World Development Report 2014: Risk and Opportunity - Managing Risk for Development by World Bank (2013) Paperback

by World Bank Group

The past 25 years have witnessed unprecedented changes around the world―many of them for the better. Across the continents, many countries have embarked on a path of international integration, economic reform, technological modernization, and democratic participation. As a result, economies that had been stagnant for decades are growing, people whose families had suffered deprivation for generations are escaping poverty, and hundreds of millions are enjoying the benefits of improved living standards and scientific and cultural sharing across nations.As the world changes, a host of opportunities arise constantly. With them, however, appear old and new risks, from the possibility of job loss and disease to the potential for social unrest and environmental damage. If ignored, these risks can turn into crises that reverse hard-won gains and endanger the social and economic reforms that produced these gains.The World Development Report 2014 (WDR 2014), Risk and Managing Risk for Development, contends that the solution is not to reject change in order to avoid risk but to prepare for the opportunities and risks that change entails. Managing risks responsibly and effectively has the potential to bring about security and a means of progress for people in developing countries and beyond.Although individuals’ own efforts, initiative, and responsibility are essential for managing risk, their success will be limited without a supportive social environment―especially when risks are large or systemic in nature. The WDR 2014 argues that people can successfully confront risks that are beyond their means by sharing their risk management with others. This can be done through naturally occurring social and economic systems that enable people to overcome the obstacles that individuals and groups face, including lack of resources and information, cognitive and behavioral failures, missing markets and public goods, and social externalities and exclusion. These systems―from the household and the community to the state and the international community―have the potential to support people’s risk management in different yet complementary ways.The Report focuses on some of the most pressing questions policy makers are asking. What role should the state take in helping people manage risks? When should this role consist of direct interventions, and when should it consist of providing an enabling environment? How can governments improve their own risk management, and what happens when they fail or lack capacity, as in many fragile and conflict-affected states? Through what mechanisms can risk management be mainstreamed into the development agenda? And how can collective action failures to manage systemic risks be addressed, especially those with irreversible consequences? The WDR 2014 provides policy makers with insights and recommendations to address these difficult questions. It should serve to guide the dialogue, operations, and contributions from key development actors―from civil society and national governments to the donor community and international development organizations.

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First published October 7, 2013

About the author

The World Bank Group (WBG) is a family of five international organizations that make leveraged loans to developing countries. It is the largest and most famous development bank in the world and is an observer at the United Nations Development Group. The bank is based in Washington, D.C. and provided around $61 billion in loans and assistance to "developing" and transition countries in the 2014 fiscal year. The bank's stated mission is to achieve the twin goals of ending extreme poverty and building shared prosperity. Its five organizations are the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID).

The World Bank's (the IBRD and IDA's) activities are focused on developing countries, in fields such as human development (e.g. education, health), agriculture and rural development (e.g. irrigation and rural services), environmental protection (e.g. pollution reduction, establishing and enforcing regulations), infrastructure (e.g. roads, urban regeneration, and electricity), large industrial construction projects, and governance (e.g. anti-corruption, legal institutions development). The IBRD and IDA provide loans at preferential rates to member countries, as well as grants to the poorest countries. Loans or grants for specific projects are often linked to wider policy changes in the sector or the country's economy as a whole. For example, a loan to improve coastal environmental management may be linked to development of new environmental institutions at national and local levels and the implementation of new regulations to limit pollution, or not, such as in the World Bank financed constructions of paper mills along the Rio Uruguay in 2006.

Reviews

[Nils · Rating 2 out of 5]

A pretty baggy affair -- not sharp delineations of the concept of risk or uncertainty or a real attempt to adjudicate different sorts of risks. Perhaps the most useful moment was Box 5 (p20) which defines four categories or risk and the systemic level at which each should be addressed:
"Small idiosyncratic risks" = individuals and households
"Large idiosyncratic risks" = enterprise sector and financial system
"Small Systemic risks" (e.g. food shortages, urban violence) = the community and the state*
"Large systemic risks" (e.g. natural hazards, financial crises) = state and int'l community*

* As these distinctions make clear, however, the Bank punts on the huge debates about exactly where the locus of governance should lie. For small systemic risks, the entire debate is whether it should be the community OR the state that addresses this issue -- is it locally organized self-reliance, or is it socialism? For large systemic risks, the entire debate is whether it should be the national state OR some supranational international institutions (that the national state therefore should cede some measure of sovereignty to).