Introduction to the Report on Social Policy

Rhetoric and Reality: The World Bank's New Concern for the Poor

NACLA Report on the Americas, May/June, 1996

After years of spreading the gospel that the revival of economic growth would be a cure-all for the region's ills, the World Bank and the Inter-American Development Bank (IDB) have begun to change their tune. These multilateral development banks, which used to plow most of their money into the construction of bridges and dams, nowadays espouse the need to improve the welfare of ordinary citizens. Their publications are full of buzzwords such as "equity," "capacity-building," "decentralization" and "efficiency." As this NACLA report details, however, the reality behind the rhetoric is less heartening.

After more than a decade of trade liberalization, state cutbacks, and deregulation, 200 million Latin Americans-- nearly half the region's population--live in poverty, with monthly incomes of $60 or less. It is estimated that by the year 2000, seven out of ten Latin Americans will not be able to meet their basic daily nutritional needs. The World Bank and the IDB fear that this widespread misery side-by-side with the conspicuous consumption of a small elite is a dynamite stick waiting for a match. A social explosion would be bad for U.S. investors in the region, and could spell disaster for the whole neoliberal economic program that these organizations have worked so assiduously to cultivate. Far from having an epiphany about the need to pursue alternative paths to social development, the multilateral lending institutions have developed a coherent set of social policies with the explicit purpose of shoring up free-market economics in Latin America.

The World Bank recipe for social policy is essentially two- fold: targeted anti-poverty programs and privatization of the social-security network. Poverty-alleviation programs-- especially in their incarnation as centrally controlled social-investment funds--have been strong on propaganda, but weak on results. Not only are these programs the equivalent of putting a band-aid on a hemorrhaging wound, but the cause of the bleeding--the neoliberal economic system--is never called into question. Efforts to privatize the education, health-care and pension systems represent an incursion of a market ethos into the social sphere. Privatization has led to a massive transfer of resources from the public to private sector, and sharpened the inequities between rich and poor. In the process, the whole notion of universal access to basic social services is being gutted in favor of a model based on the individual's ability to pay.

Both anti-poverty programs and privatization have a strong component of decentralization. Few on the left or right oppose decentralization in principle, but the way the process is being carried out in Latin America is cause for concern. In the neoliberal playbook, decentralization often means turning over tasks--but not decision-making or funds--to the local level. The state is handed an excuse to dump its basic civic responsibilities onto the laps of cash-starved, over- extended local governments and grassroots organizations.

This brand of social reform may sound familiar to U.S. citizens. The U.S. health-care system is increasingly organized according to market criteria while decentralization and business-state partnerships are the rage in U.S. educational policy. Meanwhile, government-run entitlement programs such as Medicare, Medicaid and welfare have come under unprecedented attack. While in the United States the conservative razor blade has tattered the social-security net, in Latin America it has all but disappeared for most people.

In the final analysis, social policy cannot be divorced from the dominant economic development model. The possibilities and limits of World Bank and IDB social policy are defined by the neoliberal economic agenda in which it is rooted. As the case of Chile demonstrates, neoliberal social policy allows the government to abdicate one of its principal social functions: promoting a genuine redistribution of income.