GLOBALISATION, POVERTY AND CONFLICT

Globalisation, Poverty andConflict

A Critical “Development” Reader

Edited by

Max SpoorInstitute of Social Studies,

The Hague, The Netherlands

KLUWER ACADEMIC PUBLISHERSNEW YORK, BOSTON, DORDRECHT, LONDON, MOSCOW

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For Francisca Quilaqueo

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CONTENTS

Abbreviations ................................................................................................xi

INTRODUCTION

Globalisation, Poverty and Conflict

Max Spoor ...................................................................................................xiii1. Introduction.............................................................................................xiii2. Review of the Chapters ............................................................................xv3. The Conference and this Reader ............................................................xxv

PART I: GLOBALISATION, INEQUALITY AND POVERTY

1 From Exclusive to Inclusive Development

Agnes van Ardenne .........................................................................................3

2 Collateral Damage or Calculated Default? The Millennium

Development Goals and the Politics of Globalisation

Jan Pronk .......................................................................................................91. Introduction ...............................................................................................92. The Millennium Development Goals......................................................103. Global Poverty ........................................................................................124. Politics: Gaining New Insights or Ignoring Them? ...............................155. Aid and Cooperation ...............................................................................176. Are We on Track? ...................................................................................207. The Politics of Globalisation...................................................................25

3 Can Improved Human Development Policies Break the Cycle

of Poverty?

Jozef M. Ritzen .............................................................................................351. Introduction .............................................................................................352. Poverty and Development Trends ..........................................................363. Human Development ..............................................................................384. The Quality of Human Development Policies .......................................395. Accelerating Human Development .........................................................436. Conclusion...............................................................................................44

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4 Inequality, Poverty and Conflict in Transition Economies

Max Spoor ....................................................................................................471. Introduction .............................................................................................472. Growth with Inequality: Accession Countries and Emerging

Peripheries ...............................................................................................503. Increased Income Inequality and Higher Rural Poverty Risks ...............554. Conclusions .............................................................................................60

5 Globalisation, Marginalisation and Conflict

S. Mansoob Murshed ....................................................................................671. Introduction .............................................................................................672. Globalisation and Marginalisation ..........................................................673. Suspension of the Development Contract ..............................................734. The Development of Violent Internal Conflict .......................................765. Conclusion...............................................................................................78

6 The Slow Progress of International Financial Reform

Stephany Griffith-Jones ................................................................................811. Introduction .............................................................................................812. What Progress Till Now? ........................................................................833. Crises Prevention: Have the Right Measures Been Taken?....................854. Political Economy ...................................................................................905. Conclusions and Policy Suggestions for Encouraging Private flows .....93

7 The Debt Crisis and the South in an Era of Globalisation

Kunibert Raffer.............................................................................................971. Introduction .............................................................................................972. Waves of Resource Flows and Changes in Debt Structures ...................993. The Way Out: Globalising Insolvency Procedures ...............................1054. Shortcomings of the IMF Model...........................................................1085. A Fair and Transparent Process ............................................................1106. Concluding Remarks .............................................................................112

PART II: GOVERNANCE, CIVIL SOCIETY AND POVERTY

8 Disempowering New Democracies and the Persistence of Poverty

Thandika Mkandawire ...............................................................................1171. Introduction ...........................................................................................1172. The Centrality of Growth and Equity....................................................1183. An Elective Affinity? ............................................................................1204. Some Evidence and Illustrative Examples ............................................1225. The Problematique ................................................................................1316. Some Explanations................................................................................1337. Globalisation, Structural Adjustment and “Choiceless Democracies”....1408. Conclusion.............................................................................................145

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9 Local Governance and Rural Poverty in Africa

Paschal B. Mihyo .......................................................................................1551. The Common Identity of Sub-Saharan Africa ......................................1552. The Search for a Governance Paradigm Conducive to Development

in Africa ................................................................................................1583. Governance and the Administration of Rural Poverty ..........................1614. Decentralisation of Conflict and Poverty ..............................................1655. Regulation and Rural Poverty ...............................................................1676. Conclusion.............................................................................................169

10 Local Governance Hybrids: Enabling Policies and Citizen Approaches

to Poverty Reduction

A. H. J. (Bert) Helmsing .............................................................................1771. Introduction ...........................................................................................1772. Enablement and Citizenship..................................................................1783. Constituent Elements of New Governance Hybrids for Poverty

Reduction..............................................................................................1804. Limitations and Concluding Observations............................................194

11 Civic Engagement, Social Accountability and the Governance Crisis

William Reuben ..........................................................................................1991. Defining Civic Engagement ..................................................................1992. Aspects of Civic Engagement ..............................................................1993. The Governance Crisis ..........................................................................2054. Social Accountability ............................................................................2085. Strengthening Civic engagement and Social Accountability ...............212

12 Blurring the State-Private Divide: Flex Organisations and the Decline

of Accountability

Janine R. Wedel ..........................................................................................2171. Introduction ...........................................................................................2172. Retreat of the State? ..............................................................................2183. Two Disconnects ...................................................................................2194. Social Organisation and Networks of Governance ..............................2205. Boundary Crossing in Post-Socialist States ..........................................2216. The Deep and Widespread Unaccountable State? ................................2287. Implications for Accountability ...........................................................230

PART III: RESOURCE DEGRADATION, INSTITUTIONS AND CONFLICT

13 Multi-Level Governance and Resilience of Social-Ecological Systems

Elinor Ostrom and Marco A. Janssen ........................................................2391. Introduction ...........................................................................................2392. The Belief in the Efficacy of Top-Down Solutions ..............................2403. Social-Ecological Systems as Complex Adaptive Systems ..................246

CONTENTS ix

4. Multi-Scale Adaptive Processes in the History of Political-Economic Development........................................................................251

