomberg says that more than $1 trillion a year now flows from the private sector and major philanthropies to developing economies. In contrast the total new lending by the Bank in 2013 was a paltry $35 million. We are unnecessarily running after the Bank and allowing it to push anti-people projects. It is time we ask the World Bank to leave this country just as Indira Gandhi had asked the Ford Foundation to leave. Finance Minister Jaitley should appoint a commission to examine the impact of projects financed by the World Bank on the poor people. He must ask for more voting power in the Bank so that these policies can be reformed.
(The author was formerly Professor of Economics at IIM Bengaluru)

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