In fact, with good governance, poverty does end for all intents and
purposes. Of course we can do much better even in the developed
world. How do we know this? - just look at the stunning success of
micro banking.
Cashing up the poor and having them fix it all and provide governance at the same time solves the whole problem. Cashing them up can include credit mostly and a base allowance system so each individual can eat and sleep. Our own system limits the allowance to the elderly and the weakened, but it need not stop there and surely should not. The key is to build it into a community self reliance protocol.
What has been happening around the globe, is that good governance is
getting established but it continues to be slow and evolutionary with
generations wasted. Yet once well established as an indigenous
force, there is no going back without a lot of push back from the
citizens. We are seeing that happen everywhere also.
Hope came to India when an engineer demanded complete control of all
aspects of building the Delhi subway. He showed them how. It became
the new standard all over India and capital investments now work
there.
No end to poverty
without better governance
Sri Mulyani Indrawati,
Managing Director of the World Bank
First published in
Thomson Reuters Foundation- TrustLaw
May 16, 2013
In April the World
Bank governors endorsed two historic goals: to end extreme poverty by
2030 and to ensure that prosperity is shared. It will take a lot to
end poverty: strong growth, more infrastructure investments,
increased agricultural productivity, better business environments,
jobs, good education, and quality health care. We have to do more of
this in tough places, particularly those that are fragile and
conflict-affected. But it also takes overcoming institutional
weaknesses and zero tolerance for corruption. Without improving
governance it will not be possible to lift the 1.2 billion people who
still live of $1.25 a day or less out of poverty and to ensure that
economic growth will benefit all citizens.
Good governance and
the role it plays in fighting poverty is complex. A finance minister
from a resource rich but otherwise poor country told me recently that
the fuel subsidies in that country, designed to protect the most
vulnerable from high prices, are ultimately “anti-poor” because
the rich benefit most, they are wasteful and ineffective. And another
official from a middle income country described achieving shared
prosperity as tough because a growing middle class has high
expectations and becomes disillusioned by corruption and lack of
services, making them less willing to support the state.
The first issue is a
spending problem and trying to fix it comes often with high political
costs. Yemen, Nigeria, Jordan and my country, Indonesia, have all
experienced riots over fuel subsidy reforms. While limited public
finances should leave no room for waste, blanket subsidies do exactly
that: they squander spare resources, they are expensive and
ineffective. One World Bank analysis notes that only an estimated 8
percent of the $409 billion spent on fossil fuel subsides throughout
the developing world in 2010 went to the poorest 20 percent of the
population. In seven African countries the richest 20 percent receive
six times more in fuel subsidy benefits then the poorest because they
consume more.
In some places fuel
prices are kept so low, they promote a vibrant shadow economy. In one
oil-producing country, for example, an estimated $857 million is lost
through fuel smuggling to higher priced markets—over $300 for every
inhabitant.
The second is a trust
issue, most poignant with the emerging middle class. At some level
this is good news because when people are better off, they demand
better services and they grow less tolerant of corruption and bad
governance. But if their government isn’t delivering, they are less
willing to pay taxes, invest or play by the rules. Citizens with the
means to do so use services outside the state system, reducing the
pressure for improvements that could raise living standards for all.
Some analysts have also seen a connection between lower trust in the
state and patron-client relationships, in which favored groups are
looked after and rewarded at the expense of the whole. It can breed a
vicious cycle in which lack of trust and inclusion reinforce each
other and undermine efforts to strengthen institutions and improve
the quality of service delivery. In other words a state who does not
deliver ‘clean’ services will choke its engine of growth – a
strong middle class – and creates a major obstacle for achieving
shared prosperity.
Yet there are examples
that show that citizens can improve governance. The “I paid a
bribe” initiative which started in India is now active in a number
of other developing countries. Users expose corruption with the aim
to strengthen public accountability posting on a website that serves
as a public shaming tool. They now can also report when they
encounter an honest public servant.
At the World Bank, I
am privileged to chair the Governance and Anticorruption
Council—which tackles governance obstacles in the way of
development goals. Many developing countries have turned to the Bank
for advice and assistance in reforms. For example, in Mexico
procurement costs accounted for 40 percent of the federal budget,
around 10 percent of GDP. Lack of transparency also caused corruption
to flourish. With Bank support, the government implemented a set of
innovations. Over three years bidding for contracts by small
businesses went up by 36 percent and the government saved about US$ 1
billion. The Bank has also worked on similarly innovative programs to
make extractive industries more transparent or to use technology in
India to improve the quality of maternal health care.
Yet more can be done.
Our governance work concentrates on ensuring compliance and the
financial probity of our projects. And as an institution we’ll
continue to increase our focus on delivery on the ground, whether to
the poorest or the middle class, whether through targeted safety nets
or governance reforms. Because without results for all citizens
delivered effectively and ‘clean’ we won’t be able to end
extreme poverty nor to promote shared prosperity.
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