Category Archives: World Bank

Sociable sociopaths – is it the system ?

System Analysis is simply another way of looking at the world, trying to look at the structure and composition of an aggregate of anything from computer code to people to machines.

For those unaware of terminology (which would be anyone who has not taken a systems course), a system is an entity with certain inputs and outputs, and which converts inputs to outputs through a certain mechanism. It can be completely defined by its inputs, outputs, external limits and feedback systems. Limits determine the boundaries within which the system must operate, like the size of our parliament is limited by the number of rich and powerful idiots in the country. Feedback systems determine the response of the system to changes in its output or environment, like the elections are a feedback in a democracy.

Another factor which determines the performance of the system is delay in the feedback systems. Scientists have been telling economists to change developmental objectives to include climate change issues for many decades and yet it has come into focus only very recently. Even today, development does not include many environmental issues like deforestation and toxic dumps and species extinction. This can be called as a large delay between output changes and the attendant change in system performance.

Why is systems thinking important ? From a business perspective, it can help analyse the people and objects that determine how a system (company) behaves, and how certain kinds of behavior of these ‘components’ can affect overall system output. For example, car manufacturers should change the specifications of their car according to general consumer tastes. Therefore, there must be some system feature that links car specification with consumer taste. If the person who is in charge of implementing this feature in this system fails to do her job well, system output (which is cars) will fail to make the desired impact.

Therefore, most social systems – religion, corporation, state – come up with a set of desired behaviors that the components that make up the system should have, and this is inculcated by various mechanisms – schools, corporate orientation, religious instruction and so on.

One can, if one has considerable amount of time to burn, apply systems principles to the present situation in India. First, a look at the state. The state is a glorified watchman of sorts, taking money from us taxpayers and giving political, social and economic protection. The recent spate of terrorist attacks have underlined the fact that it is unable to deal with the phenomenon of terrorism which is structurally very different from the normal antisocial elements that it is used to dealing with. Highly motivated individuals, working in small groups, from varied backgrounds, with no monetary motivation causing mayhem is something no state can cope with: it was simply not designed for such a task. And there goes physical safety that we were supposed to have.

Next thing to go was religious tolerance. Talking to random people on the train shows that the average Hindu looks at his Christian neighbor with suspicion and will be more hesitant than before to attend religious festivals. This is due to the sensationalist feedback systems which have been set in place called the media and no doubt supported by a political party that wants to expel Pakistani and Bangladeshi nationals (only those with expired visas, of course, preferably Muslims) since they might be terrorists. Never mind the fact that terrorists will go to great lengths to see that their papers are in order, and are not stupid enough to be in a place where checks are taking place. A system is only as good as the people that make it up, and this is shown well in Karnataka now and Gujarat before.

Before these was, of course, financial security. A global economic system needs globalĀ  regulatory agencies, a role which the IMF and World Bank ostensibly play. The present crisis shows that a system designed around rational ordering and behavior of individuals completely fails when greed, fear and panic are the inputs. The subprime crisis surfaced around this time last year and its effects are showing now, a huge delay between input and output. This kind of behavior can only mean worse things in the coming year. IMF and the World Bank probably should stick to bullying third world nations.

All these developments are having interesting effects – terrorism has made grassroot level spying a noble duty in service of the state (Orwellian nightmare!), people belonging to different religious groups are eyeing each other with suspicion, and people with money to lose are running around like headless chickens. If people are taken as a system, and if insecurity is an input, the system moves towards whatever promises stability. Therefore, unfortunately, the State and religious organizations are going to be more powerful than before when the dust settles. The last bastion of reliable information feedback, the internet, is now becoming more prone to State intervention. Wonder what the status of the people will be after this – are we going to be sociable components of sociopathic systems ?

Review: Imperial Nature

The subtitle reads “The World Bank and struggles for social justice in the age of globalization”. This, along with the highly suggestive title, should hint as to the intellectual direction of the book.

Imperial Nature is critical look at the extant relations between the ‘developed’ North and the ‘underdeveloped’ South, with the myriad aid agencies that mediate these relations, especially in the spheres of development. The World Bank has emerged as a highly influential global actor in these relations (or networks), and the book analyses how the Bank got to the enviable (and equally notorious) position that it finds itself in.

