38230 The World Bank PREMnotes A U G U S T 2 0 0 6 N U M B E R 1 1 0 PREM ANCHOR Reducing Poverty on a Global Scale This Note discusses the book Reducing Poverty on a Global Scale: Learning and Innovating for Development, which explores poverty-relieving country approaches, pro- grams, projects, and practices. It focuses on lessons that can be transported across coun- tries, and offers a new dimension and a different way of looking at poverty. Development practitioners have been Macroeconomic stability is absolutely working for half a century to help pull mil- necessary but not sufficient in promoting lions of people out of poverty, disease, and growth and reducing poverty and inequali- fear. However, the challenge of poverty ty. One premise of this research is that sus- remains enormous. The disparity in levels tained growth and poverty reduction of income, health, and education across strategies expand their potential impact countries grows greater, even as levels of and outreach when they rest on policies absolute poverty decline. that upgrade a country's investment cli- mate while giving social inclusion a high Many countries have made great priority. achievements, but the lack of capacity to collect their experiences, learn from them, Improvements in investment climate and extract lessons to emulate have kept traditionally require reforming policies and their stories from being sufficiently practices to give both domestic and foreign explored. Such great work could be adop- investors a reasonable assurance of a mar- ted and adapted to make remarkable ket-driven regime that facilitates trade, change in other poor people's lives. infrastructure, and financial flows, as well The focus on as a stable, transparent, and efficient The book Reducing Poverty on a Global lessons that can system of law and regulation with impar- Scale: Learning and Innovating for Development be transported tial, timely judicial recourse. Social inclu- explores over 100 case studies on poverty-reliev- sion means making the effort to promote across countries ing country approaches, programs, projects, and shared growth that benefits the poorest practices. It is a learning guide that enlight- offers a new strata of society by facilitating their ens development practitioners about imple- access to markets, assets, and services. dimension and mentation achievements. It doesn't recom- a different way mend particular solutions or best practices, Reducing poverty and inequality: and doesn't pretend to cover all potentially of looking at economic growth as the solid valuable development lessons worldwide. poverty Instead, it targets key findings from the strategi-foundation cally selected examples and weaves them The correlation between growth and pover- into a topical narrative. The focus on les- ty reduction varies both across and within sons that can be transported across coun- countries. Many countries exhibiting sus- tries also offers a new dimension, and a dif- tained growth managed to reduce the ferent way of looking at poverty. prevalence of poverty; others have achieved overall growth but continue to What are the lessons? struggle with the challenge of raising the The book reveals that to reduce poverty on incomes of the poor. Hand-in-hand with a global scale, the analysis must consider economic growth, a country must imple- macroeconomic and inter-temporal angles, ment social programs to help break the within geographic boundaries, and across cycle of poverty. Even in countries with countries and regions. exemplary stories of poverty reduction, FROM THE POVERTY REDUCTION AND ECONOMIC MANAGEMENT NETWORK such as China and Chile, achievements to encourage active participation of the were not always due to growth alone, and families in education. At the request of poverty reduction did not necessarily trans- the Mexican authorities, an evaluation late into less inequality. The stories clearly component was built into the design of the connect growth to decreases in poverty, program from the outset. The results quick- however, some point to (1) the limits of ly shed light on the positive impact of the growth's impact on poverty reduction, program: all health indicators among chil- unless parallel social measures are imple- dren improved, school enrollment mented, and (2) the inequalities that growth increased, the gap between girls' and boys' may maintain or even exacerbate, at least enrollment narrowed, and total years of initially. schooling increased significantly. This con- vinced Mexican authorities not only to Taking responsibility at the top maintain the program, despite political The political commitment and credibility of pressures, but also to scale it up. The impact a country's leadership is crucial to the evaluation not only supported the program design, sequencing, continuity, and ulti- expansion, but also contributed to a hori- mate success of the reforms. In Uganda, zontal scaling up across countries like strong and single-minded political leader- Colombia and Brazil, which are implement- ship backed the needed reforms that led to ing similar programs of conditional cash steady growth. When growth alone was transfers. insufficient to raise rural well-being, this clear and uncontested center of power was Using external catalysts to an asset in developing targeted social proj- support homegrown reforms The lack of ects. In the South Korea story, the key factor Many stories illustrate the productive role capacity to was not only the high level of commitment