Does World Bank Educational Programs Help to Reduce Poverty?

Poverty has always been the bane of society.

In modern-day times, with the easy spread of information, poverty is even more magnified. People in wealthy areas and situations are aware of exactly how poor people are wretched areas, and, more critically, people in wretched areas are entirely aware how wealthy people in more fortunate areas. Civilizations have always had vast discrepancies of wealth -- as is indicated by every GINI study -- but today, the knowledge of that discrepancy has become an even more viable and potent cause for violent action.

The events of September 11th were engendered by religious differences, yes, but the root cause is indisputably economic inequalities. The poor not only are poor, they now have access -- through technology -- to information like televisions which portray lives of opulence in other lands, and to weapons of mass danger. The vast majority of the world's poor are just that -- poor. But there are those with violent proclivities who now have the means the impetus to cause significant harm to the people whom they view as their oppressors.

As a solution to such violence, diplomacy and sometimes war are needed, as we are seeing in Afghanistan today. But these tools only speak to the symptoms of the problem. The cure must speak to the disease, and the disease is poverty.

Too often, even after that realization, we are tempted to treat on the symptoms of poverty as well. For instance, even though the humanitarian aid rations dropped from tens of thousands of feet upon the Afghan people -- killing one Afghan women, no less -- had a distinct political message as well, the backbone thought behind the program was to help feed the same poor people we were bombing. Small yellow packages of food will only go so far in tackling the huge multi-layered problem of international destitution.

We need to switch our focus from thinking in the now -- who can we feed to day so they don't attack us tomorrow? -- to how can we materially affect a group of people's lives such that we have earned their friendship and respect for decades to come? All this is, of course, in addition to the simple thought that poverty is an evil and needs be addressed.

One possible manner in which to speak to the disease and not the symptoms is through educational programs for the poor through the World Bank. The World Bank has been engaging in educational programs in its target area countries for much of its 57 years of existence, but to mixed results and reviews.

This paper will examine the efficacy of the World Bank's educational policies as perceived through various literature that has been devoted to the subject recently. We will try to determine whether the World Bank is truly addressing the root of the problem of poverty by investing so many millions of dollars yearly on educating the poor.

Literature Review

This paper will utilize, primarily, two articles that deal specifically with the efficacy of the World Bank's education programs: "The Impact of Education on Economic Growth" by Francisco Rivera-Batiz and "The World Bank's Mission Creep" by Jessica Einborn. In addition, the paper will use several New York Times articles that question the World Bank's role in alleviating poverty and much of the data garnered in class this semester.

The literature used will be relied upon for factual and analytical views of the World Bank's policies, and the primary goal will be examining the educational policies and their worth.

Conceptual Framework

After reviewing the relevant literature, this paper will attempt to analyze the various critics' assessment of the World Bank's educational policies. World Bank investments will be examined with an end to determining not only their surface success in raising enrollment levels, but in raising standard of living and general growth as well.

The problems inherent in examining such voluminous data will be discussed, but still a solution will be proposed.

This paper will conclude that the World Bank's educational investments must continue for LDCs to exhibit growth, albeit with some serious changes in the way the investments are administered.

Analysis of Problem

The World Bank was created 57 years ago to reduce poverty and stabilize foreign currency markets which fluctuated wildly. The World Bank works in conjunction with the International Monetary fund, and they have a very schizophrenic role in the international marketplace: They have shareholders -- the world's richest nations led by the United States -- and beneficiaries -- the world's poorest nations such as Haiti -- and they have responsibilities to both.

To the richest nations, the World Bank and the IMF owe profits via interest rates charged to the poorest nations. However, since the basic objective is to help the poorest nations emerge from poverty, often the debts incurred by them will never be paid back.

The richest countries can arguably afford this risky investment because the ultimate goal is helping alleviate poverty, but the poorest countries simply cannot afford the degree of failure so many of the World Bank led projects have encountered. For instance, Haiti has received over $1 billion in aid and projects from the World Bank over the last 50 years, and the IMF as infused $150 million in cash to the poor nation as well: however, over 80% of Haiti's population still lives in poverty, as opposed to only 65% in 1987. The situation in Haiti was untenable to begin with, and now, with the World Bank's and the IMF's huge investments, somehow the situation has only gotten worse.

