World Bank and Urban Development

Edward Ramsamy

• Publisher: Routledge
• Year: 2006
• ISBN:
  9781134286966
• Edition: 1
• Topic: Physical Sciences
• Subtopic: Geography
• Index: Geography

As one of the world's most powerful supranational institutions, the World Bank has played an important role in international development discourse and practice since 1946. This is the first book-length history and analysis of the Bank's urban programs and their complex relationship to urban policy formulation in the developing world. Through extensive primary research, the book examines four major themes:

• the political and economic forces that propelled the reluctant World Bank to finally embrace urban programs in the 1970s
• how the Bank fashioned its general ideology of development into specific urban projects
• trends and transitions within the Bank's urban agenda from its inception to the present
• the World Bank's historic and contemporary role in the complex interaction between global, national, and local forces that shape the urban agendas of developing countries.

The book also examines how protests from NGOs and civic movements, in the context of globalization and neo-liberalism, have influenced the World Bank policies from the 1990s to the present. The institution's attempts to restructure and legitimate itself, in light of shifting geo-political and intellectual contexts, are considered throughout.

Chapter 1
Theorizing the World Bank and development

A major controversy associated with the World Bank is whether its programs promote or thwart development in the Third World. While the Bank’s charter affirms that it is a purely economic institution whose primary function is to provide loans for specific projects, the Bank wields considerable power as a supranational agency shaping policy in many developing countries. Over the decades since its inception at Bretton Woods, the World Bank has become an increasingly hegemonic player in development. Its capacity for realpolitik enables it to move with great ease through the geo-political complexity of the world. Whether it is promoting broad policy “reform,” such as structural adjustment, fiscal management, or governance, or implementing particular projects in specific locations the Bank repeatedly has proven itself to be a

“glocal” actor.¹

The aim of this chapter is to develop a framework that theorizes the process by which the World Bank affects policy choices in developing nations. The chapter consists of three parts. The first part overviews major development theories and relates them to the World Bank. The second part identifies some weaknesses that render these theories inadequate for conceptualizing the Bank’s role in the policy-making process in the developing world. In the third part, I present an alternative framework that addresses the shortcomings of development theory and captures the uneven and scaled articulation between the World Bank and LDCs. Existing literature on the Bank’s relationship with developing countries tends to view the interaction in binary terms, as either positive or negative. The Bank is seen as either a catalyst for growth for developing countries or an instrument of domination that stifles national development, promotes dependency, and increases vulnerability; in fact, the relationship is more complex. Based on the premise that the world political economy both shapes and is shaped by individual states and modes of regulation, I suggest that a more nuanced reading of the Bank’s role in development is needed, one that avoids the reduction of hegemony to domination and the overdetermination of the local by the global.

Theories of development and the World Bank

The World Bank and the modernization paradigm

During the 1950s and 1960s, development thinking and planning were dominated by the modernization approach. With its intellectual roots in the writings of Spencer, Weber, Parsons, and Bentham, modernization theory saw development as a gradual, evolutionary process involving various stages and transforming all societies from traditional to modern. As societies modernized, they were supposed to develop complex economies, institutions, bureaucracies, and divisions of labor that enabled them to meet their production and consumption needs. In keeping with the neo-classical economic tradition, modernization theory advocated integration into the global capitalist system, economic growth, and Western liberalism as a way of achieving development.

Influenced by evolutionary theory, modernization theory posited that social change occurs as societies move linearly from traditional to advanced, implying that the movement represents progress, civilization, and development. Second, the evolution from a simple, primitive society to a complex, modern one is seen as a long, slow, incremental, but irreversible process. Third, the homogenization of societies caused by modernization is said to enable effective economic linkages. Cultural convergence among developing societies in the form of Westernization also homogenizes them, with the assumption that following the European and American examples might lead to levels of economic prosperity enjoyed by the West (Rostow 1964).

Modernization theory also borrows from functionalism. In this regard, modernization is seen by its proponents as a comprehensive program, affecting all social functions and leading to changes in industrialization, urbanization, social organization and differentiation, and participation. Modernization is also assumed to replace traditional values with modern ones. Following Parsons (1951), modernization theory holds that, if they are to survive, societies have to adapt to their environments, attain specific goals, integrate within themselves, and transmit modern values from generation to generation through the economy, government, and institutions.