5. Conclusion: Coping with Complexity...................................................254

14 The Limits of Institutions: Environmental Degradation and

Knowledge Framing

M. A. Mohamed Salih .................................................................................2611. Introduction ...........................................................................................2612. Framing Environmental Knowledge .....................................................2623. The Environmental Degradation Causes Conflict Thesis .....................2654. Institutional Interventions: Development Agents or Sources of

Conflict? ...............................................................................................2705. Conclusion.............................................................................................276Annex 1. Resource Conditions and Causes of Conflict ............................277

15 Beyond State-Community Polarisations and Bogus “Joint”ness:

Crafting Institutional Solutions for Resource Management

Sharachchandra Lélé .................................................................................2831. Introduction ...........................................................................................2832. Institutions for Natural Resources Management: Definitions and

Moral Imperatives ................................................................................2843. The Need for Institutions in the Case of Natural Resources/

Ecosystem Management .......................................................................2874. The Design of Multi-Level Institutions for Natural

Resource Governance ...........................................................................2915. Conclusion: The Limits of Institutions .................................................297

IN CONCLUSION

16 Knowledge Sharing in Support of Human Development

J. B. (Hans) Opschoor ................................................................................3071. Beyond Development? ..........................................................................3072. Knowledge and Education in Development .........................................3133. Conclusion: Reciprocity and Partnership..............................................319

Contributors...............................................................................................323Index..........................................................................................................325

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ABBREVIATIONS

BUPP Bangalore Urban Poverty Project (India)CCD Christian Commission on Development (Honduras)CCL Contingency Credit LineCEE Central and Eastern EuropeCESTRAD Centre for the Study of Transition and Development (Netherlands)CIFOR Centre for International Forestry Research (Indonesia)CIS Commonwealth of Independent StatesCODESRIA Council for the Development of Social Science Research in AfricaDISHA Developing Initiatives for Social and Human Action (India)DSR debt service ratioEBRD European Bank for Reconstruction and DevelopmentECA export guarantee agencyECLAC Economic Commission for Latin America and the CaribbeanEGDI Expert Group on Development IssuesESAF Enhanced Structural Adjustment FacilityEU European UnionFDI foreign direct investmentFTAP Fair and Transparent Arbitration ProcessGATS General Agreement on Trade in ServicesGDP gross domestic productGEAR Growth, Employment and Redistribution (South Africa)GONGOs government-organised non-governmental organisationsHDI Human Development IndexHICs Highly Indebted CountriesHIID Harvard Institute for International DevelopmentHIPCs Highly Indebted Poor CountriesHOS Heckscher-Ohlin-Samuelson (paradigm)IADB Inter-American Development BankICCO Inter-Church Organisation for Development Cooperation (Netherlands)ICRG International Country Risk GuideIDASA Institute for Democracy in South AfricaIDPs internally displaced personsIDRC International Development Research CentreIFAD International Fund for Agricultural DevelopmentILBE Institute for Law-Based Economy (Russia)IMF International Monetary FundIRB internal rating based (approach)ISPA Instrument for Structural Policies for Pre-AccessionISS Institute of Social Studies (Netherlands)LDCs less developed countriesMMD Movement for Multi-Party Democracy (Zambia)MSY maximum sustainable yield

xii ABBREVIATIONS

NATO North Atlantic Treaty OrganisationNDCEs New Developing Countries of EuropeNEPAD New Partnership for Africa’s DevelopmentNGO non-governmental organisationNIK Supreme Chamber of Control (Poland)NTB non-tariff barriersODA official development assistanceOED Operations Evaluation Department (World Bank)OPEC Organization of the Petroleum Exporting CountriesOSCE Organization for Security and Co-operation in EuropeOTBs Organizaciones Territoriales de Base (Bolivia)PAP Poverty Alleviation Programme (Bolivia)PD probabilities of defaultPFRON Fund for the Rehabilitation of Disabled People (Poland)PIN Public Information NoticePISA Project International Student AssessmentPPP purchasing power parityPROGRESA Education, Health and Food Programme (Mexico)PRSC Poverty Reduction Support CreditPRSP Poverty Reduction Strategy PaperQUANGOs quasi-non-governmental organisationsRBEC Regional Bureau for Europe and the CIS (UNDP)RICE relative income conversion efficiencyRPC Russian Privatisation CentreRSAA Royal Society for Asian AffairsSAPARD Special Accession Programme for Agriculture and Rural Development (EU)SDRM Sovereign Debt Restructuring MechanismSDRs Special Drawing Rights (IMF)SEE South and Eastern EuropeSEWA Self-Employed Women’s Association (India)SME small- and medium-sized enterpriseSRF Supplementary Reserve FacilityTRIPs Trade-Related Aspects of Intellectual Property RightsUN United NationsUNCED United Nations Conference on Environment and DevelopmentUNCHS United Nations Centre for Human SettlementsUNCTAD United Nations Conference on Trade and DevelopmentUNDP United Nations Development ProgrammeUNECE United Nations Economic Commission for EuropeUNEP United Nations Environment ProgrammeUNESCO United Nations Educational, Scientific and Cultural OrganisationUNHCR United Nations High Commissioner for RefugeesUNICEF United Nations Children’s FundUNRISD United Nations Research Institute for Social DevelopmentUNU United Nations UniversityUS United StatesWCED World Conference on Environment and DevelopmentWHO World Health OrganizationWIDER World Institute for Development Economics ResearchWTO World Trade Organization

INTRODUCTION

GLOBALISATION, POVERTY AND CONFLICT

MAX SPOOR

1. INTRODUCTION

Within the dynamic field of “development studies”, an important body of literature hasemerged which deals with complex processes of economic, social and politicaltransformation in the developing and, more recently, in many of the transitioncountries. This literature reflects the evolution of debates and paradigms on thesocietal changes and transformations that have taken place over the past half-century.The current volume presents a set of state-of-the-art contributions to that literature,offering critical thinking on the theory and practice of development policy as it isevolving within the current era of rapid globalisation. Chapters focus on povertyreduction, the build up of multi-level democratic institutions and containing andpreventing conflicts, critically confronting the predominantly neoliberal mainstreamideas on “development” and proposing alternatives.