Granted, much of the investment failure is due to several political upheavals in Haiti and misappropriation of funds, but should not the World Bank and the IM take these factors into consideration in the implementation of its programs? Surely their analysts must have expected political upheavals and funds-siphoning.

True, the World Bank has had many successes, and several in the field of education enhancement alone. For instance, India and China now have higher literacy rates than ever due, in no small part, to the World Bank's efforts.

But education efforts have also resulted in the World Bank's strongest criticisms:

In the journal Foreign Affairs last fall, Jessica Einhorn, a former managing director at the bank, accused Mr. Wolfensohn [current head of the World Bank] of taking on too many desperate missions. The bank's mission, she wrote, has become so complex that it "strains credulity" to portray it as a manageable organization. "The bank takes on challenges that lie far beyond any institution's operational capabilities," she wrote.

Many critics have compared the World Bank to both the Carter administration and Amtrak, in that the World Bank does not stick to the practice of infusing investment funds into poor nations; it gets side-tracked into many other related projects, eventually causing itself to lose focus and the ability to achieve any success.

One such side-track has been the concept of investment in education:

For anyone analyzing the process of economic development, the role played by education on economic growth poses a great challenge. The conventional wisdom suggests that human capital accumulation induces greater growth. Yet, a recent body of theoretical and empirical work has sharply questioned this relationship. Indeed, in a recent paper reviewing this literature, World Bank economist Lant Pritchett concludes that "For LDCs as a whole the basic story line about education just does not scan. Two basic facts are well-known. Enrollment rates in LDCs have increased dramatically in the last 30 years...However, the second well-known fact is that, on average, growth rates of LDCs have been stagnant, or even falling, over time and are lower than those for developed countries."

Here, Rivera-Batiz, through Pritchett, presents a rather unique and sharper criticism of the World Bank's promotion of education. Most critics simply allege that the World Bank's programs -- especially with regard to education -- simply do not work. They are not effective, and a waste of money that shows no results.

However, Rivera-Batiz and Pritchett argue that indeed, the World Bank educational investments engender positive results in schooling in that enrollment rates are significantly higher, but still, the end desired result is simply not there: growth rates in those countries have still stagnated despite more children attending school more regularly. This data is substantiated by our class findings that 79% to 80% of World Bank projects with regard to education have been met with a satisfactory set of outcomes between 1990 and 1999. So, the programs are working in that they achieve their immediate goals of improving schooling, but the long-term goals of growth are not being achieved.

Indeed, this runs contrary to the East-Asian formula. Countries such as Hong Kong, Korea, Taiwan and Singapore have picked themselves up from the boot straps of poverty through education. Why does this same formula not work in today's developing nations?

There are several possible reasons that explain the lack of impact of education programs -- which are successful in improving education -- on economic growth in lesser developed countries. First, the simple answer: unreliable data. "Often the only source of information on this are household surveys and/or Census surveys that, because of limited samples, are representative only of segments of the population (mostly urban households) and are collected rather infrequently, some every ten years or more." In other words, our assessment that the World Bank's educational programs are increasing enrollment but not increasing growth may be wrong on either end: enrollment may not be increasing, and growth may indeed be increasing in some sectors that do not have tangible or easy measurements.

This problem of unreliable data is especially evident in labor force measurements:

An alternative source of information on changes in the education of the labor force is to imply such changes from the number of persons being educated in the country's school system. Data on enrollment rates are widely-available, often on a yearly basis. Unfortunately, they also have problems. Enrollment rates published by education authorities in most developing countries usually fail to include information on private sector enrollment, which can be over 50% of total enrollment.

