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Does the World Bank Gloat Too Much?

What's behind Africa's boom?
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The World Bank headquarters in Washington, D.C. (PHOTO: SHINY THINGS/WIKIMEDIA COMMONS)

The World Bank headquarters in Washington, D.C. (PHOTO: SHINY THINGS/WIKIMEDIA COMMONS)

Writing at Think Africa Press, a United Nations undersecretary working in African economics, Carlos Lopes, just took a bit of a shot at his colleagues at the World Bank. Lopes' rant brings some attention to the argument over what's behind the Sub-Saharan economic boom of the past few years.

Lopes focuses on comments by various senior World Bank types claiming that Sub-Saharan states owe their recent good fortune to bank and IMF Structural Adjustment programs, a set of loans-for-liberalization policies originally dating to the 1970s. Lopes sees this as grandstanding:

A number of African countries are experiencing economic growth fuelled by their endowment with commodities at a time of surging prices as well as improved political environments, prudent macroeconomic management, rising domestic consumption and strong public investment.

The Bretton Woods institutions – the World Bank and the International Monetary Fund (IMF) – are emboldened by these developments and have laid claim to the success story currently coming out of Africa. Recently, in an interview with Think Africa Press, the Chief Economist of the Bank's Africa Division, Shantanayan Devarajan, credited Africa’s robust economic performance to the policies of the World Bank and the IMF.

The success came, according to him, because African policy makers followed the Bank’s policy of Structural Adjustment Programmes (SAPs) in the past 10 to 15 years. The SAPs, he claims, “delivered economic growth and poverty reduction”.

Lopes argues that the SAP programs, which often involved private banking deals brokered through the World Bank, were much more of a mixed bag.

Although the policy restored macroeconomic stability in some countries, economic growth stagnated and social conditions worsened considerably. For example, the decay in public health services in Nigeria made people to coin the phrase that government hospitals had become “mere preliminary consulting rooms”.

Many families were destroyed as their bread winners, who were rationalised out of employment or whose take-home pay could hardly take them home, were no longer able to cater for their dependents. One report said, thanks to the SAPs, some men in Zambia left home and abdicated their responsibility to their wives.

He cites as an alternative, not shockingly, work by his own U.N. body, the Economic Commission for Africa (ECA). For a diplomat, he's not particularly diplomatic:

To keep the continent on the rise, the ECA is robustly arguing for governments to be involved in developing their countries rather than toe the IMF/World Bank line of promoting market fundamentalism with little or no state involvement. The Commission is of the opinion that if Africa could leverage on its primary commodities to industrialise through adding value to them and linking the commodity sector to the rest of the economy, then the 21st century could indeed be Africa’s. The recent successes of Asian countries who did not take the prescriptions of the Washington Consensus bear testimony to the strength of the model.

Does this matter? As a rhetorical exercise, certainly, and as policy making, perhaps. Lopes is arguing for replacing IMF-type loans-for-restructuring deals with direct foreign investment, from a medium-high pulpit. His argument is not without its curiosities. Replacing the IMF programs with stuff like contracts with off-continent mining companies isn't going to make everyone cheer—though certainly the mining companies will. But the tone of all of this suggests Lopes is serious about what he's saying, and believes it. This sort of talk is not unheard of, but something so unvarnished and so public is notable for a higher-up at the U.N. Someone's not getting to the head of the dessert line at Davos this year.

So this isn't just some personal pissing match, though it may be that too. This is two models for developing a middle class in places that don't have much of one, having a real debate, in public, between people with a lot of power to impose their preferred models. This is the sort of wonky but real discussion you don't see aired that much by anyone with something to lose.

Read the rest here.