Applying neo-classical economics to urbanization, Berry (1970) and others promoted the view of “growth impulses” that diffuse down the urban hierarchy, much like the diffusion of ideas. In explaining urban development in the Third World, Friedmann (1966: 35) argued that “where economic growth is sustained over long periods, its incidence works toward the progressive integration of the space economy” such that, eventually, a functionally interdependent system of cities would emerge. Economic development, according to Friedmann, will ultimately lead to the convergence of regional incomes and welfare.

The modernization perspective has greatly influenced how the Bank’s relationship with developing countries is theorized and represented. Rostow’s (1960) ideas, Rosenstein-Rodan’s “big push” model (1957), and the “twogap” growth model developed by Chenery and Strout (1966) all highlighted the theme of “gap-ism” between the developed and developing worlds. These perspectives advocated a significant increase in productive investment, the development of a manufacturing sector, and the creation of a social, political, and institutional framework that facilitates the mobilization of capital. During the 1950s and 1960s, there was a strong belief that external inducements were crucial in bridging the gap between the developed and developing worlds.

While the World Bank was not as important a player in the international development scene during the early post-war period as it is in the contemporary period, it nevertheless provided assistance for projects that complemented the logic of the modernization school of thought. The evolutionary perspective of the modernization approach greatly influenced the Bank’s own thinking on development and led the institution to see itself as a catalyst to economic growth. From 1945 to about 1970, the Bank firmly believed in external capital investment as a “locomotive” to push traditional societies to modernize themselves (Shihata 1991). The overt functionalism of the modernization approach is also apparent in the Bank’s world view. Investment in key sectors such as mining and manufacturing was seen as enabling accumulated wealth to “trickle down” and reach the poor, who were eventually to benefit from it in the long run. Urban infrastructure loans were intended to support projects that would promote the “growth impulse,” whose benefits would then diffuse into the entire economy.

Following the logic of the modernization paradigm, the Bank advocated that in order for private initiative and investment to occur there needs to be an adequate complement of public overhead capital in the form of railways, roads, power plants, ports, etc. Production will expand, it was assumed, once infrastructure and a satisfactory climate for private investment are in place. The Bank’s role, then, was to provide development assistance (both material and technical) to meet these requirements. This view is reflected in the Bank’s sixth annual report:

It is only natural that, except for the early reconstruction loans, the Bank’s lending operations have been concentrated in the field of basic utilities. An adequate supply of power, communications and transportation facilities is a pre-condition for the most productive application of private savings in new enterprises. It is also the first step in the gradual industrialization and diversification of the underdeveloped countries. These basic facilities require large initial capital outlays, which, because of the low level of savings and the inadequate development of savings institutions, often cannot be financed wholly by the countries themselves. Moreover, most of the machinery and equipment used in the construction of these facilities must be imported. Therefore the resources of the Bank are called upon to provide the foreign exchange necessary for the building of these vitally important facilities.

(World Bank 1950–1: 14)

Dependency/world systems approaches and the World Bank

Development theorists, such as Hayter (1971, 1981), Payer (1974, 1982), and Wellings (1982), have applied the logic of dependency theory in examining the relationship between the programs of the World Bank and development. This school of thought argued that, instead of promoting socioeconomic development in Third World countries, interventions by organizations such as the World Bank lead to increased dependency and international vulnerability. The dependency and world systems arguments draw inspiration from traditions that challenged the intellectual dominance of modernization theory and the political ideologies of the capitalist West. In contrast to advocates of modernization, who view the Third World’s interaction with the world economy as beneficial, dependency theorists regard it as a constraint. Two major theoretical assumptions characterize the dependency school. First, the international political economy is conceptualized as a hierarchically ordered system of dominance. Second, the development process in the periphery is a function of the way in which it is incorporated into the international division of labor. Since development in the core causes underdevelopment in the periphery, according to this perspective, external forces are primarily responsible for the distortions that characterize the economies of the developing world (Frank 1967; Amin 1972; Rodney 1972).

At any given time, the picture of the world, according to Frank, consists of:

a whole chain of metropolises and satellites, which runs from the world metropoles down to the hacienda or rural merchants who are satellites of the local commercial metropolitan center but who have peasants as satellites.

(Frank 1967: 146–7)

This formulation formed the basis of Castells’ (1977) more systematic explication of dependent urbanization. His main quarrel with the modernization paradigm was that it did not explain how urbanization unfolded under dependent capitalism. While he acknowledged that city growth differed in form and nature in various parts of the Third World, the processes of urban development, nevertheless, ought to be understood as the expression of global capitalist political economy.

