Lessons from Shanghai

The World Bank-sponsored Shanghai conference on poverty has highlighted the need to learn from success stories in reducing poverty, while avoiding dogmatic attitudes.

Bank President James Wolfensohn used the occasion to declare that the "Washington Consensus" with its emphasis on open markets, fiscal stringency and privatisation has been long dead. The assembly paid tribute to the Chinese success in reducing poverty.

Policy makers in the developing countries, particularly in India which accounts for the largest number of the world's poor and where a change of government is signalling changes in policy, need to absorb the one lesson emphasised at the conference: there is no one size that fits all, and the key lies in learning from successes.

On macro policy, the key lesson to be learnt from China's success in reducing poverty is that rapid economic growth does the trick. China's output has grown eight-fold in the last quarter century and per capita real income has risen by an annual average of 7 per cent over the period.

This has been achieved through vastly enhanced trade and step-by-step internal liberalisation. Another key enabler has been massive investment in infrastructure. Fiscal stringency and opening up the financial sector internally and externally have taken second place.

But China's rapid growth has increased regional inequality and it is doubtful if the Chinese leaders would have been able to persist in their approach without the political control they concentrated in their hands. So the Chinese way is not entirely replicable in democratic India

The conference organisers conducted a global search for successful grassroots examples of poverty reduction. South Asia contributed 18 case studies.

Prominent among them are Karnataka's Bhoomi project, which has computerised the state's rural land records, the Bangalore Agenda Task Force (BATF) which has initiated public-private partnership to improve the quality of life in the city, and the Gramin Bank of Bangladesh which has set a benchmark in the use of micro credit to fight poverty.

A few broad lessons emerge from these and other successes. One is to empower local communities to control the way the money set aside for them is spent, because the poor must be in the lead to find solutions to their poverty.

Another is that most successful efforts to reduce poverty are joint ones in which government, NGOs and local groups cooperate. Yet another lesson is to pay attention to transparent functioning and close monitoring.

An NGO produces a periodic report card on what BATF does and Gramin Bank rates its branches on both their loan recovery record and the condition of the people in their area.