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Tuesday, 12 September, 2000, 18:11 GMT 19:11 UK
World Bank launches 'radical strategy'

The World Bank has launched what it calls a radical new strategy to tackle world poverty.

It now says that poverty reduction can only come about if governments are prepared to give the poor a voice and tackle corruption and government incompetence.

"We recognise the fundamental role of institutional and social change to the strength of the development processes and the inclusion of poor people

World Bank
The new approach gives equal weight to the goals of "empowerment" and "security" as well as the Bank's traditional emphasis on economic growth, which it calls "opportunity".

The World Bank's chief economist, Nicholas Stern, said: "We know that economic growth is crucial for sustained poverty reduction. But we also recognise the fundamental role of institutional and social change to the strength of the development processes and the inclusion of poor people".

However, disagreements over the emphasis in the first draft of the report led to the resignation of its original author, Ravi Kanbur, in May.

Debate over growth

The World Development Report shows that little progress has made been on many of the key goals agreed by the United Nations to reduce poverty.

The number of very poor people, living on less than $1 per day, has risen in every region except East Asia in the past decade.

And progress has been slow on key social indicators, such as the number of girls in primary school and the infant mortality rate.

And the gap between rich and countries continues to widen.

The Bank argues that such poverty is closely linked to the failure of economic growth, with many of the poorest countries, especially in sub-Saharan Africa, showing a fall in real per capita income over the last 35 years.

It has even published research showing a close link between growth and poverty reduction.

But critics argue that unjust government policies can increase inequality between rich and poor within a country, so that, for example in Latin America, the poor do not benefit from growth.

And the increasingly vocal anti-globalisation protestors say that the Bank uncritically fosters the integration of poor countries into the world economy, whatever the consequences.

Differences with IMF

The World Bank is one of the so-called "Bretton Woods" institutions that was created after the Second World War to help stimulate long-term development first in Europe and then in developing countries around the world.

It is supposed to work in tandem with its sister institution, the International Monetary Fund (IMF), which provides short-term assistance for countries in financial crisis.

But the report shows that it has increasing differences with the IMF on how to help poor countries.

It specifically criticises the IMF for imposing too harsh conditions on Asian countries in the early stage of the 1997-98 world financial crisis, and questions whether excessive "conditionality" - the requirements imposed on countries as pre-conditions for loans - are not counter-productive.

And the World Bank appears to endorse capital controls, where countries restrict the flow of private funds, as a reasonable response to a crisis.

Nevertheless, the Bank and the Fund are planning closer links, hoping to speed up debt relief to heavily indebted countries and agreeing a comprehensive poverty reduction and growth strategy with individual countries.

Both are likely to prove controversial with the demonstrators who are gathering in Prague in the Czech Republic next week when the two institutions hold their annual meetings.

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