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The World Bank: Promoting Stagnation
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18940 |
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CURRENT ISSUES
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| Issue
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2 / 1991 |
3,437 Words |
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Bryan T. Johnson
Bryan T. Johnson is a research associate in internation
economics at the Heritage Foundation. |
When the World Bank was formed in 1944, its purpose was to promote economic growth in war-torn Europe. Later, its mission expanded into promoting economic growth in less developed countries. In this, it has failed miserably. In areas where the World Bank has had tremendous influence, such as sub-Saharan Africa, poverty has actually increased and economic growth is virtually nonexistent.
Now the bank intends to carry its mission to the newly freed nations of Eastern Europe, where the bank is likely to rely on past strategies--thus promoting economic stagnation and not growth. The bank's most recent report, World Development Report 1990, demonstrates it has not learned the lessons of the "failure of socialism."
In its report, the World Bank has once again strayed from the role of advocating policies that promote economic growth, instead advocating those that actually put a brake on growth and result in increased poverty. The bank is suggesting that less developed countries increase the level of government intervention in their economies by instituting massive redistributive and social welfare programs. For example, the bank advocates government controlled banking sectors so subsidized credit can be given to the poor. Further, the bank relies heavily on redistributive taxing policies. Finally, the bank advocates the use of transfer payments and public employment.
While these programs are intended to assist the poor, they are more likely to create unstable economic conditions that will result in increased poverty. Rather, the World Bank should be advocating policies that call for less government intervention. History has demonstrated that such policies are the only true stimulators of inefficient economic systems.
The World Development Report 1989 called for the abolition of government-controlled financial institutions and the selling off of the massive Third World public sectors, which was sound advice. The 1990 report, however, seems to advocate policies inconsistent with the previous one. This stance has created confusion in less developed countries demonstrates the futility of these policies of the institution.
The World Bank approach as outlined in the report relies heavily on government-subsidized social welfare programs, transfer payments, public employment schemes, government-owned agricultural sectors, and price controls. The past experience of many less developed countries demonstrates the futility of these
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