The expansion of the global economy into peripheral areas leads to a development dynamic in which a few large cities act as trade centers in the web of colonial and neo-colonial exploitation. This results in a form of urbanization that leads to urban primacy, regional inequality, and centralization of political and economic power within cities (El-Shakhs 1972). Chase-Dunn (1984: 115) explains the role of the dependent city in the world system: “Peripheral primate cities are nodes on a conduit which transmit surplus value to the core and domination to the periphery, while primate cities in the core receive surplus value and transmit domination.” Dependent urbanization is, thus, characterized by high levels of unemployment, material inequality, poverty, and technological and financial dependence. Although there are significant variations in the theme of dependency, this school of thought contends that it would be impossible to comprehend most economic, social, and political phenomena in Third World regions unless they are theorized as being structurally connected to the economic and political systems of the advanced capitalist countries.

Wallerstein’s (1974, 1979, 1980) world systems perspective complements the dependency argument. It agrees that development problems in the periphery are caused by global capitalism. However, while the dependency approach applies mainly to former European colonies, the world systems approach regards the global political economy as the unit of analysis and avoids the internal versus external dichotomy from the dependent country’s viewpoint. Wallerstein argued that states are inappropriate units of analysis for studying economic and political development and called for a wide-angled approach that conceptualized the world political economy as an integrated system. Wallerstein identified three basic elements in the world system:

1. there is a single world market, which is capitalist;
2. the world political structure is mediated through a competitive interstate system; and
3. while the world economy is constructed by geographically integrating a vast set of production processes, the capitalist system is simultaneously a polarizing system.

Polarization occurs through three tiers, labeled the core, semi-periphery, and periphery, where the category of “semi-periphery” allows for the possibility of mobility between core and periphery in the international system (Taylor 1985: 9–10).

Dependency and world systems theorists have criticized the World Bank on a number of grounds. Hayter (1981), for example, identifies three problems. First is the issue of accountability. He observes that the World Bank is organized in such a way that the voting rights of member nations are determined by their level of national financial support for the Bank. Because developing nations contribute far less, they have very little leverage over the policy directions of the Bank. Second, Hayter (ibid.: 88) notes that the “World Bank and IMF were set up after the Second World War to solve the problems of rich countries.” Thus, the major purpose of the IMF and World Bank is to make the world safe and predictable for private capital and free trade. Finally, if countries refused to adhere to the policy recommendations and rules of the Bretton Woods institutions, these organizations could use their leverage to destroy the financial credibility of those obstinate countries. Thus, the World Bank and the IMF are said to perpetuate the asymmetry between the North and the South.

In her influential radical critique of the Bank, Payer (1982: 19) argues that the World Bank “promotes a philosophy of development to advance the interests of private, international capital in its expansion to every corner of the ‘underdeveloped’ world.” Payer outlines the Bank’s influence in developing countries’ policies in the following manner. The first level of influence is that of individual projects. Payer argues that poor people seldom benefit from Bank projects, and that Bank initiatives help perpetuate the status quo. The second level of influence is at the sector level. Payer argues that when the Bank funds an individual project it demands changes in the entire sector impacted directly or indirectly by that specific project. For example, if the Bank lends for a mining project, it will often demand changes in legal and taxation codes concerning mining investment as well. Poverty often increases as a consequence of the Bank’s intervention, according to Payer. Finally, the Bank is able to influence national policies by forcing borrowing governments to abandon progressive policies in favor of harsh austerity programs, which are often formulated in cooperation with the IMF and major Western powers. For Payer, the Bank

is perhaps the most important instrument of the developed capitalist countries for prying state control of its Third World member countries out of the hands of nationalists and socialists who would regulate international capital’s inroads, and turning power to the service of international capital.

(ibid.: 20)

Theorists reflecting on the activities of the Bank through the dependency paradigm contend that the inherent internationalism of the Bank thwarts the Third World’s aspirations for national sovereignty.

In sum, dependency and world systems theorists argue that the international division of labor is reproduced through the following mechanisms. First, the core countries impose a cultural hierarchy that promotes a prevailing consciousness throughout the world system. This includes variables such as media exchange and the export of an ideology that legitimates the coreperiphery structure of the world system and inequalities inherent in the modern world economy. Second, there is direct organizational control over the economic and political processes of developing countries. Trade treaties and investment policies that favor the core are said to be important to the core’s maintenance of its status at the apex of the hierarchy. Economic strength, military prowess, and political treaties all enable core countries to exert a considerable influence on the periphery and semi-periphery. The World Bank, then, is important in ensuring that the core retains leverage over domestic policies of states in the developing world. The Bank’s structural adjustment programs are viewed as striking examples of predatory economic management of Third World economies by the Bretton Woods institutions and the developed core.