The chapters, written by a select group of scholars and development practitioners,will be of direct interest to those involved in this field of the social sciences and in“development practice”. At the same time they are composed so as to remainaccessible for the generally interested reader. All chapters in this book except one wereoriginally presented at the Institute of Social Studies’ Fiftieth Anniversary ConferenceGlobalisation, Poverty and Conflict (7–9 October 2002). This volume contributes – ina critical manner – to understanding of the complex development problems at hand. Itanalyses highly controversial issues on the “development agenda” that must be takenseriously in the present unstable global economic and political environment.Globalisation, Poverty and Conflict is therefore intended as a critical developmentreader, which complements current debates in this field, but also brings once again tothe forefront the importance of development in an era in which “development fatigue”seems to have become more profound then ever before. Achieving the MillenniumDevelopment Goals by 2015 is a concrete target for “development”, and manygovernments have agreed to these objectives. Whether these goals can be realised isanother issue. Nonetheless, the Millennium Development Goals have brought focused

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Max Spoor (ed.), Globalisation, Poverty and Conflict, xiii–xxv.

© 2004 Kluwer Academic Publishers. Printed in the Netherlands.

attention to “development” in the past few years and a renewed intense debate aboutthe relationship between the process of globalisation, widespread poverty and theemergence of many violent conflicts.

The field of development studies has seen quite fundamental policy debates overthe past decades. Thinking on development has changed substantially, as well as themain paradigms that provide its foundations. In the early days of post-colonialism,with the emerging independent and nationalist regimes, there was a near absolutebelief in the virtues of the “developmental state”, interventionist policies, importsubstitution, protectionist models of development and a strong emphasis onovercoming or mending “market failures”. Several stages of the development debateemerged, such as the introduction of the “basic needs approach” and the classic disputeover whether growth and equity objectives can be reconciled. By the mid- and late1970s the focus shifted towards “state” or “bureaucratic failures” and the realisationthat there was substantial rent-seeking within the state, which had previously been seenas benign or good. The early 1980s saw the emergence of a neoliberal developmentagenda, which radically turned the clock towards a near sacrosanct belief in the virtuesof the market. The foundations were laid for the era of structural adjustment and whatlater became known as the “Washington Consensus”. The pendulum shifted fromregulation and state control to deregulation, from state property to private propertyrights through a process of privatisation of assets, and from protectionist trade,exchange rate and capital account policies to liberalisation and openness. Adjustmenttook place in the midst of a profound debt crisis, and renewed lending, particularly bythe international financial institutions, followed, making the debt issue a sometimesforgotten but nonetheless structural issue for the developing world. The role of theWorld Bank and the International Monetary Fund (IMF) became more important thanoriginally intended at Bretton Woods, and also different, for example, in their invokingconditionalities related to structural adjustment before lending could follow.

Globalisation, with its unbridled international expansion of trade and financialflows, and reduction of national governments’ degree of freedom to influenceeconomic development, has advanced at unprecedented pace in the past two decades.Trade negotiations, which had proceeded slowly for a long period, moved towards thereduction of tariffs (in particular, those levied by developing countries, as the OECDcountries retained a substantial degree of protection). Finally, this process led to thefounding of the World Trade Organization (WTO) in 1995 and subsequent tradenegotiation rounds. Poverty re-emerged on the development agenda during the 1990s.In the early stages of adjustment it was fashionable to see poverty as a temporaryproblem which would be resolved after economic growth resumed and economicrecovery was realised. The “trickle down” theory, according to which any type ofeconomic growth has a high elasticity of poverty reduction, regained popularity in theneoliberal era, despite evidence against it. Actually, the period of economic adjustment(known by the structural adjustment programmes, or SAPs) has shown growingincome inequality to be a main factor underlying rising poverty. Though some scholarshave tried to show there is convergence, it is now largely accepted that the gap betweenpoor and rich (in the various manners that this can be measured) became moreprofound in the past decades. While globalisation provides increased opportunities, it

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seems that quite some countries and segments of populations have been unable tobenefit and a process of “exclusive” rather than “inclusive” growth has taken off.There are positive signs, however, such as the rapid development of countries likeChina and India, which house most of the world’s poor and show reduced povertyincidence (at least in China). Africa, however, is lagging, alongside quite a number ofthe “transition” countries that emerged after the fall of the Berlin Wall and the collapseof the former Soviet Union. In both cases, nationalist and ethnically based conflictshave caused much suffering and widespread poverty in politically often unstable andfragile societies where sustainable economic development is still a “bridge too far”.

The democratisation of many developing and transition countries is anotherimportant phenomenon that has emerged in the past two decades. While in the 1960sand 1970s there were still countless military and authoritarian regimes, a wave ofdemocratic resurgence has swept through many regions of the world. In parallel (andpartly in response), civil society organisations have risen in importance, demanding ashare of responsibility in the development process. Economic and politicaldecentralisation and deregulation has provided them with more space and room formanoeuvre.

2. REVIEW OF THE CHAPTERS

The current volume, Globalisation, Poverty and Conflict, discusses these very topical,inter-related and controversial elements of development by looking to several sets ofissues:

• globalisation, inequality and poverty;

• governance, civil society and poverty; and

• resource degradation, institutions and conflict.

Though the chapters are grouped under these main headings, such separation does notdeny their many linkages and overlaps.

