Notes on Ravi Kanbur's "Economic Policy, Distribution and Poverty: The Nature of Disagreements"
Raj Patel*
February 2001
Not all economists are secretive sophists. A few are able to explain their art to the public in an accessible way. Still fewer actually care enough about open debate even to make the attempt.
Ravi Kanbur, who was editor of the World Bank's World Development Report 2000 until his resignation last year, is one of this small band. His paper "Economic Policy, Distribution and Poverty: The Nature of Disagreements" is a flame in fouled air of development debate.
To outsiders, the exchange between those employed by the development industry and those opposed to it is like pantomime. The central bankers, typically educated in Anglo-Saxon economic orthodoxy, declaim from centre-stage that they are committed to the poor whereupon a gaggle of non-governmental actors and activists respond with 'Oh no you're not'. (Repeat ad nauseam.)
Kanbur's analysis goes some way to showing why there has been a great deal of misunderstanding in this debate, particularly on the part of central bankers. He does a sterling job of translating the concerns of the protesters against globalisation into simple economics.
Kanbur suggests that while the subjects of conversation remain the same, with both sides taking positions on "growth" and "development", a few fundamentally divergent assumptions remain implicit in their use of the terms. Bankers assume that competitive markets already exist, they think in terms of medium run equilibria, and aggregate over entire populations when speaking of economic gains. Their opponents on the other hand, prioritise the short and long run, assume imperfectly competitive markets, and pay special attention to vulnerable and marginalised groups. This, suggests Kanbur, is why the arguments of both sides have glided past each other, and have resulted in such bitter deadlock.
Frequently, Kanbur's sympathies lie with those hostile to the Bank. He does seem to acknowledge that much of the blame for misunderstanding lies with the bankers. Yet there are moments, perhaps reflecting a personal attempt to reconcile his unease with some parts of the Bank (witness his recent resignation from the Bank World Development Report' editorship) with his confidence in others (he worked there from 1989-97), when he argues for a rapprochement between the bankers and their critics. Indeed, Kanbur argues that there is already a surprising degree of consensus, and that this convergence throws the areas of disagreement into yet starker relief.
Before launching into a critique, I should be honest about two things. First, I side unhesitatingly with the critics. Second, reader, I know him. I have studied under Kanbur and he's one of the nicest and smartest people I've ever met. This is not an ad hominem attack, but rather a critique of an economistic reduction of politics that, while old, has its best presentation yet in this recent paper. While other economic high-flyers, most notably Joseph Stiglitz, former chief economist at the World Bank, have chanced their arm at a balanced presentation of economic good sense, none have done it better than Kanbur. And it is precisely in the equivocal moments that the paper is least convincing.
Kanbur's central claims are, first, that there is already a great deal of agreement in debates between bankers and their critics and, second, that armed with a clear understanding of what the specific disagreements are, the chance of some mutually acceptable compromise, through 'dialogue', is higher. But there are at least four reasons to dispute these assertions.
1. Kanbur exaggerates the extent of consensus because of selection bias
During the consultation process over which he presided for the World Development Report, Kanbur met a wide variety of Non-Governmental Organisations (NGOs). Many of these organisations took 'flexible' positions on the state vs markets debate. Some even produced leaflets entitled 'Liberalising for the Poor'. Kanbur seems to have interpreted this as a sign that certain sticking points in the conversation between bankers and their critics, such as the desirability of markets, have been resolved. Fortunately, the debate is far from over.
The reason that Kanbur might have been deceived has more to do with the NGOs he met than with the debate in wider social activist circles. He consulted, after all, with those NGOs prepared to work with the Bank on the World Development Report. This group is not representative of the wider world of social movements. Many broad-based social movements are suspicious of NGOs tout court; within these movements, to be 'NGOish' is to be castigated, denounced as co-opted. The term 'CONGO' refers precisely to these co-opted NGOs.
Kanbur's limited sample of 'civil society' undermines the claim that wide consensus exists. There are many involved in resistance to the Bank whom the Bank never hears, either because the organisations will not engage in 'dialogue', or because the Bank will not listen to them. The Zapatistas and their autonomist allies outside Mexico fall into both these categories. There is little in their market philosophy that tallies with that of the Bank. Consensus is not just around the corner.