The book revolves around a concept called ‘Green Neoliberalism‘, which essentially is how neoliberalism has been promoted using the necessity for ‘sustainable’ development and protecting the environment from ‘indiscriminate’ and ‘rapacious’ forces of poverty in developing countries.

We begin with a history of the Bank, from its roots as an instrument to rebuild the devastated economies of Western Europe after WWII, to its present mandate to develop the underdeveloped Southern half of the Globe. In the beginning, most of the money that the Bank lent came from National Treasuries and Government institutions of various countries. It was run like an orthodox, risk averse bank, lending only to countries which had a positive chance of repaying the money, like France and Japan. However, when certain political changes made World Bank aid in Europe irrelevant, it had to look at other sources to lend money as well as raise capital, since it was still dependent on US Treasury handouts for capital inflows.

Therefore, the Bank looked towards Wall Street to raise money for its ventures. However, since investors are squeamish about how secure their investment is, the World Bank had to gain credibility by showing that their bonds (floated on Wall Street) were indeed secure and gave attractive returns. Now, one cannot give money to a recalcitrant dictator and expect him to repay in full running the State as he likes. Therefore, the Bank had to make sure that its money was being spent in the ‘right way’, which simply implies that it would go into money making big dams, power and other infrastructure projects rather than schooling, healthcare and so on. This is not to say that no Bank money went to such social sectors, but it was never it major thrust. In fact, there have been instances where public spending in social sectors was cut due to Bank pressure.

Next, the book looks at how the Bank innovates in the face of crisis. In the early 90’s, large scale protests against the Bank sponsored Narmada Valley project and Arun 3 in Nepal forced the Bank to back out of both. Faced with a crisis of legitimacy (which is crucial for its working, since it is a bank, after all), the Bank began it new environmental sensitivity phase. The author investigates how the processes by which the World Bank’s stand on environmentally conscious projects, which involves valuation of forests, rivers as economic goods which need to be partly conserved (to keep the environmentalists happy), and opened up for commercial use (to keep the logging industry happy), has become the dominant mode of thought in every forum where development has been discussed.

This dominance, the author argues, is due to the incredible network built by the Bank, which involves training locals in its ideologies so that they can legitimize Bank policy in their native countries, generating large amounts of (not very scholarly) research which all sing consensual policy tunes, and the good old carrot-and-stick approach which forces highly indebted countries to accept and internalize Bank policies or else.

The example of the State of Laos is taken and the major structural changes the Bank intervention caused, especially in the Government ministries (which are dominated by experts from elite organisations of the North), policies (which promote indiscriminate privatization without having a competitive domestic industry, which results in killing of the domestic players), and environmental outlooks (which promote eco-tourism over rights of indigenous people, and throws natives out of their homelands to ‘resettle’ and become ‘productive’ citizens of the nation). The solutions proposed are typically capital intensive and require large amounts of equipment and expertise from Northern contractors and consultants. It has been calculated that for every dollar of loan, around seven dollars goes back to corporates in the form of contracts and profits from running previously public sector services bought at cheap prices.

The book finally looks at the case of water supply privatisation and how the Bank, within a span of few years managed to convert this issue from a laughable non-starter to something that is a precondition to most Bank loans(yes, even the ones India takes), and how it is presented as the solution to supply quality water to the poorest but ends up becoming too expensive for them to afford, defeating the whole logic of privatisation in the first place. In highly indebted countries, privatisation of social services is said to be good as the public sector is highly ‘inefficient’ and privatization can only improve matters. The author argues against such a simplistic logic and shows how delivery of services can depend on so many factors ( The Bank forced cutting down of social expenditure one among them) and privatization usually ends up being control of a public good by Western corporates, with an indigenous face.

Though it is unlikely that the Bank will ever close down (too many people have built careers around it), such arguments against Bank policies and high-handedness may help to bring more transparency into the murky world of the development industry (yes, it is probably one of the most profitable industries!).