Dependency theorists argued that it would be in the best interest of Third World nations to break connections with international financial institutions like the World Bank. Beyond this recommendation, dependency theorists do not outline any major policy reforms for the Bank other than rhetorically advocating its demise or calling for its fundamental restructuring. However, dependency theory’s forceful critique of Western imperialism, as well as its popularity during the 1960s, contributed indirectly toward pushing the Bank toward poverty-oriented lending for basic needs, such as shelter, as part of a geo-political calculation. This issue is discussed in the next chapter.

Postmodernism, development theory, and the World Bank

The “postmodern turn” in the social sciences and the humanities has also found its way into development studies. Like modernization and dependency thinkers, postmodernists also have attempted to theorize the relationship between global dynamics and local processes in developing countries. Postmodernists begin with the view that the current “new” period represents an epochal shift from the past in terms of style and method.

Postmodernism regards development as a discursive field, a system of power relations which produce what Foucault (1979: 12) calls the “domain of objects and rituals of truth.” Using Foucault’s theme of discursive power as well as the deconstructionist method of analyzing the representation of social reality, Escobar (1995) seeks to interrogate “development” in order to illustrate how the dominance of this system of knowledge has silenced non-Western knowledge systems, and how peasants, women, and nature are objectified and targeted by the “gaze of experts.” His work has received considerable attention and is representative of the postmodernist critique.

The central premise of Escobar’s book is that international discourse on development after World War II represents the exercise of power over the Third World, and that international development agencies such as the World Bank are instruments for achieving that aim. “Development,” according to Escobar (ibid.: 13), “has relied exclusively on one knowledge system, the modern Western one.” Focusing on three defining characteristics of the global development discourse – the process of knowledge production, which relates to and informs development; the wider power relations which shape development practice; and the types of subjectivity facilitated by development discourse – Escobar (ibid.: 13) observes that “most people in the West… have great difficulty thinking about Third World situations in terms other than those provided by the dominant development discourse.”

Postmodernist development theory is also a response to modernization and dependency theories, both of which contain a modernist conceit that downplays traditional knowledges and cultures. Escobar’s work is an attempt to steer development studies away from their preoccupations with neoclassical economics, on one hand, and political economy, on the other, toward issues of discourse, identity, and representation. Emphasizing the relationship between development and capitalist forces, Escobar points out that the socialist critique of development is incomplete. For Escobar, development economics presents itself as a science, making claims to objective and infallible truth, and its self-portrayal renders development discourse inimical to the traditions, realities, and aspirations of Third World communities.

Postmodern critics track the Western discourse of development from the creation of organizations such as the World Bank and the United Nations in the 1940s and 1950s, through the growth of a legion of “experts” to staff these institutions, as well as the successive strategies adopted by these agencies through the 1980s. They argue that people are left out of the discourse because of its elitist, ethnocentric, and technocratic method of reducing human beings to facts and figures. Postmodernists argue that, instead of solving the problems of poverty and hunger, development agencies have made them manageable while becoming the livelihood of an amorphous group of development “professionals.” Thus, the postmodern project aims to deconstruct development, to expose the practices through which the discourse of development is reproduced, and to explore the alternatives that are available.

Escobar argues that expert planning through international development agencies is one of the principal practices in which the discourse of development is embedded, making it inherently incapable of addressing the world’s development problems. Through its domination of development discourse as the largest development agency, the World Bank is able to construct a discourse in which all count...

Table of contents

• Cover Page
• Routledge Studies in Development and Society
• Title Page
• Copyright Page
• Figures
• Tables
• Acknowledgments
• Abbreviations
• Introduction
• Chapter 1: Theorizing the World Bank and development
• Chapter 2: Toward social lending: Shifts in the World Bank’s development thinking
• Chapter 3: The search for an urban agenda at the World Bank
• Chapter 4: The fall of poverty alleviation: The politics of urban lending at the World Bank
• Chapter 5: Beyond global and local: A critical analysis of the World Bank and urban development in Zimbabwe
• Chapter 6: Globalization, neo-liberalism, and the politics of the World Bank’s current urban agenda
• Chapter 7: Conclusion
• Notes
• Bibliography