Speakers:
Roumeen Islam, Director, WDR team 2001
Simon Maxwell, Director ODI
Chair:
David Booth

1. Simon Maxwell started off by giving an overview of the WDR 2000/01 on poverty. He summarised the report's three main themes - opportunity, empowerment and security - and went on to look at what is new in this year's report. Among the new entries are the focus on participation; the acknowledgement of poverty as multi-dimensional; redistribution as instrumental to growth; and the need for international action.

2. Although glad the WDR included these important aspects, Maxwell had a major point to raise: How far did this contribute to international concensus? Widely discussed in development debates during the last decade or so, most of these points were made already in UNDP's Human Development Report in 1990. In this respect, the new WDR's most important contribution is towards building a consensus on poverty reduction. It's the messenger that matters, not the message.

3. Unfortunately three things were missing from the report, in Maxwell's opinion:

a)  A rights-based approach. The importance of a rights perspective is that it implies duties as well as entitlements; this changes the nature of the discourse on poverty;
b) Redistribution was too cautiously discussed and rather narrowly defined as market based;
c) And the fiscal implications of the recommendations in WDR had not been considered enough. The danger is that the report will be used very selectively, as one cannot possibly implement all the recommendations for fiscal reasons.

In order to avoid a situation where the recommendations are used on a 'pick and choose' basis, there is a need for guidelines on their operationalisation (like the Poverty Handbook that followed WDR 1990).

4. Concluding, Simon Maxwell remarked that the new WDR is a solid contribution to building a consensus on poverty reduction, but suffers from some significant gaps and is not actually introducing anything new.

5. James Putzel (LSE) commented that the report at least showed a bit more nuance in World Bank thinking. But it was a pity that some of the innovations in the early drafts had been dropped, and particularly that the treatment of politics had been 'sanitised'.

Institutions for markets - markets for the poor?

1. Roumeen Islam started her presentation by posing Simon Maxwell a question: When the European countries were developing, how much redistribution was there and how many rights did poor people have? There's a need for a historical perspective on development; not everything can be changed at once.

2. According to Islam, WDR 2000/01 acknowledges how important markets are to the lives of poor people. Next year's report will follow up on this by making 'institutions for markets' its main theme. The focus of the report will be on institutions that support broad-based inclusive markets. Important questions are: what are these institutions and how do they support markets and people's participation in markets?

3. Producing two slides, one from a vegetable market in Singapore, the other from the New York stock exchange, Islam emphasised the differences between the two. Characteristics of the vegetable market include low risk, exchange for cash and lack of involvement of institutions. The stock exchange is a high-risk market where the products are not standardised and participants do not know each other; thus there is a greater need for laws, regulations and institutional back-up.

4. This later led to some discussion. Marcus Lenzen (Consumers International) argued that a vegetable market can by no means be considered low-risk in micro-economic terms, as people's daily bread depends on it. Andrew Dorward (Imperial College) saw a problem in defining institutions only in formal terms, as informal institutions in most cases are more important to the poor; thus a possible change in informal institutions has larger potential for poverty reduction than changes in formal institutions. Islam replied that the report will cover informal institutions and will in fact explore how a better connection can be achieved between formal and informal institutions, thus improving the poor's access to formal institutions.

5. Roumeen Islam continued her presentation by looking at the institutions that support market development. There is a difficulty in defining institutions, as they are so varied. So, rather than attempting a definition, one should look at their functions. The main functions are: reducing information asymmetries; enabling low-cost contract enforcement and dispute resolution; and enhancing competition.

6. Next year's WDR will focus on users and providers of institutions. Attention will be given to: firms - farmers, financial institutions and non-financial institutions; governments - governance, judicial systems, competition policy and regulation; and society - social inclusion. A central question will be how we can equip people to take advantage of markets and improve their access to markets for services. In order to develop institutions we need to look at lessons learned from history; from experience with transplanted institutions and from social processes and politics.

7. Roumeen Islam concluded her presentation by underlining some central issues: What is the role of the states versus markets? Under what circumstances do public and private actors complement each other? Can countries accelerate the pace of institutional change by borrowing from others? Can competition and experimentation improve the design of institutional structure? When are standardisation and convergence in legal structures important?'

8. In the discussion that followed, Duncan Green (CAFOD) raised his concern that by focusing on institutions for markets one could easily lose sight of the issue of what institutions are good for poverty reduction. Lucia Hanmer (ODI) found the definition of institution worryingly narrow, and asked how the report will deal with issues such as corruption and transparency, and the interface between policy and political systems. Roumeen Islam assured her these issues would be dealt with in the report and were taken seriously by the Bank. Paul Steele (DFID) found it worrying that international markets and market failure seemed to be excluded, and James Putzel (LSE) wanted the Asian financial collapse to be a central concern.

9. Concluding, Roumeen Islam emphasised that the report is not yet written; the team is just at the beginning of the process. Also, 'institutions' can be taken to mean everything, but in order to treat issues thoroughly, it will be necessary to focus on a limited range of questions about institutions and markets, thus inevitably leaving other aspects out.