World Bank shamed by 2.8bn in poverty

Campaigners and street protesters force rewriting of rules to ease the damaging effects of capitalism on Third World

Displaying remarkable, and hitherto unnoticed, empathy with the 2.8 billion people in the world living on less than $2 (£1.40) a day, the World Bank has undergone a radical conversion in its anti-povertypolicies and prescriptions.

Displaying remarkable, and hitherto unnoticed, empathy with the 2.8 billion people in the world living on less than $2 (£1.40) a day, the World Bank has undergone a radical conversion in its anti-povertypolicies and prescriptions.

However, this shift is not radical enough for some, including the main author of the new report who resigned part way through its production. Ravi Kanbur, an expert in economic development from Cornell University, was unhappy when the World Bank's staff economists toned down the radicalism of an early draft.

The influence of street protests - starting with Seattle last year - has shifted the bank's analysis, but it is unlikely to be enough to keep demonstrators off the streets of Prague at next week's International Monetary Fund and World Bank meeting. In a foretaste of the antics expected in Prague, demonstrators disrupted the Asia-Pacific Economic Summit in Melbourne, Australia yesterday for the second day running.

The market-driven orthodoxy of recent years in which the bank advocated structural reforms that left the poorest countries saddled with crippling debt and crumbling health and education systems has been banished in favour of "complementary" action at global and national level "to achieve maximum benefit for poor people throughout the world".

The bank's annual World Development Report, published today, states that international targets for the reduction of poverty by 2015 are unlikely to be met without policy reforms.

The report places a new emphasis on the need to improve economic security for people living in very poor countries, and to ensure that government policies tackle inequality. Where the markets reigned supreme in the past, this year the bank is calling for an "interaction of markets, state institutions, and civil society" to harness the forces of economic integration and serve the interests of poor people.

In the past campaigners have criticised the World Bank, sister institution to the IMF, for ignoring the impact of its programmes on the very poorest and most vulnerable people. The change in tone in this year's report marks a response to the increasingly vocal demonstrations against globalisation and the experience of the Asian financial crisis in 1997-98.

Michael Walton, the World Bank's director for poverty reduction, said: "The crisis did have an important impact." He described it as a watershed in the bank's approach. Mr Walton said the published version had merely changed the emphasis to place the importance of economic growth ahead of theradical new messages about equality and economic security. But the dispute has left activists disappointed.

David Bryer, director of Oxfam, said: "I regret that some economists are still refusing to abandon the discredited ideas of the past." Duncan Green, of the relief agency Cafod, said the watering down of early drafts of the report was shocking.

"The initial critique of conventional bank thinking has been replaced with an apologia for business as usual," he said.

The report, "Attacking Poverty", puts market reforms to promote economic growth at the top of the agenda. Nicholas Stern, the World Bank's chief economist, said: "Expanding economic opportunities overall - that is, promoting growth that directly benefits the poor - remains central."

However, it also presents a mass of depressing evidence showing that past growth has not been enough to make inroads into desperate poverty.

At a time of unprecedented global wealth, almost half the world's population lives on less than $2 a day, and 1.2 billion people live on less than $1. In the poor countries one child in 20 dies before the age of five, and half of children under five are malnourished. The tally makes it unlikely that United Nation targets for poverty reduction and improvements in health and mortality rates in the next decade and a half can be met.

The report therefore argues that growth must be supported by other reforms. These would include institutional changes to tackle corrupt bureaucracies and legal systems, reduce discrimination and ensure government policies aid the poor rather than the middle classes or élites. The report documents the vulnerability of the poor to inefficiency and corruption in many countries. Its recommendations include, for example, the modernisation of police forces, and the development of legal services organisations that can help people to gain access to legal redress.

It also proposes financial safety nets and measures to tackle the effects of natural disasters, as financial andnatural crises are much bigger catastrophes for the poor. Examples include engineering projects such as a flood relief scheme in Argentina, and insurance measures such as an expanded earthquake insurance programme in Turkey, or local cereal banks to guard against the impact of drought in Burkina Faso.

These elements of the report, at least, will be welcomed by aid agencies. Mr Bryer of Oxfam said: "Behind the mass of empirical evidence, it carries the simple message that mass poverty in the midst of global prosperity is morally unacceptable, politically unsustainable and economically wasteful."

'Attacking Poverty: WorldDevelopment Report 2000/2001', the Oxford University Press or available online at www.worldbank.org/wdr