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WB report cites Dabhol to underline the power of sub-national forces

C K Arora in Washington

The World Bank appears to have rejected the simplistic theory of trickle-down-growth, commending for the 21st century a ''comprehensive framework for development,'' in partnerships among different levels of governments, the private sector, donor groups and civil society.

''Growth does not trickle down. Development must address human needs directly,'' says its World Development Report 1999-2000, which was released here today.

It warns against the risks involved in globalisation of the world economy and localisation -- the growing political and economic power of cities, provinces and sub-national entities -- the twin forces, which together, will shape the future of the world economy.

World Bank group president James D Wolfensohn says the report deals with their impact on the poor, highlighting "the need for development thinking to move beyond simplistic notions of economic growth to embrace a more comprehensive view of peoples' lives''.

''Globalisation is like a giant wave, that can either capsize nations or carry them forward,'' says World Bank chief economist and senior vice-president, Joseph Stiglitz, who oversaw the team that prepared the report.

The 300-page document says that localisation can take the form of a general demand for broader popular participation in politics such as the democracy movements in Poland and Brazil in the 1980s, South Korea in the 1990s and Indonesia today. Or, it can take the form of demands for greater local autonomy, which may lead to decentralisation or official recognition of a local cultural identity, as in Canada, Spain, Uganda. Either way, localisastion can be a mixed blessing.

When it works, decentralising power to the provincial and local level can result in more responsive and efficient local government. There will be less room for close business dealings, more calls for accountability, and a continuing move away from the authoritarianism practised in various parts of the world between the 1960s and the 1980s, the report predicts.

In this context, the report takes note of the renegotiations of the Dabhol power project in Maharashtra after installation of new government after the defeat of the Congress ministry. As a result of which, the formal cost of construction fell from $ 1.3 million per megawatt to $ 0.9 million per megawatt. However, the delay cost about $ 250,000 per day.

The case shows how the proliferation of assertive sub-national entities, which this report identifies as one of the chief political reactions to localisation, can complicate the efforts of national governments to make binding commitments.

It says localisation can also result in over-burdened local governments being unable to provide local infrastructure and services. And at the extreme, demands for local autonomy can lead to ethnic strife and civil war, says the report.

Globalisation also offers a mix of opportunities and risks. Expanded markets and the spread of technology can lead to higher productivity and improved living standards. But they can also lead to instability and undesired changes: fear of job losses due to the influx of foreign imports, financial instability due to volatile foreign capital flows, and threats to the global environment.

The report says that given current projections, the number of people living in absolute poverty will continue to increase. At the start of the new millemium, an estimated 1.5 billion people will subsist on the equivalent of a dollar a day, up from 1.2 billion people in 1987. By 2015, the number of people subsisting below this international poverty line could reach 1.9 billion.

Moreover, based on recent trends, income disparities between industrial and developing countries will continue to grow.

According to the report, a growing number of the world's poorest people will live in cities. In 1950, the number of people living in cities was about the same in industrialised and in developing countries --about 300 million; by 2000, some 2 billion people will live in cities in developing countries, more than twice the number of urban dwellers in industrialised countries.

As industrial production has shifted to developing countries, air pollution has become an increasingly serious concern. ''For most children in developing country cities, breathing the air may be as harmful as smoking two packs of cigarettes a day,'' the report says.

For example, in Delhi, one out of 10 children aged 5 to 16 suffers from bronchial asthma, which is caused in part by air pollution.

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