In a report Thursday, the Independent Evaluation Group (IEG) said that the World Bank has focused too narrowly on economic growth, leaving unemployment and poverty rates to stagnate or worsen.
"The Bank has helped many countries to get onto a growth path through improved economic management, but the growth strategies have not always helped enough to improve job opportunities and living conditions of the poor," the IEG said in its study, titled the "Annual Review of Development Effectiveness 2006: Getting Results".
Vinod Thomas, the IEG’s director-general, said that at the current pace, "There is a long way to go in reducing the number of people living in poverty and the magnitude of their deprivation."
"Discernable progress depends on actions to sustain growth, as well as to improve income distribution through better service delivery and more opportunities for the poor," said Thomas. "The challenge is to see far more numbers of poor benefit from broad-based growth."
The report says that only two in five borrowing countries have recorded continuous per capita income growth over the five years ending in 2005, and just one in five did so for a full 10 years.
"Although the report does not call for a change of course at the Bank, it does implicitly acknowledge the failure of the institution, the IMF and other official lenders and donors to contribute in a meaningful way to poverty reduction over the past quarter century," Doug Hellinger of the Washington-based Development Group for Alternative Policies told IPS.
"Language is couched carefully so as not to directly address the failures of the now much discredited poverty-creating ’Washington Consensus’ structural adjustment policies, as liberalisation, privatisation and other adjustment measures are still being placed on loans by these institutions," he said.
Hellinger said it was good that the report calls for "a better understanding of the political economy of countries, and particularly of the nature of growth and its projected impact on income distribution, before loans are made." However, he added that "no mention is made of the need to directly engage [the poor] in the ’policy dialogue’ that the Bank has used to control national economies and which this report still supports."
The report was particularly critical of the income distribution model the Bank has offered in its projects and lending. It said that high and sometimes worsening income inequality has dampened the poverty-reducing effect of growth in a number of countries..
It also found that the strongest growers have better economic management, as well as better policies for social inclusion, than do moderate or slow growers.
In Madagascar, for example, the Bank focused on sectors with high growth potential that would allow for relatively quick payoffs, but their impact on poverty was limited.
In Georgia, the oil transport sector in which the Bank invested was a major driver of growth, but it created few jobs.
The study says that where growth did not result in poverty reduction, it was concentrated in subsectors with low labour intensity and where few of the poor could work.
Thomas told reporters Thursday that the answer to reconciling the Bank’s emphasis on economic growth and the fight against poverty is to work on both issues at the same time.
Anti-poverty campaigners who have long called attention to what they say is a "failed" economic model promoted by the World Bank and its sister institution the International Monetary Fund greeted the report as vindication of their positions.
They noted that the report pointed to how export-oriented and privatisation-dependent economies tend to suffer when growth does occur because the gains go to very few people.
"Bolivia... is an interesting example. It was forced to privatise its natural gas