2. 'Political preferences' are signs of stubborn convictions
Economics has opinions about many things, but preferences remain fundamentally intractable to economic analysis. Kanbur is a good economist, and in his paper the positions adopted by the 'central bankers' and 'the protesters' reveal preferences that cannot be teased apart, or which can be scratched at only anecdotally. Political preferences are not, however, plucked from the air. They are signs of broader and, in this case, radically different political convictions, and are therefore far less reconcilable than their simple co-existence on different ends a spectrum of choice might suggest.
Consider this: socialists want high levels of income tax redistribution (in the interests of social justice), conservatives want low levels (as incentives to work). To suggest that there can be a middle path in which the conservatives and socialists agree on a median level of taxation, in the absence of other political considerations, is wishful thinking. Such a compromise would be symptomatic of breaks with fundamental theories of justice, equity, freedom and fairness. To hope that dialogue over percentage points will, in the absence of broader political confrontation, transcend these principles is to subscribe to the most facile kind of third wayism.
3. Bankers talk softly and carry big sticks
The possibility of rapprochement between the bankers and their critics becomes even more politically suspect when one remembers that dialogue with the central bank mob is unlike genuine dialogue. 'Central bankers', often wielding vast amounts of cash and a great deal of power, are ideologues with guns. The militarisation that surrounds the meetings of the Bank, Fund and WTO testify to the violence necessary to sustain one side of this dialogue. The bankers, in other words, are only credentialed to participate in 'dialogue' through their hold on power.
This is, furthermore, an undemocratic, unaccountable and (hence) illegitimate dialogue. There are many more grassroots critics of the Bank than supporters. The peasant farmers in Karnataka and landless peasants in Brazil, for instance, number well over five million. Through grassroots education initiatives, they are well versed in trade theory, and the latest machinations of the bankers. Their views count for little, however, against development technocracy.
4. History doesn't dialogue
The final reason to suspect that clarity in talking will not to lead to a third way is historical. In his paper, Kanbur contrasts "confrontation" - a sign of irrational, frustrated rage, with "dialogue" - a symptom of equanimity, reasonableness, preparedness to compromise. Yet confrontation is far more important than Kanbur allows. It has always been through confrontation that certain politics become possible. Dialogue happens after the fact.
Kanbur mistakes policy change as the consequence of dialogue, rather than as a cause of it. For example, referring to internal World Bank politics, he observes that "the issue of safety nets is back on the table, after its banishment in the 1980s, the banishment itself being a reaction to their inefficiencies and misuse in the 1960s and 1970s." That swings in the acceptability of 'safety nets' at the World Bank have reflected the ups and downs prevailing political trends is no accident.
The rise of conservatism in North America and Europe through the late 1970s and 1980s cannot have been peripheral to the changes in policy within the bank. The only way that the removal of safety nets became a conscionable action within the Bank is because of a great deal of confrontation, not dialogue, both within and outside the Bank, by the political right. The smashing of union power, the erosion of the welfare state and the privatization of public goods were accomplished through minority fiat, not as the consequence of popular dialogue and debate. That happened afterwards.
What we have seen, in recent anti-capitalist rumblings, is a counter movement on the part of those who want far more radical change than is thinkable at the moment by the bankers. Dialogue is unlikely to lead to benign 'big tent' politics, when the activists outside these institutions see bankers and their ideologies as part of the problem, not the solution. We can only hope that the effects of popular confrontation, whether over issues such as the privatization of water and health care in developing countries, or against the recent coup in the US, can be as profound as those confrontations by the right in the 1990s.
This is perhaps the greatest disappointment of the paper. While Kanbur, perhaps more than any other economist of his stature, sees that 'for whom' questions are at the heart of the critique of globalisation, he fails to see that 'dialogue' itself favours the very status quo that protesters wish to overturn.
In the final analysis, perhaps we should be grateful to Kanbur for clearing the air. He shows, wittingly or not, that the divides are deeper, and less surmountable, than bankers might have hoped. Kanbur begins his article with the excellent observation that the End of History didn't last long. It is a shame that the underlying desire of this paper seems to be to bring it about once again.
Helpful links: Ravi Kanbur's homepage http://people.cornell.edu/pages/sk145
* Raj Patel is a researcher for SEATINI <http://www.seatini.org> and a PhD student at Cornell University http://people.cornell.edu/pages/rcp9 This article was first published in SEATINI Buletin Volume 4, Number 2.