The Human Capital Project: How the World Bank tries to reinvent itself
One of the World Bank’s flagship programs has just celebrated its 6th anniversary. It is thus an opportunity for Mamta Murthi, the institution Vice-President for Human Development, to take stock and discuss the World Bank challenges in guaranteeing access to health and education for all countries.
By Loraine Bourget and Lucas Nitzsche
Mamta Murthi (Copyright: Dasan Bobo/World Bank)
The number of people living below the poverty line, which had been decreasing for 30 years, rose to an unprecedented level in 2020. Since then, its decline has hardly returned to pre-crisis levels. Could you tell us in a few words how the World Bank is responding to this new rebound in extreme poverty? Are new investment sectors currently being targeted?
Covid has been a huge step back to global poverty reduction. On top of the 700 million people already living in extreme poverty, we estimate that an additional 70 to a 100 million people are at risk of finding themselves in this situation. This is also related to the war in Ukraine, as well as the Covid pandemic and other events.
As the largest multilateral financier of development, this has been a call to arms for our institution. Since 2019, we have expanded access to electricity and health services to about 500 million people, we have helped close to 400 million students get access to education and we have contributed to a reduction in greenhouse gasses of around 200 million tons.
We have stepped up in terms of financial and technical assistance that we provide to developing countries, which allowed us to make available a very large financial package of 170 billion dollars over a 15-month period, which just ended in 2023. It provides resources to both governments and the private sector, as well as guarantees that support foreign direct investment.
““Investing in learning and skills is (…) the bedrock of economic growth and prosperity.””
Since 2017 and the launch of the Human Capital Project, the indicators used by the World Bank seem to be shifting away from purely economic concerns. How did the idea of a more people-centered approach emerge within the institution?
It’s very clear that human capabilities, skills, knowledge and health are central to economic development. A lot of analytical work suggests that the major factors explaining differences in development and in per capita income are human skills, ingenuity and capability. Given the prominence of these aspects of development, we created the Human Capital Project. The network itself was launched in 2018, and has already expanded to nearly 90 countries, including both rich and poor states. The issue of building human capital seems to resonate across the capital income spectrum.
There are three parts to the Human Capital Project: knowledge exchange – the biggest part –, the Human Capital Index and the engagement within countries. The index measures what a child born today can aim to achieve by way of productivity, given the conditions that prevail in his country. As for the engagement within countries, we especially support ministries of finance and planning to think about spending on health, education and social protection as an investment and not as a recurrent cost.
The Covid pandemic showed us just how fundamental investment in the health sector is. Since then, has the global trend been for public spending in this area to rise or fall?
The good news is that during Covid all countries, whether the rich or the poor, expanded their spending on health, first to respond to people who got Covid, and then investing in the vaccines to prevent people from getting Covid. Unfortunately, we now see that the importance of health as a share of total government spending is back at pre-pandemic levels. In low and middle-income countries, overall government spending is under a lot of stress, because of the need to service debt, because of inflation and other crises.
It is particularly true in developing countries, where governments need the most to build their health systems and expand access to healthcare. They are far from universal health coverage, and they need to meet the backlog of care that arose because of Covid. The World Bank is therefore trying to support countries with our own financing, and encouraging them in raising resources. Some measures are good both for health and revenue mobilization. For example, taxes on alcohol or tobacco. We have also been pushing countries to stop using lots of harmful subsidies such as fossil fuel ones. We advocated for reducing those subsidies and putting that money into health and education.
Speaking of the stress that low-income countries have to go through in their finances, could it be possible to consider canceling part of the debts as called for by certain NGOs such as Oxfam or CCFD?
I think this option should be considered, but in a way that is fiscally enhancing. If I may use a very English expression, the devil is in the details: suppose a country is not servicing its debt at the moment because it can’t. Then, it really doesn’t have the capacity to spend more on anything. Canceling the debt is fine, but it is not making additional resources available now for the country. We therefore need to cancel debt in a way that expands the capacity of the country to build long term growth, through education, infrastructure and health. Another option to consider is pausing debt repayments during crisis which is something the World Bank now allows countries to do.
““I don’t think one can have sustainable poverty reduction without thinking about climate action, both mitigating greenhouse gasses and helping countries adapt to climate change.””
The other area showing a significant difference between countries is education. How can the lack of investment in low-income countries impact economic growth and prosperity worldwide?
Investing in learning and skills is investing in human capability, and is the bedrock of economic growth and prosperity. If we don’t invest in today’s children in developing countries and make them into good citizens, parents or workers, it is hard to think of eliminating poverty, giving everybody a good standard of living.
Making it possible for every child to learn not only helps the child, but also the next generation. We know the existence of an intergenerational transmission of poverty, which results from the fact that people are not educated and it’s difficult for them to have well-paying jobs, to be good parents and citizens. Educating a child is one of the best ways of reducing inequality, encouraging national growth, and achieving societal cohesion. We often talk of magic remedies: why aren’t we thinking of education as this sort of magnificent intervention that actually can do so many things? It’s about national prosperity, individuals and their potentials, about reducing intergenerational transmission of poverty, enhancing social cohesion… It can impact on so many multiple dimensions of well-being.
How are environmental challenges integrated into development plans/projects supported by the World Bank?
I’m really glad that one of the outcomes of the Summit for a New Global Financial Pact was to reaffirm that poverty reduction and climate action go hand in hand. I don’t think one can have sustainable poverty reduction without thinking about climate action, both mitigating greenhouse gasses and helping countries adapt to climate change.
That is why all our projects at the World Bank and all our lending are now Paris aligned, and that is central for us. The second thing we are doing is to support countries through a lot of our new diagnostic tool, the “country climate and development report”. The purpose is to help countries understand what their options are if they both want to meet their climate targets as articulated in their nationally defined contributions, and want to meet their development goals. It helps define the policy space and the interventions that support a development path which is consistent with their entity. We have now completed this work in 29 countries, and our intention is to complete this in all the countries that we work in, hand-in-hand in partnership with governments and other actors. In addition to the advocacy, we support governments with technical work and with tools that can reduce harmful subsidies.
Finally, and this is equally important, we want to be leaders on the metrics. There’s a lot of discussion about how much money is going into climate finance, is it effective or not, and this is a very murky area. We announced at the Summit for a New Global Financial Pact that we would like to work with everyone to come up with metrics that are really defensible and can be implemented effectively, so that as a global community we are aware of our contributions.
This interview was published in the november 2023 issue of Émile.