The first section of this volume deals with globalisation, growing inequality andpoverty. It touches upon the Millennium Development Goals and their feasibility interms of poverty reduction, globalisation and marginalisation (Van Ardenne, Pronk,Ritzen, Spoor and Murshed) and then looks to the international financial system inrelation to the position of developing countries (Griffith-Jones and Raffer).

In the brief opening chapter, Van Ardenne discusses a number of the relationships.First, it is evident that violent conflicts can cause widespread poverty, particularlyamongst internally displaced persons and refugees. A causal relation between povertyand conflict is less straightforward, but growing inequality can lead to social andpolitical unrest, resulting in higher poverty incidence. Second, globalisation providesopportunities, but it does not automatically lead to equal distribution of economicbenefits. Third, globalisation can give impetus to conflicts, as some conflicts arefuelled more by greed than by grievance, and open borders stimulate the spread ofAIDS and illegal trafficking (of arms, drugs and human beings). However, theinformation age and exchange of ideas might ease tensions. Van Ardenne makes astrong plea for “inclusive governance” based on “inclusive policies” (through

INTRODUCTION xv

participation, democratic development and local governance), in contrast to the“exclusive development” that is now taking place.

Pronk (Chapter 2) follows by discussing the feasibility of the MillenniumDevelopment Goals in view of the politics of globalisation. He distinguishes twophases of the current wave of globalisation; namely, a first since 1945 and a secondsince the end of the Cold War and the fall of the Berlin Wall in 1989. While discussingvarious development initiatives, particularly those by United Nations bodies, Pronkunderlines the significance of the Millennium Declaration. He sees this as a milestonedevelopment agreement, constituting a step away from the paradigm of “trickle down”of whatever growth is generated. A United Nations evaluation of developmentprogress at the start of the new millennium points to mixed outcomes. Some countriesor regimes are doing well, while others show a negative record in poverty reductionand human development. Pronk asks, ‘Is this just collateral damage of globalisation, orthe result of faulty development policies (and calculated default)?’ Excluding China,poverty has increased worldwide (measured as the number of people with an incomebelow the threshold of one US dollar per day). Pronk criticises the adjustment policiesbacked by the Washington Consensus as ‘bound to result in a stagnation of povertyreduction’. Adjustment has led in some cases to the resumption of growth, but this wasmostly not “pro-poor growth”. He discusses the fate of different developmentparadigms during what the United Nations calls the various “development decades”.When sustainability rose to the top of the development agenda, more optimismemerged, which in a sense was reflected in the Social Summit of 1995 and theMillennium Declaration of 2000. The latter addresses not only income poverty, butalso access to social services and utilities (water, sewerage). In order to realise thesegoals, Pronk argues, there is a need for a ‘dramatic change of direction’, and ‘thisrequires political leadership’.

Ritzen (Chapter 3) defends the role of “good” governance and policies (based on“best practice”) that contribute to development. He adheres to the position that thedifferentiation between successful and failed cases of poverty reduction in developingcountries can be largely explained by the quality of governance and the policiesimplemented. In five of the six developing regions, income poverty is likely to behalved by 2015, thus bringing the income-related Millennium Development Goal intosight. Yet this is not the case with the Millennium Development Goals related toeducation and health. Though agreements have recently been made to increase financefor human development, Ritzen is weary of the ineffectiveness of public expenditure inthese areas. He provides examples in which private delivery of public goods andservices has actually improved access by the poor. This is done by “contracting out” or“contracting in” non-governmental organisations (NGOs) or the private sector. Hence,public finance remains necessary, but the public sphere need not be the exclusive oneto deliver. Ritzen also emphasises the role of direct incentives (such as schoolattendance-related payments for girls), which have shown success.

Spoor, in Chapter 4, deals with one of the most dramatic changes of the twentiethcentury, namely the process of transition since the fall of the Berlin Wall in 1989 andthe subsequent collapse of the Soviet Union in 1991. The transition countries sufferedmany conflicts during the 1990s, the most dramatic being that in the former

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Yugoslavia. With the huge contraction in their economies and redistribution of theirnational wealth to (mostly a small number of) private actors, until the recovery of themid-1990s the number of poor in this region increased from 14 million to 147 million(including a yet largely unrecognised new category, the “working poor”). Poverty thusbecame the most pressing problem of economic recovery and development in this partof the world. New (or the continuation of old) peripheries became evident. In theterritory of the former Soviet Union, the periphery is formed by the so-called CIS-7(the poorest areas of the Commonwealth of Independent States). Along Central andEastern Europe (CEE) another periphery is visible in the South-eastern European(SEE) states. After ‘die Wende’ of 1989, the CEE countries moved quickly towards aWestern-type market economy and political system, using in some cases even “shocktherapy” and benefiting from nearby markets and large streams of foreign directinvestment (FDI). The two peripheries had a more mixed record, suffering conflicts,slow or no reforms, authoritarian regimes and less favourable initial conditions interms of market access and possession of mineral wealth. Comparing incomes percapita shows that the CIS-7 are the worst off, while the difference between thiscategory of countries and the new members of the EU-25 is around 1:10. This is alsoillustrated by the HDI (Human Development Index), which places the two peripheralgroupings in the “medium” human development category. Absolute poverty in most ofthe “transition peripheries” is high, above 50 percent and with an income level of justover two US dollars a day – a staggering figure indeed.

