It is now widely acknowledged in economics circles that IMF/World Bbank development economics have largely failed the developing world. Why their models for economic growth still influence economic thought and policy in developing countries remains a puzzle.
In his 2001 book, The Exclusive 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 prescriptions in the past 50 years. It is shown, for example, that between the second world war and 1995, the West has invested one 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. Easterly’s research shows that between 1980 and 1994, 12 countries, including Uganda received 15 or more World Bank and IMF adjustment loans.
The median per capita growth rate for these 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 were he has been directly involved as economic advisor.
He presents evidence from 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. He calls for innovative and holistic approaches. He proposes a fascinating approach called ‘clinical economics’.
The basic argument is that economies are complex systems and require a ‘differential diagnosis’ much the same 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 modelled on Western countries without due regard to the peculiar background and the complexity of developing economies.
You will find that the PhD holders 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 is deeply surprising and even scandalous that African economic authorities and even academics are still intellectually inclined to the World Bank/IMF growth templates despite evidence that their model has largely failed.
Often it is foreign protesters in Seattle or Davos who call for the abandonment of the 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 strategies as flawed.
There is no concrete indication on the part of the world of the need for a pradigm shift or a new prototype. The basic truth is that not all economic problems facing countries are the same and one model cannot 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.