But this revelation of possible error is hardly encouraging: rather, it means that even more people may be in school than earlier anticipated but still the growth just is not there. But Rivera-Batiz presents a corollary to this argument, which is that in addition to the enrollment numbers being off possibly, labor force numbers may be off as well: "Insofar as different individuals enter the labor force at various rates and at various times (depending on their gender, ethnicity, socioeconomic background, etc.), enrollments rates may constitute an imprecise measure of changes in the education of the labor force." Indeed, imprecise measurements and unreliable data can wreak havoc on our analysis of the World Bank's educational policy success.

Another problem with the World Bank's concentration on educational programs is age-old quantity/quality tradeoff:

One of the predicaments facing governments whose educational system expands rapidly is the possibility that a rapid increase in the quantity of schooling offered will be at the same time associated with a decline in the quality of the schooling offered. This is likely to be the case if the public sector has limited resources invested in education. In such cases, increased enrollment means that the existing funds available to education will have to be distributed among a larger body of students, reducing expenditures per pupil.

This is a challenging problem indeed: If the World Bank continues to sink money in education in impoverished nations, perhaps that will increase the enrollment, yes, but will it truly increase the level education? Perhaps not: "There is a therefore a danger that in raising the educational attainment of the population, the quality of that education will decline, impacting negatively on economic growth."

If this scenario is true, there is no easy solution. Should the World Bank continue to fund education knowing that its investment only serves to spread out the quality of education? On the plus side, at least more of the population will receive a baseline level of education; enough, at least for them to pursue other learning opportunities on their own, thereby improving the quality of the workforce. On the minus side, perhaps this baseline quality of education simply is not enough, and is a waste of investment dollars.

A third problem facing World Bank investment in education is a profound lack of demand for skilled labor in developing countries. To liken the situation to facts that hit home here in America, every presidential administration's goal is to increase profoundly the number of students graduating from college. In fact, one Los Angeles area high school even refused its graduating seniors the right to participate in graduation ceremonies if they could not substantiate some definite future plan to attend college, military school or at least vocational school.

But, even in America, we have such a demand for low-skill jobs. If all of our youth are college educated, who will work at McDonalds? Who will sweep the floors? This is the age-old classist argument that ill-educated, ill-paid laborers are needed as well, and that educating them will only price them out of the job market entirely, and hurt society in the long run. The argument is out of favor in today's enlightened times, of course, but perhaps we can assert it with some degree of impunity once again -- carefully -- with regard to lesser developed countries.

Take Rivera-Batiz's explanation, for instance:

The impact of increased educational attainment on economic growth is closely dependent on the educated workers obtaining employment in skilled jobs. A Ph.D. In nuclear physics who only finds employment as a taxi driver is not more productive to the economy than a taxicab driver with an elementary school diploma. Similarly, highly-educated workers who end-up unemployed or withdrawing from the labor force will not be contributing to national-income, as conventionally measured.

Rivera-Batiz's point is well-taken especially with regard to the World Bank's investment policies. Is it not wiser for the World Bank and the IMF to invest their sparse funds on new agricultural techniques or even on direct food aid than on education when the education yields only unreliable data, poorly educated masses, and highly educated individuals with no market for their skilled labor?

The result was apparent in India during the 1970s and early 1980s. India spent a large part of its government and private resources on educating its workforce. The result was perhaps the most technologically literate and advanced workforce in the world -- at least among India's middle-classes and upper-middle classes. But a huge number of these skilled laborers like doctors and engineers simply left the country en masse to America, Britain, the Middle East and Canada. India called the phenomenon the "Brain Drain," but indeed, it drained India's spirit as well.

Perhaps with World Bank investment in education in lesser developed countries, this brain drain is a possibility as well. Another problem with educating the workforce is infrastructure. Even if skilled labors are there, and demand for their services is plentiful, there may not be a practical or actual demand because there are no funds to pay the laborers and there is no infrastructure or capital investment to support their endeavors. An investment banker may know his profession backwards in Bangladesh, and his neighbors may really desire his services, but they have no means by which to pay him, and e has no means by which to obtain the information he needs to do his job. The World Bank may spend billions educating people who simply may not be able to perform their jobs to any degree of economic viability.