Bringing the analysis to a more global level, and making the link with the twosubsequent more technical chapters on the international financial system and debtcrises, Murshed (Chapter 5) outlines the inter-linked processes of globalisation andmarginalisation of part of the developing world. Since the 1980s the developingcountries have (become) rapidly integrated into the global trade regime. Somemiddle-income countries have particularly benefited from this development, but alsolarge (low-income) countries such as China and India. Yet just a few countries(including these and Mexico and Brazil) receive most of the FDI flow to thedeveloping world. Within this unequal international investment environment, it is nosurprise that global inequality, the income gap between rich and poor countries,rapidly grew from the early nineteenth century to the early 1990s. Murshed draws onMilanovic’s three indices of inter-country inequality: “category 1 inequality” whichtreats countries, whether large or small, equally; “category 2 inequality” which adjustsfor population size; and “category 3 inequality” which is based on individuals ratherthan the countries themselves. In all cases inequality is high, highest in category 3.Following this analysis, Murshed discusses various theories of international trade,pointing to the unequalising effects of North-South trade. Structural adjustmentprogrammes have forced more openness on the developing countries (while the Northhas retained much of its trade protection), and in the emerging debt crises the South hasbeen treated harshly by its creditors in the North. The establishment of the WTO andresults of trade negotiation rounds, in particular the Trade-Related Aspects ofIntellectual Property Rights (TRIPs), discriminate against the South developingtechnological capacity to provide a basis for their “development”. Murshed concludeswith an analysis of the origins of violent conflicts, which are usually fought out under

INTRODUCTION xvii

ethnic and nationalist banners. He uses the “greed versus grievance” dichotomy andthe failure of the social contract in explaining the emergence of conflicts.

Griffith-Jones (Chapter 6) contributes a profound analysis of global financialgovernance in its current state. The objectives of a new financial architecture should beto prevent recurrent banking and currency crises and to promote, and even guarantee,stable private and official financial flows towards developing countries. Althoughduring the 1990s some changes have been introduced in the global financial system,important and even dramatic financial crises occurred in this decade, such as the Asian,Russian and Brazilian crises. Financial flows to developing and emerging economieshave dropped since 1998, with the latter category even becoming a net exporter ofcapital to the developed world. Why have the reforms been insufficient? Griffith-Jonesmentions at least four reasons. There is no agreed reform agenda. There is substantialasymmetry in reforms, which are focused primarily on changes in developingcountries. There is too much emphasis on (short-term) crisis management, rather thanpromoting stable flows of finance. Finally, the developing countries themselves havelittle influence on the reforms, since they are hardly represented in the deciding bodies,and the large “bail-out” packages of the IMF are viewed with increasing suspicion.New financial regulations should be counter-cyclical, Griffith-Jones posits, althoughthe newly proposed Basel Capital Accord seems to promote pro-cyclicality. Theauthor also points out that risk is lower in bank loan portfolios that are more equallyspread among developed and developing countries. The IMF introduced newfinancing facilities in the 1990s. However, any developing country trying to use theseoptions would likely be stigmatised by the financial markets. Finally, she asks whythere are so many difficulties in reforming the international financial system. Maybe itis because powerful financial actors in developed countries do not see the reforms asbeing in their interests. However, many (non-financial) actors take the side of thedeveloping world. Griffith-Jones pleas for renewed negotiations for a new “first-best”international financial system, rather than continued focus on marginal adaptations tothe current system.

In another contribution dealing with international finance, Raffer (Chapter 7)analyses the debt crises that have struck the developing countries over the pastdecades. The current position of the international financial institutions is founded onthe early neoliberal doctrine as implemented in Chile under the post-1973 Pinochetmilitary regime, leading to the deep financial crisis of 1982. After that, globalisationproduced a great number of – readily forgotten – financial crises, including the USSavings & Loans scandal and the Mexico crisis of 1994–95. During the past decades,international financial institutions have become more important in the global financialarchitecture. Several waves of “debt-creating flows” changed the structure of theoverall debt of developing countries and also increased its volume. Originally, with theloan spray of the Euromarket and the negative real interest rates in the internationalfinancial markets, debts contracted by southern countries grew sky-high, in particularfrom commercial banks. After the series of financial crises in the early 1980s there wasa shift towards debt held by international institutions, following a massive bail-out ofprivate banks. In the 1990s this was followed by more influence of bondholders (suchas mutual and pension funds). Although various steps were taken to address the

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increasingly severe debt problems of developing countries, such as the HighlyIndebted Poor Countries (HIPC) initiatives, the international financial institutionscontinued to advise developing countries to implement policies similar to those thathad led to previous crises. “Debt relief” financing usually meant more lending in orderto finance debt service, further deteriorating the position of the debtor countries in thelong run rather than resolving the debt problem. Raffer’s main argument is that theinternational financial institutions do not accept default, while commercial banks do.Therefore, procedures for sovereign insolvency should be established internationally.The newly proposed Sovereign Debt Restructuring Mechanism (SDRM), asscrutinised by the author, offers the debtors insufficient protection. Instead, Rafferproposes his Fair and Transparent Arbitration Process (FTAP), applying the US Codeon Corporate Bankruptcy to sovereign debt overhang. This, he suggests, wouldprovide adequate debtor country protection (which is now totally absent).

The second group of chapters deals with governance, civil society and poverty,looking to democratic institutions and the role of civil society organisations, localgovernment and rapidly transforming forms of governance (Mkandawire, Mihyo,Helmsing, Reuben, and Wedel).

