Andrew Fischer: reflections after Brussels

Development Policy25 Jun 2009Andrew M. Fischer

After reading Andy Sumner’s article and then attending the policy forum I thought I would share some of my reflections on the issues that have been raised. It is important to recall that addressing poverty is not particularly antithetical with the so called ‘Washington Consensus’. Indeed, the World Bank dedicated its World Development Report specifically to the theme of poverty for the first time in 1990. Michael Lipton and Simon Maxwell (1992) famously called this the ‘New Poverty Agenda,’ which emerged in the midst of consensual euphoria in Washington, just after the fall of the Berlin Wall had wiped away bad memories from the 80s but before the debacles of the 90s caused the World Bank to run for cover under Good Governance and New Institutional Economics.

Poverty is actually quite comfortably explained within the analytical framework of the Washington Consensus by way of market imperfections. Poverty exists precisely because markets do not function efficiently, causing cracks (i.e. market failures) through which people fall. In most cases this is due (it is argued) to witless government interventions that cause countless economic distortions in need of structural adjusting. In the meantime, targeted safety nets are provided for those who fall through the cracks, provided they are deemed as deserving. The ‘Post Washington Consensus’ basically added the weakness of market-supporting institutions (i.e. insecure property rights, poor enforcement of contracts, corruption, etc) to the list of reasons why markets fail without fundamentally challenging the underlying logic.

In other words, talking about poverty does not necessarily signal a shift of paradigm. It is often symptomatic of a more conservative position that emphasises charity and paternalism, versus more progressive (i.e. redistributive) positions that emphasise equality and employment. This point was powerfully made by Marc Wuyts (2002) and is worth recollecting as we discuss the possibility of new paradigms emerging from the MDG agenda.

Similar tendencies exist in the more recent iterations of the poverty agenda. For example, multidimensional conceptions of poverty (which are not at all new, although they have come to be treated as such) can be easily co-opted into a supply-side policy paradigm, more or less Washington Consensus in nature, i.e. avoid demand management and focus instead on allowing supply to create its own demand, particularly through the operation of efficient markets. Hence strategies tend to focus excessively on education or microcredit while neglecting serious consideration of employment generation, particularly employment with decent wages and with terms negotiated by strong labour organisations. Rather, employment generation is vaguely evoked by way of ‘flexible labour markets’ (how much more flexible can informal labour markets get?), implying that firms should be free to fire as well as hire and wages should be free to fall as well as to rise (the advice is obviously not meant for tenured university economists). Keynes’ biggest battle in the 1930s was against this conventional wisdom that employment would improve if wages would be allowed to fall, which belies the shallowness of claims today that we are all Keynesians now.

Similarly, the recent turn towards conditional cash transfers and even wellbeing approaches also have the potential to be co-opted by supply-side strategies. The point is not that conditionality is inherently wrong or that wellbeing studies have no insights to offer, but that their adoption within the current paradigm has tended to reinforce a perspective that seeks the causes and/or solutions of poverty in the behaviour of poor people themselves, as if they don’t have enough to worry about already. The alternative is to see their behaviour as symptomatic of efforts to adapt and survive in the face of broader political and economic processes affecting their lives. It is in this sense that co-optation of the poverty agenda has drawn attention away from the responsibility of rich countries for poverty in poor countries, not simply in terms of the altruistic prerogative to provide aid but more importantly in terms of actually causing poverty.

Even rights-based approaches carry this propensity. Their advocacy of the ‘poorest first’ can be easily attributed as a rational for targeted social policy interventions, while their emphasis on justiciability tends to focus attention on national violations that are easy to name and shame, rather than international violations that are much less so (such as the health and education impacts of SAPs or later day PRSPs), if only because of the ideological fazing that surrounds the latter. I shall expand upon these thoughts in my next blog post.