Warren C. Baum and Stokes M. Tolbert
It has been said that to govern is to choose. In the economic arena, the most basic choice that all societies must face in allocating resources is between current consumption of goods and services and investment in future growth. In developing countries, the choice must be made in the face of the deplorably low, often subsistence, level of consumption of a large proportion of the population and the urgent need to invest as the best hope of achieving higher living standards. When the choice is made in favor of investment, it is imperative that the scarce resources be deployed to obtain the maximum benefit. Packaging these investments into projects through the disciplined project approach developed by the World Bank can be a very effective means toward this end. This special article, which is, with minor modifications, to make it self-contained, the final chapter of a new book by the Bank, highlights some of the principal lessons that can be drawn, for the benefit of developing countries, from the Bank’s more than thirty-five years of experience with the project approach.
Economic development, of which project work is an integral part, is a long, slow, and often painful process of learning from experience. Investing in development through projects is subject to all the vicissitudes and constraints that hamper development generally. Development projects take years to prepare and implement. Through-out this time, project managers must confront and deal with the scarcity of human skills and material resources that are synonymous with underdevelopment, with a chronic shortage of funds, and with shifts in political support. They must operate within often fragile economic structures that are exposed to the worldwide forces of inflation and recession and to the unpredictable forces of nature.
Project work is thus highly demanding, and it sometimes seems to demand most from countries with the least capacity to respond. It is more difficult, but also more important, to do project work well when there is little or no cushion to absorb the effects of unsound policies, weak public administration, or unskilled project management. This is true of all types of projects, but particularly of those intended to alleviate poverty and raise the living standard of large numbers of people.
Fortunately, the rewards of project work are commensurate with the demands. Done well, project work pays high dividends. In the postwar era, it has become one of the most potent instruments for promoting economic growth. By setting investment priorities within a national and sectoral strategy, getting the policies right, and combining investments with technical assistance to strengthen institutions and train people, the project approach can enable countries to move more rapidly along the path of economic development.
Doing project work well is as much an art as a science. Drawing on the wealth of World Bank experience, we can identify many of the ingredients of success as well as many of the pitfalls. Developing countries can profit from this experience and thereby telescope the learning process. Some may be able to achieve in decades the economic progress that took generations in the now developed world.
In reviewing the lessons of the Bank’s experience, we have been struck again and again by how obvious many of them seem to be. They often read like little more than the dictates of common sense. But to say that something is obvious does not mean that it is simple. Perhaps simple to understand—except for a few esoteric subjects such as cost-benefit analysis—but not simple to put into practice. If the lessons of experience have not yet been learned, it is not because of irrationality or obduracy, but rather because a powerful constellation of forces makes things what they are and serves as a formidable obstacle to change. Moreover, economic development is a long-term process; when governments change frequently, the continuity of effort that is a sine qua non of development is soon broken. Even in reasonably stable political conditions, public officials are often and understandably preoccupied with more immediate considerations. They are more likely to suffer the short-term political penalties of policy changes such as raising the prices of basic commodities than to reap any political rewards from their long-term benefits.
To take just one example of the difficulty of applying a simple lesson of experience: it is by now widely accepted that developing countries should use the technology most “appropriate” to their circumstances. These circumstances usually include a surplus of low-cost, unskilled labor and a shortage of capital—facts which suggest that the technologies adopted should be relatively labor-intensive. The point seems obvious; which government would knowingly or willingly espouse an “inappropriate” technology? Yet in countless instances developing countries have adopted or retained technologies clearly unsuitable to their circumstances.
Why does this happen? Foreign consultants or advisers may advocate the technology with which they are most familiar. Local engineers, if educated abroad or the heirs of a colonial legacy, may have acquired a similar bias in favor of advanced technology, or they may simply presume, as do their superiors, that what is most modern is best. Special interest groups may favor a particular technical approach, while those who would benefit most from some other approach may be either unaware of the choice or politically disenfranchised. Deep-seated customs and traditions may favor certain solutions and make others unacceptable. Economic policies that overprice labor (through minimum wage or other legislation) or underprice capital (through subsidized interest rates or an overvalued currency) may send distorted signals to decisionmakers. A simple lack of knowledge or reluctance to experiment may limit the range of choice. Bilateral lending agencies may themselves be part of the problem; when aid is tied to the supply of equipment from the donor country—a policy as widely practiced as it is deplored—freedom to choose an appropriate technology may be compromised. With so many factors at work, it is not surprising that a “simple” lesson—such as selecting an appropriate technology—may prove far from simple to apply.
Trying to summarize the lessons of the World Bank’s experience is a daunting task. We can only highlight the more important lessons, with no expectation of doing justice to the many issues and problems that these lessons raise. The presentation takes up, in turn, national investment management, sector analysis and management, the project cycle, and the various dimensions of project analysis. Many of the lessons of sector analysis are not referred to as such, since they underlie the points discussed under the project cycle and project analysis.
No attempt is made to indicate the relative importance of these lessons, although some are clearly more important than others. Not getting prices right, for example, or not providing adequate recurrent funds to operate and maintain project investments can have more far-reaching consequences than not regularly evaluating completed projects. Since the lessons relate to different aspects of investment planning, sector analysis, and project work, it should be possible, at least in theory, to apply them all. But to many officials in developing countries, they may appear to constitute a formidable agenda. It is for each official, knowing the local circumstances, to establish priorities for action at any time. Progress may often be slow and partial, but responding flexibly to changing circumstances, combining rational economic choice with informed political judgment, avoiding the more egregious mistakes, and maintaining a steady pace are the best way to keep the country on the path to sound economic development.