The opening chapter in this section, that by Mkandawire (Chapter 8), analysesdemocracy, economic policy reform and performance in terms of poverty reduction.There have been (and are) authoritarian regimes that have done (and do) quite well inpoverty reduction. Economic growth, however, does not necessarily lead to povertyreduction, since growth may be anti-poor biased. Only explicit redistributionalmeasures and growth in the sectors where many of the poor are active will benefit thepoor. With such measures and “pro-poor” growth in place, much lower growth rateswill be needed to realise the income poverty Millennium Development Goal. Althoughthe contrary is often believed, the new democracies have implemented the mostorthodox adjustment policies. Mkandawire makes this point by screening economicpolicies implemented by old and new African, Latin American and Asiandemocracies. However, structural adjustment has delivered neither sustainable growthnor poverty reduction. Why then were these democracies so orthodox in theireconomic policies? The author gives various explanations. There were ideologicalshifts and radical changes in leadership in the early 1980s. As interventionism was thetrademark of authoritarian regimes, the new democracies identified themselves withthe defining principles of adjustment. While the older democracies were entrenched insocial pacts, these were absent in the new ones. Finally, the new democracies used thefigurative “new broom” in implementing harsh and austere reform programmes,availing of the euphoria following the radical change towards democracy. In the era ofglobalisation the room for manoeuvre for nation-states has been substantially reduced.Also, many of these new democracies emerged as an outcome of the crisis of theinterventionist model and inherited large deficits. Mkandawire calls these “choicelessdemocracies”. He concludes that the core adjustment model has been left unchanged,even now that poverty has re-emerged on the development agenda. Though theinternational financial institutions have recognised the importance of poverty, theyseek no fundamental change in their proposed economic reforms. Poverty is being

INTRODUCTION xix

targeted, rather than making the implementation of proper social policies part andparcel of the development model.

Mihyo (Chapter 9) turns attention to rural poverty and poor local governance. Hepaints a vivid picture of Africa’s poverty, in particular, rural poverty, which iswidespread and often extreme (not so much below a dollar a day, but below a dollar aweek). Many rural-based ethnic minorities in Africa have been marginalised. Rulingelites have perpetuated rural illiteracy in order to keep control, and the gap betweenurban and rural areas – in all respects – has grown. Viewed with hindsight, even the“basic needs” approach that was popular in the 1970s was geared more towardsmanaging poverty than to reducing it. The author compares various developmentpolicy paradigms for their impact on rural poverty. The structural adjustmentprogrammes of the 1980s weakened states’ capacity to steer the development process.The environmental concerns that were added in the 1980s and 1990s were very muchelite-based with no concern for rural problems. Finally, with good governancebecoming the buzzword of the 1990s, the relation between rural people and rulersremained that of “slaves and master”. Market intrusion has increased vulnerability,alongside of which there has been a continuity of, rather than a break in, the “dialoguefailure” with rural people, in particular the rural poor. African rural poverty is causedby many factors, the author contends, and rural development failure is evident overall.Rural areas have weak local governance, minimal or no productive and socialinfrastructure and low literacy. The move towards decentralisation has mostly meant atransfer of responsibility to the local level, without providing the necessary resources.Local governance and the capacity to develop and implement policies at the local (andrural) level remains weak. Finally, Mihyo concludes, ‘none of the major developmentpolicy paradigms seriously addressed the issue of rural poverty’.

Pushing the argument for improved local governance and decentralisation further,Helmsing (Chapter 10) develops an “enabling policies–citizen approach” to povertyreduction, distinguishing it from mainstream social policy, community development,and empowerment approaches. In fact, the “enabling state” was a cornerstone ofneoliberal reforms, a new view of the role of the state that contrasted with the previous“interventionist state”. However, in the “citizen approach” the state must become theprime regulator, rather than assuming the passive role of “enabling”. The authordevelops his approach by examining examples of local governance anddecentralisation. Bolivia introduced decentralised governance and extensive popularparticipation in the early 1990s, leading Helmsing to conclude that ‘decentralisation, ifwell-resourced, can make a difference’. The “citizen approach” is quite different frominterventionist policies, as the state is involved in regulation of the delivery of servicesto the poor rather than the delivery itself, or for example enabling contacts betweenlocal producers and international buyers. It is also a different form of governance, as isshown by the example of the Porto Alegre participatory budgeting process. Theapproach has advantages, such as the possibility of leveraging additional resourcesand, through localising the tendering of certain infrastructure projects, it generatesopportunities for local producers. Finally, in order to reach the poor, not as “targets”,but as active “citizens” who have a right to development, organisations of the poor arecrucial. Helmsing provides examples of strong indigenous organisations in Ecuador

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and Bolivia and analyses the role of NGOs, traditional trade unions and politicalparties, versus community organisations and management, such as experienced inPorto Alegre and Kerala.

Reuben (Chapter 11), in a similar vein, stresses the role of “civic engagement” in“development” and the importance of civil society in general. Whether in Africa andLatin America, civil society should be considered equally important as the market andthe state. NGOs are ‘just one sub-set’ of civic engagement, often supported by donorsor domestic private funds. Beyond these there is a wide spectrum of other civil societyorganisations, such as labour unions and other professional, economic and culturalassociations. Organisations of the poor mostly suffer from “civic exclusion”, becauseof asymmetric access and connections. The author takes the position that there hasbeen a fundamental change towards ‘multi-layered, highly diversified civil societies’,beyond the traditional forms of class-based interest representation. Also, civil societyorganisations are now more non-membership-based organisations, which derivelegitimacy only from transparency and accountability. Civic engagement caninfluence “the market” by improving access (for the poor), reducing market failuresand influencing the ethics of corporate management. Likewise, civil societyorganisations can be complementary to the state, for example, in public servicedelivery. A “governance crisis” occurs in particular when trust in the state (inproviding public goods and services) is lacking. Governments have differentapproaches towards civil society, which can range from laissez-faire to proactiveengagement, while civil society organisations have strategies varying fromconfrontation to full support or endorsement. As examples of successful civicengagement, Reuben also mentions participatory budgeting in Brazil, financialtracking systems (monitoring allocations to ensure they really arrive at theirdesignated destination) and civil society performance evaluations of public entities.He concludes that, in order to be effective, civic engagement requires an enablingenvironment that includes a regulatory framework, a proper political and institutionalsetting and a civic culture.

