IMF/WORLD BANK

IMF/WORLD BANK ECONOMICS HAVE FAILED THE. DEVELOPING WORLD

By Henry Zakumumpa

It is now widely acknowledged in economic circles that IMF/World bank development economics have largely failed the developing world. Why their models for economic growth still influence economic thought and policy in developing countries especially such as Uganda remains a puzzle.

In his 2001 book, The Elusive Quest for Growth: Economists Adventures and Misadventures in the Tropics, William Easterly, himself an ex-World Bank economist of long standing, presents a body of evidence that illustrates the failure of the World Bank and IMF economic prescriptions for developing economies in the past fifty years.

It is shown for example that between the second world war and 1995, the west has invested a trillion dollars in developing countries with nothing much to show for it. The belief by the World Bank and IMF that foreign aid, investment in education and technology, population growth control, loans pegged to reform conditions and debt relief were the panacea for growth is a model that has not delivered results.

In some cases countries which have religiously embraced the Breton woods economic policies have actually become poorer with many stagnating. Easterly’s research shows that between 1980 to 1994 (a fifteen year-period) twelve countries including Uganda received fifteen or more World Bank and IMF adjustment loans. The median per capita growth rate for these twelve countries over the loan period was zero!

More recently, renowned economist Jeffery Sachs in his 2005 best seller, The End of Poverty: Economic Possibilities of our time, recounts his work in Bolivia, Poland, Russia, Zimbabwe and Kenya where he has been directly involved as economic adviser on economic policy. He presents evidence form the field, amassed over a twenty year period, that is highly critical of the one-model-fits-all approach the IMF and World Bank propose to all countries seeking their loans and patronage and calls for more innovative and holistic approaches.

He proposes a fascinating approach he calls ‘clinical economics’. The basic argument is that economies are complex systems and require a’ differential diagnosis’ much in a way a Physician would probe an entire person’s body to pin point the cause of an illness and therefore the remedy.

As far back as 1982, Margaret Hardiman in her book, The Social Dimensions of Development observed that most economic growth approaches for the developing world are erroneously modeled on western countries without due regard to the peculiar background and the complexity of developing economies. You will find that the PhDs that populate World Bank and IMF offices and dictate economic policy in the third world are mostly from western universities with limited practical understanding of the developing world terrain.

It’s deeply surprising and even scandalous, that African economic authorities and even academics are still intellectually inclined to the World Bank/IMF growth template despite evidence that their model has largely not worked. Often its foreign protesters in western capitals at Seattle or Davos who call for the abandonment of the growth strategies preached by the IMF and world bank altogether when African leaders and economists sit back.

It is common to hear government officials continue to tout IMF/World bank development economics despite available evidence that these approaches haven’t had many true success stories. Many economists, with the benefit of hindsight, have acknowledged this much with many discrediting IMF/world bank prescriptions. Despite the wide consensus among economists that World Bank/ IMF strategies are flawed there is no concrete indication on the part of the developing world of the need for a paradigm shift or a new prototype. The basic truth is that not all economic problems facing countries are the same and one model can’t be the answer.

The finance ministry in Uganda should therefore endeavour to think outside the box and call for a debate on the need for new economic approaches. As has been observed, the only thing more dangerous than an economist is an amateur economist.

The writer is an Assistant Registrar at Makerere University