Beyond the World Bank Agenda An Institutional Approach to Development
by Howard Stein
University of Chicago Press, 2008
Cloth: 978-0-226-77167-0 | Paper: 978-0-226-21477-1 | Electronic: 978-0-226-77165-6
ABOUT THIS BOOKAUTHOR BIOGRAPHYREVIEWSTABLE OF CONTENTS

ABOUT THIS BOOK

Despite massive investment of money and research aimed at ameliorating third-world poverty, the development strategies of the international financial institutions over the past few decades have been a profound failure. Under the tutelage of the World Bank, developing countries have experienced lower growth and rising inequality compared to previous periods. In Beyond the World Bank Agenda, Howard Stein argues that the controversial institution is plagued by a myopic, neoclassical mindset that wrongly focuses on individual rationality and downplays the social and political contexts that can either facilitate or impede development.
            Drawing on the examples of Africa, Asia, Latin America, and transitional European economies, this revolutionary volume proposes an alternative vision of institutional development with chapter-length applications to finance, state formation, and health care to provide a holistic, contextualized solution to the problems of developing nations. Beyond the World Bank Agenda will be essential reading for anyone concerned with forging a new strategy for sustainable development. 
 

 
 
 
 

AUTHOR BIOGRAPHY

Howard Stein is a professor at the University of Michigan’s Department of Afroamerican and African Studies.
 
 

REVIEWS

Beyond the World Bank Agenda will certainly make an important and novel contribution to the literature. Howard Stein puts forward an institutional approach to development, very different and more akin to the real world than the prevailing view. Commendable.”

— Philip Arestis, Cambridge Center for Economic and Public Policy, Department of Land Economy, University of Cambridge

“Stein offers a critical review of the World Bank’s economic development policy agenda and its theoretical foundations—particularly on state formation, financial development and health policies. His institutionalist perspective points to pragmatic policy alternatives to such increasingly discredited Washington Consensus policies. This book is long overdue.”

— Jomo Kwame Sundaram, UN Assistant Secretary General for Economic Development

“This book is dynamite. It blows to pieces the World Bank and the bogus economics it sold to the poor countries of the world. Professor Stein’s indictment of the World Bank pulls no punches, meticulously documenting the gross incompetence and dishonesty behind the World Bank’s failure to reduce world poverty. Stein’s mastery of economic theory is unmatched, as is his knowledge of world poverty, particularly in Africa. You must read his book.”

— William M. Dugger, University of Tulsa

“Every year books, about the World Bank are published. Few make an impact beyond the moment, if at all. This book does more than make an impact: it sets the standard. Its power lies in 1) its historical analysis to place World Bank practice in context, and 2) a sophisticated yet accessible treatment of the economic analysis underlying World Bank practice, and 3) why that economic analysis is fatally flawed. And, most importantly, it indicates the way forward.”

— John Weeks, School of Oriental and African Studies, University of London

"A fascinating analysis of World Bank policies and lending, focusing primarily on the theory and practice of structural adjustment. . . . The historical aspects of the presentation are especially interesting, as are institutional details in the chapters on financial repression and health policy."
— Choice

TABLE OF CONTENTS

List of Illustrations

Abbreviations

Preface

Acknowledgments

I. Reflections on the History of the World Bank Agenda

- Howard Stein
DOI: 10.7208/chicago/9780226771656.003.0001
[World Bank, international organizations, international relations, United States, American interests, policy, economists]
This chapter investigates the origin, nature, and evolution of policies in the World Bank, focusing on the period from 1944 to 1980. It considers some of the competing theories about the nature of international organizations in international relations. Policy transformation in any large organization such as the Bank results from a confluence of factors interacting with an array of existing structures and interests. Various elements influencing policy are analyzed: the power of the Bank's constituent members, the ways in which the United States has asserted its dominance in the Bank, and the relation between American interests, organizational changes, and the ascendancy of economists. (pages 3 - 24)
This chapter is available at:
    University Press Scholarship Online

- Howard Stein
DOI: 10.7208/chicago/9780226771656.003.0002
[World Bank, structural adjustment, IMF, lending, bilateral aid, poverty reduction, governance ownership, social capital, legal reform]
This chapter traces the origins of structural adjustment, which has dominated the World Bank and IMF agendas since 1980. Structural adjustment lending in the Bank grew rapidly during the 1980s. Most donors of bilateral aid supported a similar agenda, thus placing enormous pressures on governments in developing countries to accept the policy packages. But in that decade the performance of countries subject to the adjustment program was quite dismal. To protect the integrity, resources, and reputation of the Bank, which had invested so much in adjustment, it was necessary to find a way to make it work. In the Bank's view, the problem was not that the policies of structural adjustment per se had failed but that other factors had limited the positive influence of neoliberal policies. After 1989 the Bank began to expand the agenda to incorporate governance ownership, social capital, legal reform, institutions, participation, and poverty reduction. (pages 25 - 52)
This chapter is available at:
    University Press Scholarship Online