Wedel (Chapter 12), the final author in this section, goes beyond the“state-market-civil society” triangle. She focuses on “flex organisations”, which ‘canswitch their status from state to private and vice versa, according to the particularsituation’, in the context of the transition in Eastern Europe. Flex organisations are likechameleons in their behaviour, changing colours when adapting to the environmentcan provide protection. Outsourcing has become popular in the United States and theUnited Kingdom, and there is a worldwide tendency to privatise the delivery of publicgoods and services (and “governance” in a broader sense), as part and parcel of thedominant neoliberal agenda. How does flex organising fit into this? There aredisconnects between government growing by private (or privatised) work force andthe need for accountability and the loss of public control on the processes ofoutsourcing and subcontracting. Wedel uses social network analysis to disentangle thecomplex relationships between formal and informal and between private and publicstructures and processes. In the concrete cases of Poland and Russia, there are informalsocial groupings of elite, called “institutional nomads” and “clans”, respectively, withtheir ‘fingers in a kitchenfull of pies’. The process of privatisation (without

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transparency and accountability) led to an uncontrolled “grabitisation” and theemergence of billionaire oligarchs. Wedel’s research found tightly-knit interlockingnetworks that governed the multi-million western aid to Russia. Furthermore, specialagencies and targeted funds in Poland present ‘myriad opportunities for corruption’.Flex organisations are also found in the West, such as the powerful informal groupingof neo-conservatives in and around the current Bush administration. Improvingtransparency in flex organisations might be possible, but she concludes that theseorganisations are ‘inherently unaccountable’, as they can shift their status within the‘private-state nexus’.

The third section of this volume analyses resource degradation, institutions andconflict (with contributions by Ostrom and Janssen, Salih and Lélé). In particular, itlooks at the type of multi-layered institutions that are needed in resource management,and their role in conflicts and sustainable development.

Ostrom and Janssen offer a detailed analytical piece (Chapter 13) on naturalresources management and complex institutions. Social-ecological systems are seen ashighly complex; simple linear policies cannot successfully intervene in such complexinstitutions. The policies of economic development and environmental protection areboth based on surprisingly similar “top-down” technocratic “mental models” (or“belief structures”), as the authors contend. Since the era of the founding of the BrettonWoods institutions, “development” has been a synonym for “modernisation”. Thebottlenecks encountered in the development process were seen as caused by gaps incapital, resources and technology. Hence, large quantities of foreign assistance havebeen extended as the means to overcome these gaps. Thinking on “development” wasbased on “top-down” solutions. Mainstream economic theory, in particularneo-classical theory, ignored institutions. While growth did occur, poverty remainedwidespread. It was even (more recently) questioned whether development aid helpedor was counterproductive to development. In the field of resource management,top-down and simplistic policy solutions have also prevailed, implemented mostly bycentral governments and backed by “science”. These policies were often contrary toindigenous resource management practiced at micro-levels. The “belief system”behind such an approach is centralistic and technocratic, as policy analysts search forthe “optimal policy”, rather than an understanding of the complexities of the system inwhich the policy is implemented. Ostrom and Janssen analyse social-ecologicalsystems as “complex adaptive systems” as they move through multiple equilibria(between connectivity and resilience, focused on production or innovation forsustainability). They cite the example of the Dutch waterboards, which throughouthistory have been (and still are) successful because of their complex institutionalarrangements and the shared norms that support them within Dutch society. However,in another example, that of Dutch engineering knowledge forcefully transferred toBali, the results were largely negative. This island has a thousand-year history ofmulti-level irrigation. The “top-down” intervention during the Green Revolution yearshad a negative impact because it ignored indigenous culture and knowledge. Theauthors conclude, ‘It is time to declare this belief system bankrupt.’

Salih (Chapter 14) follows suit to investigate the relationship between environmentand politics, in order to discuss whether conflicts arise over resource degradation and

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what is the role of institutions in managing, causing or even aggravating conflict.Conventional wisdom might propose the former causal relationship, but conflict itselfmight also generate environmental degradation. The focus of analysis should thereforebe on “environmental change” rather than degradation, as – according to Salih – thereare likely to be ‘more intense conflicts over a healthy environment than over degradedresources’. The linkage between population growth, environmental degradation andconflict is still popular. However, the author finds it ‘absurd, to say the least’ to claimthat conflicts would be increasingly linked to resource degradation, in particularwithout analysing the political economy of the cause of depletion. He cites variousconflicts that can only be explained by factors such as clan politics (Ethiopia,Somalia), appropriation by a business elite of large areas of fertile land (Sudan) or thealienation of traditional rights of communities (India). Actually, environmentaldegradation is often caused by various factors of intervention, and is not the causeitself of the conflicts that occur. What follows is a detailed discussion of the role ofinstitutions, taking a line similar to Ostrom, citing her statement that ‘neither the statenor the market is the answer to the commons dilemma and the conflicts associated withit’. The role of institutions is complex, as they are able to both cause and manageresource conflicts. However, there are limits to institutions with regard to resourceconflicts, and therefore they ‘should be demystified rather than glorified’.

To conclude this section, Lélé (Chapter 15) contributes with a conceptual andoperational analysis of institutions of resource management, from local-levelcommunity institutions to the state, ending with the concrete design of an institutionalframework for community-based forest management. In order to promote“environmentally sound development”, institutional arrangements must be concernedwith efficiency, sustainability and equity. However, much of the literature on resourcemanagement focuses on only one of these concerns. Institutions can be voluntary orinvoluntary, productive or regulatory, (quasi)state or civil society, etc. Afterdiscussing specific characteristics of eco- and social systems, he concludes that these‘necessitate coordination and regulation of individual actions through rules (andinstitutions that make the rules)’. Institutional arrangements for resource managementare needed at various levels, overlapping and strengthening each other, ranging fromlocal-level self-organised collective-action institutions to the central state itself.Simple “co-management” is clearly not sufficient, and multi-layered institutions arethe obvious answer, Lélé notes. The principles of institutional design are (1) stronglinkages between authority, responsibility and incentives; (2) proper jurisdictionsbetween different levels; and (3) financial viability and maximum transparency.Forests represent a typical mixture of common-pool resources, toll goods and purelypublic goods. Hence, local-level community management systems are mostappropriate for forest resource management, and centralised management systemswould be ineffective. He provides a detailed design for multi-layered forestmanagement, going ‘against the grain’ of the simplistic co- or joint managementinstitutional frameworks. The different institutions need to be able to deal with theharvesting of forest products, resource management, marketing, conflict resolutionand forest conservation. In his design of an appropriate institutional framework forforest resource management, Lélé keeps a close eye on the three basic concerns he laid

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out, namely efficiency, sustainability and equity. He concludes by saying that indeedinstitutions matter, but institutional failure is by no means the only cause of‘environmentally unsound development’.

