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Via: Shakesville
World Bank’s ‘Wrong Advice’ Left Silos Empty in Poor Countries

‘The Washington Consensus’
Created in 1944, the Washington-based World Bank Group spent much of its first 35 years dispensing low-interest loans, grants and development advice to poor countries with an eye toward promoting self-reliance. In 1980, the bank’s executives began attaching conditions to loans that required “structural adjustments” in the recipients’ national economies. The mandates were designed to have poor countries cut import tariffs, reduce government’s role in enterprises such as agriculture and promote cultivation of export crops to attract foreign currency.
The philosophy, which came to be known as “The Washington Consensus,” was based in part on assumptions that importing basic grains would be inexpensive and that farmers in developing nations could earn more producing exports. Food prices had fallen for years and few economists thought that would change, said Mark Cackler, manager of the bank’s Agriculture and Rural Development Department in Washington.
Exporter to Importer
In 2007 and the first half of 2008, an index of more than 60 food commodity prices compiled by the FAO rose 82 percent. While costs have since eased, they were 20 percent higher on Nov. 1 than at the end of 2006.
The increases hit hard in countries such as El Salvador, which had adopted the principles of the Washington Consensus in return for loans. El Salvador’s Central Reserve Bank said the total amount of the lending was “not available.” The Agriculture Ministry did provide this measure of their effects: The country was a net exporter of rice 20 years ago; now it imports 75 to 80 percent of what it consumes.
The World Bank has “given consistently wrong advice,” said Jose Ramos-Horta, the president of East Timor in Asia and the 1996 Nobel Peace Prize winner.
“It is their advice -- that buying externally is cheaper than producing -- that has resulted in this,” he said.MORE