of international assistance in helping coun- by the authorities but, even more impor- collect countries' tries reform broad economic policy when tantly, the strong perception by investors the intervention supports homegrown experiences, and the population in general that policies reforms and promotes ownership in the learn from them, that had been announced would be, in fact, country. When a developing country implemented. and extract accepts the need for reform and the poten- tial of policy change to aid in reducing ideas to scale up Innovating and adapting poverty, the relationship with donors can poverty reduction An environment where innovation and become highly productive. adaptation could take place is key to any have kept these effort of poverty reduction. Many countries The Peace Accords signed in 1996 were stories from have gone through profound policy and the key catalyst for justice reform in institutional innovations. China succeeded Guatemala. The United Nations being sufficiently not just through sweeping reforms, but Development Programme (UNDP), and the explored through continuing innovation in the imple- international donor community, including mentation of antipoverty programs and in the World Bank, helped build momentum the institutions managing them. for this reform. The locally led judicial reform process and international commu- Watching the steps: monitoring nity involvement have helped promote and evaluating process the demand and supply linkages for access to justice service, and gradually Accurate information and analysis do not extend the service to the urban and rural guarantee timely corrective action. areas. This has also helped keep pressure However, without rigorous evaluation of on issues of corruption and accountability the impact of various programs, national in the system. leaders and their international partners cannot know what approach needs to be Lessons at the sector level fine-tuned, scrapped, or scaled up to con- The book also explores how accomplish- tinue the fight against poverty. ments at the sector level can trigger tangi- The evaluation of the Oportunidades ble outcomes that affect the living stan- (former PROGRESA) program in Mexico dards of poor people. The thematic sections provides a powerful example. This pro- provide detailed descriptions of the gram started with a pilot project to processes that were tried, how discovery of improve the educational, health, and what works happened, and how project nutritional status of poor families, and and program teams were put in place: PREMNOTE AUGUST 2006 · The daunting challenge of making infra- Since the seventies, Bangladesh has been structure investments accessible to the successfully running microfinance insti- poor requires comprehensive investment tutions (MFIs) as a way to empower the planning, including areas where the poor poor socially and economically. Initially, populations live and work, long-term the MFIs focused on the provision of resource mobilization, and increased pri- loans to individuals organized into vate sector participation. groups where members provided guar- antees of each other's loans, and received The Morocco Rural Roads Project achieved a strong support and monitoring from bigger impact on poverty reduction by branch offices. By the early 1990s, several adopting a focus on accessibility and pro- MFIs had acquired sufficient management moting local government participation. capacity and field-based expertise to During project conception, the government undertake a massive expansion fueled by madethestrategicdecisiontofocusonacces- large amounts of funding from donors for sibility rather than on physical outputs to both capacity building and the capitaliza- ensure that road services benefit the less- tion of loan funds; by high levels of loan accessible populations, including a higher repayments, which enabled the MFIs to proportion of the poorest people. The local recycle their loan funds; and by commit- governments also actively participated at ments from the MFIs to move toward full various levels in the planning process, even cost recovery and eventual independence as the responsibility for developing and from donor subsidies. As a result, some implementing the program remained vested 1,200 MFIs now finance 13 million house- with the national highway agency. holds, with a remarkable scale of outreach · Judicial systems should provide arbiters to the poorest and the remote areas. for social conflict, guarantors of civil and · Given the scarcity of resources in devel- human rights, and authority in the rule of No country oping countries and the competition for law. To promote good governance, achieved poverty the same resources between health and empower poor people, and improve other sectors, the human and financial reduction without investment climate, they must be based resources required to address health on four critical dimensions: institutions, addressing problems can be secured only if there is enforcement of decisions, legal frame- macroeconomic further engagement of political leaders, work, and societal commitment. long-term donor commitment, and aid imbalances and In Rwanda, no classic approach to mod- predictability. creating solid ernization would have sufficed to meet To coordinate HIV/AIDS responses, the extraordinary needs created by the foundations for Thailand established National AIDS hundreds of thousands of severe criminal growth Committees sharing: one action frame- and genocide-related