In a concluding chapter, Opschoor reminds the reader that “development” in theearly post-World War II years was equated with “modernity”. Though there has beenmuch critique of this rather simplistic notion, it seems that with globalisation and thepredominant neoliberal agenda, again a (questionable) uniformity has emerged in theconcept of “development” that is invoked, namely through the implementation of thatagenda and with “good governance”. The author, as part of his public address to thefiftieth Dies Natalis of the Institute of Social Studies in The Hague, discusses brieflythe variety of high-level contributions that were presented at the conferenceGlobalisation, Poverty and Conflict, of which this volume is the final product. Themain topic of his contribution, however, is knowledge and education in development.With the current liberalisation of international educational markets, many providersare active and competing. Nevertheless, there are disadvantages in far-reachingprivatisation and liberalisation, such as a loss of diversity, exclusionary effects forlower-income students, and quality reduction because of cost minimisation. Althougheducation might not be considered a “global public good”, it is a “global public need”,Opschoor ascertains. Actually, the needs in developing countries for higher educationare high, and rapidly growing, but the “knowledge gap” is also increasing between richand poor countries. Globalisation increases demands for different educational systemsfocused on flexible learning and permanent education. He sees a shifting of the centreof gravity of educational programme delivery (especially in the international highereducation system of which the ISS is part), towards the developing (i.e. receiving)countries, and away from its home base in the OECD countries, through institutionalcapacity development and partnerships. Opschoor concludes that we have to movefurther to develop knowledge and promote ‘knowledge-sharing in the field of socialchange and sustainable human development’, emphasising the special roleinternational (“development oriented”) higher education institutes can play in thisprocess.

In summary, this volume presents a collection of high-quality, analytical andpolicy-relevant contributions on current “development” issues. They are overall quitecritical on the current process of globalisation, which since the 1980s – apart fromrapidly expanding trade, capital markets and information streams – has seen continuedwidespread poverty and violent conflicts in many parts of the world. Althoughglobalisation in its current form presents opportunities to certain countries andsegments of populations, it also stimulates inequality and marginalisation. Withoutsteering the current process of globalisation and development, the income gap willcontinue to grow. As Branko Milanovic said in his presentation to the conference, ‘aworld without middle class’ is emerging. Poverty reduction is not a “trickle down”effect of economic growth, since much of the growth is not “pro-poor”. Despite theincreased attention by the Bretton Woods institutions to poverty (with the PovertyReduction Strategy Papers), the “fundamentals” of the adjustment era are still largelyin place, in spite of their questionable poverty reduction performance record.

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Many authors in this volume contend that institutions are of crucial importance, inparticular those institutions that are multi-layered and operating at different levels.Institutions should take into account that development processes and social-ecologicalsystems are highly complex and continuously transforming and adapting. “Top-down”development (or resource management) policies are seen counterproductive, withpossible very negative outcomes. Conflicts can arise in socially unstable situations, inthe absence of appropriate institutional arrangements that can manage them. Conflictscan be caused by resource degradation, but most resource degradation is theconsequence of other factors (such as alienation of rights and resource appropriationby elites), which in themselves form the origin for conflict. In turn, conflict can equallybe the consequence of greed, leading to grabbing of resources. Democracy, civilsociety organisations and local governance are seen as important elements ofsustainable human development. Finally, human capital development is crucial for“development”. Given the increasing knowledge gap between poor and rich countries,human capital is becoming even more important for seizing the opportunities offeredin the process of globalisation.

3. THE CONFERENCE AND THIS READER

The conference Globalisation, Poverty and Conflict, of which this volume is theoutcome, was successfully organised with a team of several colleagues at the Instituteof Social Studies, such as Arjun Bedi, Kristin Komives, Peter Knorringa, PaschalMihyo, Mansoob Murshed and Hans Opschoor. It would not have been possiblewithout the support of many people, such as Martin Blok, Paula Bownas, BerhaneGhebretnsaie, Matty Klatter, Sandra Nijhof, and several other members of thetechnical and administrative staff of the Institute of Social Studies. The assistance ofMichelle Luijben in the language editing of the volume and the editorial supportrendered by Henny Hoogervorst and Esther Verdries of Kluwer Academic Publishershave been invaluable. Finally, the conference was generously sponsored by the DutchMinistry of Education, the Dutch Ministry of Development Cooperation, the EuropeanUnion and the Dutch National Commission for Sustainable Development (NCDO).Their support is gratefully acknowledged here. Agnes van Ardenne, Dutch Ministerfor Development Cooperation, opened the conference, which commenced the dayafter Prince Claus of the Netherlands passed away. In her opening statement shereminded us of one of Prince Claus’ better known theses, ‘You can’t develop people,they develop themselves.’

We hope that this “development reader” will contribute to an improvedunderstanding of the very complex issues that are currently debated in “developmentstudies”. This could stimulate the emergence of innovative and alternative policies andinstitutions that effectively address the enormous problems of poverty and emerging orongoing conflicts in our globalising world.

The Hague, May 2004

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