The World Bank, Neo-Liberalism and Development Research

Elisa Van Waeyenberge, Ben Fine and Kate Bayliss

1.1 PRELUDE: A TALE OF THREE RESIGNATIONS

In the autumn of 2006, one week after its Annual Meetings, the findings were released of an external evaluation of World Bank research that had been undertaken between 1998 and 2006 (Deaton et al. 2006). The evaluation had been commissioned by the Bank and was carried out by a panel of four distinguished development economists, with Angus Deaton acting as chair.

The period covered by the review had revealed itself to be particularly tumultuous in the history of Bank research. Joe Stiglitz, at the time vice president and chief economist, had opened 1998 with a bang. At the WIDER annual lecture, he delivered his now much-celebrated address, 'More Instruments and Broader Goals: Moving towards the Post-Washington Consensus' (Stiglitz 1998a). As indicated by the title, Stiglitz called for an urgent reorientation of the Bank's development paradigm, beyond what he perceived as the excessively narrow bias that was the basis of the Washington Consensus that had steered Bank policies during the 1980s and early 1990s. For Stiglitz, the Washington Consensus had been 'at best incomplete and at worst misguided' (p.3). A more 'holistic' and 'broad-based' approach to development was to be pursued through a broader set of policy instruments than those traditionally associated with the Washington Consensus – itself shorthand for macroeconomic 'stabilisation', i.e. fiscal austerity, trade liberalisation, privatisation, and so on. In the autumn of the same year, Stiglitz (1998b) issued another urgent call from a public platform for a new development paradigm to be promoted by the Bank. One year later, he was forced to resign from his job as chief economist.

Meanwhile the drafting of the 2000/01 World Development Report (WDR) was under way. 'Attacking Poverty' was important for the Bank (World Bank 2001a). As a World Development Report, it summed up and publicly advertised Bank ideas in a particular area. Further, it was part of a longer-term exercise that sought, over a period of ten years, to reformulate Bank analysis and policy on poverty – with poverty reduction sitting at the heart of the Bank's proclaimed mission. Ravi Kanbur, another distinguished development economist, known to be broadly in tune with the more comprehensive and 'holistic' approach advocated by Stiglitz and the then Bank president James Wolfensohn, had been tasked with leading the team writing the report. Yet by mid 2000, soon after drafts of the report had been circulated for comment to representatives of the Bank's member governments and to researchers in and outside the Bank, Kanbur had departed his post.

Within the Bank's main research department, the Development Economics Research Group (DECRG), led between 1998 and 2003 by Paul Collier, another drama was about to unfold. William Easterly, a senior advisor in the Macroeconomics and Growth division of DECRG since 1989, had received clearance from the Bank to write a book on some of his research findings regarding the causes of growth. After authoring an op-ed piece in the Financial Times summarising some of his findings, he found himself the subject of a misconduct investigation. He too had left his job at the Bank before the end of 2001.

To the extent that the postures adopted by these three high-level Bank staff diverged from the official line espoused by the Bank, their positions became compromised and unacceptable. The resignations forced to the fore a set of tensions between scholarly efforts at the Bank, its advocacy role and the specific policy imperatives the institution was seeking to promote and, where necessary, defend.

This book seeks to assess critically the Bank's development research both in how it affects particular debates and policies about development and through a closer look at the role it plays for the Bank itself, with particular attention to the shifting contradictions within and across Bank scholarship, its advocacy, and the policies the institution promotes. The Deaton evaluation provides a critical lens through which this endeavour is approached. The report sought to assess the extent to which Bank research contributed to its two main stated objectives: the generation of new knowledge on development and the broadening of the understanding of development policy. This was broached across nine fields of enquiry: macroeconomics and growth; fiscal policy, public sector management and governance; trade and international economics; poverty and social welfare; human development; finance and private sector development; agriculture and rural development; infrastructure and urban development; and the environment. Running to 165 pages, it came out in favour of a formal 'knowledge' role for the Bank, but denounced a set of fundamental shortcomings regarding the way in which the Bank discharged itself of its intellectual responsibilities.

The failure of the report, however, to situate the Bank's research effort within a set of broader political–economic pressures bearing upon the Bank's scholarly activity, and the absence of any exploration of how the relationship between Bank research, rhetoric and policy priorities is mediated, were striking (see Chapter 2). The way the Deaton Report dealt with (or avoided) the resignations mentioned above serves as an illustration. For example, the book that sat at the heart of Easterly's resignation, The Elusive Quest for Growth, Easterly (2001a), was hailed by Deaton et al. (2006, p.50) as 'perhaps the most cited and influential of all of the Bank's research output' – without a hint of the controversy the book had ignited within the Bank. Further, Deaton et al. (p.11) put forward the fact that one of the Bank's former chief economists, the unnamed Stiglitz, was a Nobel laureate as evidence of the Bank's alleged leading edge in development research. But there was no mention of the forced departure of Stiglitz from the Bank. Nor was there any mention of Kanbur's resignation, while a later (and more sober and less...