World Bank Report Stresses Democracy

FOR an institution that publicly shies away from politics, the World Bank is now making strong statements about the importance of democracy in developing economies.The bank's 1991 World Development Report, released today, stresses good governance in developing countries as the best way to move toward efficient production and distribution of goods and services. This is the keystone of the bank's self-described "market-friendly" approach to development economics. World Bank chief economist Larry Summers places a premium on democratic processes that have "more success in lowering infant mortality, raising literacy rates, and improving the treatment and integration of women in society." He argues that a higher quality of life for the world's poor - some 1 billion people live on $1 a day each - is best achieved through a political system that responds to popular needs. Vinod Thomas, lead author of the report, says that countries devoid of democracy engage in a "vicious cycle of political weakness where there is no consensus, there is poor economic performance [because there is no accountability], and then political weakness follows. This involves questions of corruption and military expenditure." This is starkly apparent in Africa, home to the world's poorest, according to the World Bank, several United Nations programs, and African institutions. There, government mismanagement and high proportions of defense spending exacerbate practically insurmountable problems, such as a quarter of the population facing chronic food shortages and some two-thirds without a safe water supply. "Sadly, Africa has been the one exception toward this global trend toward political and economic freedom," according to the 1991 edition of the US and Africa Statistical Handbook published by the Heritage Foundation. "Forty-one of Africa's 50 nations are one-party or military dictatorships, and the vast majority of Africa's governments maintain ... extensive control over the day-to-day operations of economy," says the report. Military spending in many African countries exceeds one-quarter of their respective budgets. The Heritage report concludes that "despite infusions of $100 billion in Western aid and credits sent to Africa throughout the 1980s, African economies have actually shrunk. ... This aid has contributed to corruption, as African leaders have sought to use it for their own financial and political gain." World Bank assessments put military spending "well in excess of combined expenditures on education and health in a number of developing countries [around the world]." The report concludes that "aid and finance agencies are entitled to ask whether it makes sense to help governments whose first priority is not to develop but to add to their military strength." Communism's demise and Eastern European reforms are cause for World Bank encouragement, say its officials. Once rife with government repression, corruption, and wasteful spending, it now holds great promise as the bastion of change in favor of responsive governance. US Executive Director Patrick Coady cautions that while reforms are initially painful, they must not lose momentum. The leading shareholder in the World Bank, the US has also taken the lead in promoting private-sector development as a bank priority. But the bank holds onto two troubling theologies, Mr. Coady says. "One is that you have to fix an enterprise before you privatize it. That's very costly," he says. The other theology is the bank's gradualism in moving toward economic reforms. "The bank goes at the pace of its clients," which costs the institution money and the developing country time. These theologies serve as setbacks, not stimulants to reform, he says. Coady says private-sector growth supports good governance. "The private sector not only creates a capitalistic environment, it creates jobs and tax systems that support social spending," he says. Mr. Thomas talks about the importance of the public sector in "building infrastructure, environmental protection, education, and making sure that poverty programs are carried out. But if governments have trouble running successful industries, what can they do in these other areas?" he asks. Overseas Development Council Executive Vice President Richard Feinberg says the World Bank overstates "the degrees of consensus existing on the proper roles of governments in providing social services, redistributing income, and promoting industrial exports." Coady says what constitutes proper governance is open to debate. "Even on the European continent, there is disagreement over governance," says one bank official. In Italy, for example, the government owns major shares of most industries. Czechoslovakia, by contrast, is now trying to shed layers of industrial inefficiency due to government mismanagement of Czechoslovak industry. "The Czechs balk at Italy's suggestion for more government control," he says.