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Bank's Policies Create Poverty, Stifle Jobs

By Gumisai Mutume, IPS
13 January 1999

JOHANNESBURG, Jan 13 (IPS) - Employment creation should be at the centre of any successful poverty alleviation programme, says a World Bank economist, but South African analysts argue that the Bank's own policies have done little to stimulate employment in Africa.

"Employment has to be at the centre," says Joseph Stiglitz, chief economist of the World Bank when he addressed a three-day Inter Faith/World Bank poverty conference which began in Johannesburg on Tuesday. "It is absolutely important and it is often forgotten as a key message."

The conference's findings will be incorporated in the UN's forthcoming World Development Report.

Stiglitz says in the past, poverty alleviation strategies focused mainly on economic growth and employment creation was less emphasised.

There is now a need to add new measures of poverty, such as mobility in income positions in a country, measures of opportunity, such as access to education, and measures of risk, how often and how easy it is for a family to fall below or above the poverty line, Stiglitz adds.

Over the years, the World Bank has made several prescriptions for the alleviation of poverty, the most widely implemented being Structural Adjustment Programmes (SAPS) in developing countries. But there have been little returns.

"Many of the opinions of the World Bank are the old ones," says ruling African National Congress (ANC) parliamentarian and economic thinker Ben Turok. "There is no one message."

World Bank orthodoxies emphasising economic stability above all else have influenced South Africa, yet stabilisation often leads to job losses and increased poverty, Turok adds.

"In many countries in Africa, the stabilisation programme has worsened the situation and brought greater poverty without creating jobs," Turok told IPS.

South Africa's government is saddled with the problem of 50 percent of the population living below the poverty line. The country has been a faithful disciple of World Bank-led macro- economic policies, clipping its budget deficit from 10.2 percent of Gross Domestic Product (GDP) in 1993/94 to the current 3.5 percent. With further discipline, it aims to bring it down to three percent.

Under the Growth, Employment and Redistribution (GEAR) strategy, a pseudo structural adjustment programme, government aims to achieve growth rates of six percent per annum and to churn out 600,000 jobs annually by the year 2002.

Turok recommends a strategy that couples such stabilisation with targetted infrastructural spending and investment.

South Africa's unemployment rate has grown from 17 percent in 1995 to 23 percent last year, according to 'Statistics South Africa'. Independent analysts put it as high as 50 percent among the majority Black population.

The country's economy, on the other hand, has not been growing handsomely. It is expected to improve by half a percentage point in 1999, hardly anything to savour given a population growth rate of above 2.5 percent.

Talk of poverty alleviation without talk of debt cancellation is meaningless, says the Anglican Archbishop of Cape Town Njongonkulu Ndungane.

"One of the contributing factors to poverty is the astronomical debt that is owed to developed countries by developing countries," says Ndungane, who is championing debt- forgiveness.

"The cancellation of these unpayable debts will go a long way towards improving the quality of life and restoring dignity in developing countries," he adds.

"A first step would be for the Group of Eight (G8) countries and financial institutions, when they meet in June in the German city of Cologne, to make an unequivocal commitment of intent to cancel the developing world's unpayable debts."

G8 groups the industrial nations of Germany, Italy, France, Japan, the United States, Britain, Canada and Russia.

Another factor that has been identified as a key contributor to growing world poverty is globalisation.

While it has positive aspects, such as new information technologies, deregulation in money markets and a significant growth in global trade, it also has hit national economies through the whim of multi-national decision makers and international capital.

Government's no longer wield power and real power is now in the hands of those who have money -- the multinationals who shift intensive employment around the globe to where wages are lowest.

Worldwide, according to UN statistics, 1.3 billion people live in extreme poverty(on less than one U.S. dollar a day), and about 70 percent of them are women. By 2020, the number of malnourished children is set to grow to 200 million from 193 million and most of them will be in Africa.

Increasingly, however, there have been important voices, including that of the World Bank, conceding the flaws of the present free market ideology.

(END/IPS/gm/pm/98)