World Development Report 2014: something old, new, borrowed and blue

Tom Mitchell
7 October 2013
Articles and blogs
When food, fuel and financial crises combined in 2008 to cause sharp declines in economic growth within many developed economies, a tsunami of interest was unleashed in ‘managing risk’ through strengthening resilience, social-protection, shock facilities, food and nutrition security and early-warning systems, among others. This trend has been further underpinned by doomsday projections of the future, where climate change, population growth and resource scarcity are predicted to combine to bring death, destruction and economic ruin at every turn. It is little wonder then that the 2014 World Development Report(WDR), released today, chooses risk management as its focus. But given the outpouring of writing and research on this topic in recent years, what new insights does it bring?

1.      Risk is seen as opportunity. The Report’s focus on ‘risk as opportunity’ is symptomatic of sea change in the last two or three years, where risk-management investments have switched from being cast as some kind of additional burden one begrudges, to being integral to durable development and economic growth. Nonetheless, a background paper we authored for the report highlights enduring difficulties in finding the right incentives to ensure risk reduction is a priority rather than an afterthought.

2.      The role of shocks in pushing people into poverty is central. The report shows that 75% of people in developing countries live on less than US$4 a day. They are at risk of dropping into extreme poverty when faced by shocks. This has considerable implications for the international community’s aim of ending extreme poverty by 2030. Eradicating poverty will mean concentrating on stopping impoverishment brought about as a result of shocks, as well as lifting those already in extreme poverty to higher levels of income to ensure they do not quickly slip back when faced with a crisis.

3.      Risks are dynamic and the past cannot be considered as an accurate guide to the future. The report contains some fascinating regional data on incidence of different types of shocks. Maternal mortality, homicides, natural disasters and recessions are all compared over the last three decades. While maternal mortality and recessions have declined in all developing world regions, the number of natural disasters has risen sharply everywhere and homicides are up in Latin America and Sub-Saharan Africa. The blend of risks that households or governments will face in the future is therefore not clear, pushing forward-looking risk-modelling exercises and scenario planning back into the centre ground of planning and budgetary processes.

4.      Risk management often requires institutions that understand specific, local, risk contexts and trends. The report contains some excellent observations about risk management across scales and the need for more subsidiarity, facilitated by the report’s division into chapters assessing different geographic and governance scales. Rarely before has a robust discussion of the productivity and flexibility of labour markets and macro-economic financial stability been interwoven with analysis of household informal and social insurance and access to credit. This helps to illustrate the point that risk-management options are interlinked across scales and are relevant to a whole range of shocks (the report claims that economic, financial and social outcomes are linked more closely than ever before), but often require the interventions of institutions tailored to understanding specific risk contexts and trends.

Of course there are many elements of the 2014 World Development Report that are not new, and on which one can draw comfort. Take, for example, the four pillars of risk management being labelled as ‘knowledge’, ‘protection’, ‘insurance’ (in its broadest sense) and ‘coping’ and refer to similarities in a recent ODI publication that draws comparisons between risk-management frameworks. Or assess their country ‘index of risk preparation’ which throws up refreshing similar results to those developed in the World Risks Report or by the Global Adaptation Institute, where countries south of the Sahara tend to be most ill equipped. Or consider the discussion of ‘obstacles’ to risk management, where market and governance failures, lack of information and insufficient financial or human resources sit alongside the concern that human tendency is to hide and ignore bad news. Finally, it is good to see the message about risk management needing a system of stakeholders locked together in a virtuous alliance as the most successful way of driving down threats, a strong conclusion of the 2012 IPCC Special Report on Extreme Events.

There are areas of analysis, context and recommendations conspicuous by their absence however. For example, despite highlighting dynamic risk contexts there is precious little analysis of the future. Maybe the report team felt others had cornered this industry – McKinsey or the World Economic Forum for example – but, for the World Bank, an organisation so publicly focused on ending extreme poverty by 2030 and tacking climate change and disaster risks, this missing context and perspective is strange. Also, the excellent set of recommendations is rather light on prescriptions for the international community, mentioning risk sharing between countries and creation of ‘coalitions of the willing’ to tackle climate change, but entirely ignoring the post-2015 development goals. In this regard, I would have expected a clear recommendation that a goal on ending poverty by 2030 should include a set of targets on reducing risks, building resilience and minimising the drivers of impoverishment. This is something that a new ODI report: The Geography of Poverty, Disasters and Climate Extremes in 2030 will be recommending when it is launched next week.

Nevertheless, the report leaves you with a feeling that an ever wider audience is engaging with questions of risk to development, something entirely sensible at a time of diminishing traditional development financial flows and when risks appear to be layered in ever more complex ways. At ODI, we very much look forward to hosting the European launch of the World Development Report on 25 November. Please join us.

Tom Mitchell