cases. Political work that provides the basis for coordi- leaders and executive branch officials nation, one national coordination author- made the decision to overcome the sad ity, and one agreed upon monitoring and legacy of intertribal strife by using tradi- evaluation system. An extensive surveil- tional justice mechanisms that created lance of the general population changed the opportunity for truth telling, accusa- the perception of Thailand's political tion, punishment, and reconciliation. The leaders about HIV/AIDS, and allowed Rwandan experience stands out with the country to identify the problem early regard to the grave condition of its judi- and take measures to control the epidem- cial system and represents a notable ic. The number of new infections was response to the overwhelming conse- reduced significantly from 200,000 new quences of genocide. cases in 1991 to 17,000 cases in 2003. · Inclusive microfinance institutions can · Greater access to education can produce lead to faster reductions of income strong, positive economic, political, and inequality and faster rates of poverty social benefits, with girls' education lead- alleviation, if governments foster dynam- ing to particularly high returns both to ic financial markets, donors continue to individuals and to their families. finance innovation, and pro-poor finan- Understanding and exploiting close cial institutions achieve a scale of opera- interrelationships and synergies between tion large enough to generate efficiency education supply and demand, carefully and profitability. prioritizing and targeting investments, PREMNOTE AUGUST 2006 and widening stakeholder participation disseminating the experience of similar are crucial elements. initiatives in different contexts adds tremendous value and can reduce the Turkey's Rapid Coverage for time needed to learn. A counterfactual- Compulsory Education (RCCE) Program balanced assessment of the final effects of was conceived during a period of severe any initiative on the lives of poor people economic crises, political instability, and is vital in choosing the most effective short-lived coalition governments. course of action. Rigorous impact evalua- However, it succeeded with the con- tions, including a process of systematic scious adoption of a highly centralized, and robust learning from experience, can big-bang approach that minimized oppo- create a solid basis for reducing poverty sition. The government's intense educa- on a global scale. tion reform, coupled with a new law per- mitting tax-deductible donations to edu- · Fiscal Space and External Financing: For cation also awakened a strong public and how long should the international insti- private fervor to contribute. tutions stay engaged before seeing these initiatives become totally mature and Issues for future research sustainable? What is the right balance In its last chapter, the book highlights between domestic and external financ- important topics that the international ing?Howcanrecipientcountries'absorption Leaders' political development community should continue capacities be expanded? commitment to research in its effort for better poverty · Continuity and Overall Sustainability: and credibility reduction: What factors are crucial for sustainable are crucial to · Effective Leadership: What constitutes poverty reduction impact? Which "strategic" planning and contributes to reforms can be sustained and produce the design, effective leadership at the country level? durable results? On what institutions sequencing, How does it emerge? What can be done should these reforms be based and what continuity, and to support it? What mechanism can be support is needed to foster greater effec- used to sustain policy changes and tiveness and prevent a turnaround? ultimate success achieve results? What is the relative · Interdependence between Rural and of poverty- importance of political continuity com- Urban Areas: Should the rural poor be pared with policy continuity? oriented reforms encouraged to move to cities or regions · An Environment for Learning and where they can have access to a better Innovation: How can people be enabled life? Or should they be given additional to experiment and capture the lessons of support to improve their livelihoods their own experiment as well as others? locally? What are the incentives behind the learn- This note was prepared by Blanca Moreno- ing and innovation process? Which polit- Dodson, Senior Economist, PRMVP. The book ical and institutional barriers prevent Reducing Poverty on a Global Scale: switching to a results-based culture and Learning and Innovating for Development planning for integrated development? was written under her leadership while she was · Knowledge Exchange and Impact working as Senior Economist in the World Bank Evaluation: Knowledge exchange is Institute (WBI). essential to the preparation and planning of development projects. But learning Further reading takes time and it is often necessary to Blanca Moreno-Dodson (ed.). 2005. wait until reforms are quite advanced Reducing Poverty on a Global Scale: before fully analyzing what has been Learning and Innovating for Development. learned. For that reason, comparing and Washington, DC: World Bank. This note series is intended to summarize good practices and key policy findings on PREM-related topics. The views expressed in the notes are those of the authors and do not necessarily reflect those of the World Bank. 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