World Bank Changes Direction:
after years of ordering cuts to state spending which translated into cutting education and health care, does Bank finally admit their policies never worked?
Breaking Ranks at the World Bank: "The authors of the World Bank report, 'Poverty Reduction and Growth: Virtuous and Vicious Circle,' recognize that a country can't necessarily grow its way out of poverty, and that poverty can be a huge drag on economies and on growth. Poor regions lacking in infrastructure fail to attract investment. Poor families, faced with substandard schools and high costs, are less likely to invest in the education of their children. And, as has been particularly clear in recent years, countries unable to moderate income disparities face social tensions that jeopardize business. As the authors quantify it, when poverty levels increase by 10 percent, growth decreases by 1 percent and investment is reduced by up to 8 percent of a country's GDP.
Two of their main conclusions are a breakthrough for the Bank: that private sector growth is not a panacea for the poor and that inequality must be targeted directly. A third conclusion is almost heretical for the Bank: that the state needs to take on more economic responsibility than less. 'Converting the state into an agent that promotes equality of opportunities and practices efficient redistribution is, perhaps, the most critical challenge Latin America faces in implementing better policies that simultaneously stimulate growth and reduce inequality and poverty,' the report says."