Floor discussion

A number of participants commented from the floor; then the speakers responded

Participants' Comments

First floor participant: When the World Bank attempts to implement structural adjustment in any country, this is viewed as interfering in the country's natural sovereignty This intrusion is tolerated only if the assistance is sufficiently badly needed Therefore, the Bank should revise the methodology for having the poor participate in discussions with governments so that this becomes standard procedure.

Second floor participant Carlos Heredia, what country in the world, at any point in time, would you hold up as a model for the type of policy that you were advocating?

Third floor participant: This morning Ismail Serageldin suggested that we keep in mind equity, stability, and participation, and many other speakers raised these same issues. I wonder if we looked not only at equity, but also at stability and participation, whether there would be such a model.

Fourth floor participant In reference to Carlos Heredia's statement on structural adjustment, I would point out that a recent study by the United Nations and Mexico's Department of Statistics shows that poverty declined from 18.8 percent in 1989 to 16.1 percent in 1992. Wages have not been suppressed. Real wages in Mexico increased 30 percent in real terms in the manufacturing sector between 1988 and 1992. The rural sector has declined, largely because it was heavily subsidized, and total credit to the private sector increased by 12 percent in real terms.

Regarding Nancy Birdsall's point about protection for the private sector, Mexico opened its economy, but left its agricultural sector virtually closed. For example, the price of maize was almost twice the international price until very recently, and this shielded the poor from some of the consequences that rapid opening would have brought about. More recently, the government replaced the price subsidy with an income support scheme, so now Mexico has the best of both worlds in that the rural poor are protected, but at least agriculture has the right incentives.

Finally, the Mexican government is aware of the problems of income distribution, and in recent years expenditures in the social sectors have been increasing faster than any other components in the budget, and according to a recent budget proposal, in 1994 total expenditure in the social sectors will represent more than half of total programmable expenditure.

Speakers' Responses

Carlos Heredia: I do not hold up any one country as a model to be imitated or to be taken as a blueprint for any other country What we are advocating is a set of policies that put people first The way a particular country implements those policies is subject to that country's particular political and geographic conditions.

In regard to the proportion of the population in Mexico that is living in extreme poverty, according to our case studies and regional statistics, poverty has worsened, even during the last three years Wages have been are being suppressed in Mexico Let me give you an example. Ford Motor Company wanted to increase wages in 1992 over the wage ceiling fixed by the government and strictly enforced There was a 9 percent wage ceiling, and Ford wanted to raise wages from between 12 and 15 percent Mexico's secretary of labor called Ford to say that Ford could not go above the wage ceiling.

Now as for the decline in the rural sector, I do not take the rural sector as a whole I consider the rural sector by looking at small producers and at agribusiness and big producers, and I do see a strong bias in the policies induced by the Bank and those adopted by the Mexican government toward big business, agribusiness, and big producers I do not think it is acceptable to take overall figures and then say that more money is going into the countryside, so there will be more production and people will benefit That is not true We have to look at the aggregate figures for particular subsectors of the rural population and sin how they are faring And I have to say that the statistics have been manipulated in Mexico in such a way that even the Financial Times, which cannot be accused of populism or leftism, came out with an article that stated how unbelievable it is that the Mexican government claims that the unemployment rate in Mexico is 33 percent. Not even the people who compile those statistics believe that.

Ismail Serageldin: In connection with the question on equity, sustainability, and participation, the point Carlos Heredia made is important, that even if things may be improving in the aggregate, they maybe worsening in certain areas, and there may be pockets that need special attention It is not acceptable if while many things are improving, for the few or the not so few things continue to be bad, and even less acceptable if they are worsening.

Nancy Birdsall: One of the speakers said that there must be some participation through civic society or civil society in the discussion of economic policy reforms in developing countries.

That is something we can all agree with However, I would see the issue as one not of whether economic reform and adjustment are necessary, but of improving the design of economic reform and adjustment.

If we start from the premise that adjustment takes away privileges the elite enjoy, it is easier for us—both those from nongovernmental organizations (NGOs) and those representing international financial institutions to arrive at some sense of common vision about the need for and design of these reforms if we are to overcome hunger. For example, where food and energy sub sidles are cut because of adjustment programs, let us ensure that the new fiscal resources are targeted to the poor, if necessary, through food supplementation programs Where social programs are cut, let us ensure that the cuts come from those programs that benefit the rich, and not from the basic education and health services that benefit the poor Where deficits must be brought down, let us work together to ensure that more of the success in bringing down deficits comes from developing broadly based, progressive taxes that do actually tax the relatively rich, and not only from cutting public investments In schools, roads, and so on that benefit the poor.

Now the question about East Asia. All these countries are not a model for everything. On sustainability, I think we can take heart that many of the countries in East Asia, especially in the last five years, have vigorously adopted programs to deal with natural resource degradation, pollution, and other urban problems, in part because incomes are rising.

On participation, clearly different models exist We may not believe that the model in East Asia makes sense for other parts of the world. Nevertheless, we have to recognize that the likelihood of people being more involved in both political and economic decisions increases in those countries whose approach is along the lines of what I called shared growth: not taxing agriculture, pushing exports, not closing up economies, and so on.

What I see in countries such as Costa Rica and Chile, and especially and increasingly in Mexico, is an eagerness, and certainly a willingness, on the part of powerful political groups to extend the difficult economic reforms they have undertaken to embrace larger social reform as well We have to recognize that shared growth and a social agenda are also extremely difficult from a political point of view, and so these governments can benefit from and need the support of their citizens in a participatory way in changing things. This is where I see tremendous potential for much more constructive dialogue between the multilateral institutions and those of you who are concerned with these vital issues.

Ismail Serageldin: The real answer to the issue of participation by the poor in the design of adjustment programs is not whether a World Bank delegation will somehow go and pick some representatives of poor communities at random from around a country and involve them in negotiations about the money supply or the interest rate, but whether or not the civil society in most developing countries can be strengthened. It is here that we need to take President Masire's words to heart, because he has had remarkable success in Botswana in maintaining an uninterrupted, multiparty, parliamentary democracy that has respect for human rights and pluralism, that is refocusing toward social benefits, and that is achieving universal primary education and reductions in infant mortality, and he stood today before us and said that there has to be a role for NGOs. With leaders like that, with that kind of openness in a country, and with a civil society actively affecting the policies of its government, the voice that will be heard in the debate and the discussion will be a pluralistic voice that will enrich the discussion. We must not set aside the invisible poor, those who are hungry and who have no political voice.