II. Economic Theory and the World Bank Agenda: A Critical Evaluation

- Howard Stein
DOI: 10.7208/chicago/9780226771656.003.0003
[World Bank, structural adjustment, neoclassical economics, economic theory, stabilization, liberalization, privatization]
Despite the increasing types of conditionality introduced by the World Bank and the IMF during the 1990s, the core program of adjustment with its trinity of stabilization, liberalization, and privatization remained intact. Moreover, the same problematic economic microfoundations, or theoretical propositions, that underlie adjustment continued to be present in many of the new strategies added to the World Bank agenda in the 1990s—a disconcerting fact given adjustment's poor performance and noted failures. This chapter explores the neoclassical economic roots of adjustment and includes a critical analysis of this strategy, focusing on errors generated by overreliance on the methodology and content of the economic theory embedded in structural adjustment policies. It is argued that the strict adherence to neoclassical economics methodology is largely to blame for the Bank's failure to question, adapt, or abandon policies despite the overwhelming evidence of downward economic trends among adjusting countries. (pages 55 - 84)
This chapter is available at:
    University Press Scholarship Online

- Howard Stein
DOI: 10.7208/chicago/9780226771656.003.0004
[World Bank, structural adjustment, new institutional economics, Oliver Williamson, neoliberal poilicies, World Development Report 2002]
This chapter begins with a brief comment about the role of institutions in structural adjustment, followed by a short survey of the ideas underlying new institutional economics (NIE), the variant of institutional economics used by the Bank. It then examines the rise of NIE in the World Bank, beginning with the contribution of Oliver Williamson. The remainder of the chapter examines how NIE has been used in a series of key documents to reinforce the orthodox agenda, including arguments made to counter criticisms of neoliberal policies. The final section evaluates the ways in which institutional constructs are used in the World Development Report 2002. (pages 85 - 108)
This chapter is available at:
    University Press Scholarship Online

III. Beyond the World Bank Agenda: An Institutional Approach to Development

- Howard Stein
DOI: 10.7208/chicago/9780226771656.003.0005
[Gunnar Myrdal, economists, World Bank, institutional economics, development, institutional change, institutional matrix]
The World Bank agenda of the past two decades has projected a narrow economic doctrine onto a complex social and economic reality without regard to “time, place and culture,” with disastrous consequences. It is time to return to the foundations put in place by institutional economists such as Gunnar Myrdal that have been lost to a discipline that has broadened its application while narrowing its thinking. Building on the contribution of Myrdal, this chapter draws on a large body of theory from sociology, economics, management studies, and psychology to map out an institutional approach to development. It begins with a discussion of the bias inherent in the orthodoxy of Myrdal's era and today. It then investigates Myrdal's institutionalist view of development based largely on his Asian Drama. It examines the concept of institutions in the works of Myrdal and others, and explores the five dimensions of the institutional matrix along with the relation between institutional change and development. (pages 111 - 145)
This chapter is available at:
    University Press Scholarship Online

- Howard Stein
DOI: 10.7208/chicago/9780226771656.003.0006
[World Bank, states, development, civil service reform, developing countries, state responsibility, state formation]
This chapter investigates the way in which the Bank began to reconceptualize the nature and role of states and push a neoclassical vision of the part they play in development. The main focus is on civil service reform, an important element of the World Bank agenda after 1980. Moreover, when considering the major development success stories of our time, it is quite clear that consistency in the quality and capacities of the civil service was a key factor. The chapter also attempts to generate a vision of state formation as an agent of development, in opposition to the views underlying neoliberal reforms. It argues, following Myrdal and Higgins, and contrary to the position of the World Bank, that conditions in developing countries justify greater—not less—state responsibility for development. (pages 146 - 172)
This chapter is available at:
    University Press Scholarship Online

- Howard Stein
DOI: 10.7208/chicago/9780226771656.003.0007
[financial reform, World Bank, financial repression theory, financial liberalization, new institutional economics]
This chapter argues that the World Bank reform agenda for the financial sector has been driven largely by financial repression theory, despite its rather shaky theoretical premises. It begins with a critical review of the theory underlying orthodox financial liberalization. It then discusses the way in which the theory has influenced the World Bank and the way the Bank has explained the failure of financial sector loans, while adhering to the same core orthodox policies. Next, it examines the influence of new institutional economics on the Bank's approach to financial liberalization. The latter part of the chapter considers an institutional approach to finance and attempts to generate an alternative strategy based on the institutional matrix developed in Chapter 5. (pages 173 - 206)
This chapter is available at:
    University Press Scholarship Online

- Howard Stein
DOI: 10.7208/chicago/9780226771656.003.0008
[World Bank, health policy, developing countries, health economists, health care, institutional matrix]
In spite of these enormous health challenges and the preventable nature of many illnesses afflicting the poor in developing countries, the World Bank largely neglected health issues for many decades. Moreover, when the Bank finally began to focus on this area, strategies were designed by neoclassical economists rather than by health experts. The first part of this chapter documents the history of health policy at the World Bank, including the increasing influence of economic thinking during the 1980s. It shows that Bank health economists not only influenced health policy within the organization, but also greatly influenced the agendas of other donor agencies. This is followed by an empirical review of the impact of the reform policies. The latter part of the chapter develops an institutional approach to health care based not on some optimum level of health spending, but rather on an intuitive approach that carefully applies the institutional matrix to concrete health problems. (pages 207 - 248)
This chapter is available at:
    University Press Scholarship Online

- Howard Stein
DOI: 10.7208/chicago/9780226771656.003.0009
[World Bank, agenda, development strategies]
This chapter attempts to sum up the major findings of this volume. In some small way, it hopes that this bit of “academic scribbling” will help push the agenda forward, encourage an honest reevaluation of development strategies, and find a path toward a more equitable future. (pages 249 - 266)
This chapter is available at:
    University Press Scholarship Online

Notes

Bibliography

Index