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The End of Poverty? The World Bank and the Shared Prosperity Agenda

Within our lifetimes, the world could be free of widespread, extreme poverty, replaced instead with shared prosperity and environmental and fiscal balance. That was the vision World Bank President Jim Yong Kim outlined at his first Spring Meetings in Washington, D.C. last week.

In a period of economic uncertainty, social exclusion, and climate and environmental crises, these goals hold immense promise. At the same time, for an institution already grappling with its redefined role in the coming decades, the Bank’s current capacity to support this vision will be tested.

The Common Vision for the World Bank Group that was approved by the World Bank’s Development Committee on April 20th includes two goals the Bank will work towards:

  • alleviating extreme poverty by dropping the percentage of people living on less than U.S.$ 1.25 a day to 3 percent by 2030, and

  • promoting shared prosperity by fostering income growth of the bottom 40 percent of the population in every country

These two core goals are supplemented by the Bank’s understanding that they cannot be achieved without credible action to ensure environmental sustainability, especially on climate change.

The “High-Hanging Fruit” of Poverty and Environment

The challenge the Bank has set itself – and placed before the international community – is enormous. As President Kim and UN Secretary General Ban Ki-Moon said during their remarks together on April 19th, the easy part of the global development agenda has been completed – mostly riding on the coattails of China’s impressive poverty-reduction achievements over the last thirty years. Achieving the goals of the Vision will require tackling the complex, “high-hanging fruit” that remain. But with societies in socio-economic flux and a shifting landscape of development finance, the abilities of our existing institutions, including the World Bank, to usher in this new world will be tested as never before.

At WRI’s Spring Meeting panel, we discussed the extent to which multilateral development banks (MDBs) are mainstreaming economic, social, and environmental considerations. Since there are usually additional costs associated with designing sustainable projects, panelists argued that in many cases the MDBs have to present opportunities as part of a “business case” that balances current needs with wider considerations. This could be linked with incentives provided to both internal staff for them to incorporate sustainability principles into project design, and for client countries.

There was widespread agreement amongst the panelists that both MDBs and client countries will need new tools and strategies to measure and monitor complex variables such as past, current, and future greenhouse gas emissions.

Finally the panel concluded that the World Bank and other MDBs must support countries so that the use of these tools can be “institutionalized,” rather than siloed in individual projects.

The Bank’s 2012 Environment Strategy laid out a roadmap for rolling out these measurements in projects in the coming months, which will be a promising start on the climate-related aspects of sustainability.

Turning the Common Vision into Reality

A shift in the way the World Bank tackles poverty and shared prosperity will only have the desired effects if it catalyzes and coalesces efforts by other lenders and institutions. Whereas the Bank may have once been the sole source of development finance for many countries, it now operates in a crowded landscape. However the institution still serves as a source of best practice, on social and environmental safeguards and as a conduit for international climate finance. In other words, what happens at the Bank has broader implications.

Forthcoming WRI research will look at how the Bank is incorporating aspects of sustainability into its projects – those that are working well and those that will need more attention in the future. Endorsing the Common Vision is an important step for the World Bank. Moving it into reality will require a courageous shift in perspective at the lending level--to consistently prioritize the needs of the poor, and to do so by integrating climate change considerations at all levels.

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