World Bank 2006 development report

The 2006 World Bank Development Report has been relesed and its title is "Equity Enhances the Power of Growth to Reduce Poverty."

"Equity is complementary to the pursuit of long-term prosperity," said Francois Bourguignon, the Bank's Chief Economist and Senior Vice President for Development Economics, who guided the team that produced the report. "Greater equity is doubly good for poverty reduction. It tends to favor sustained overall development, and it delivers increased opportunities to the poorest groups in a society."

Equity and Development, produced by an eight-member team of authors led by economists Francisco Ferreira and Michael Walton, makes the case for equity, not just as an end in itself, but because it often stimulates greater and more productive investment, which leads to faster growth. The report shows how wide gulfs of inequality in wealth and opportunity, both within and among nations, contribute to the persistence of extreme deprivation, often for a large proportion of the population. This wastes human potential and, in many cases, can slow the pace of sustained economic growth.

Pro-equity policies can bridge these gulfs, the authors conclude. The objective is not equality of incomes, but rather to expand access by the poor to health care, education, jobs, capital, and secure land rights. Crucially, equity requires greater equality of access to political freedoms and political power. It also means breaking down stereotyping and discrimination, and improving access to justice systems and infrastructure.

"Public action should seek to expand the set of opportunities of those who have the least voice and fewest resources and capabilities," World Bank President Paul Wolfowitz says in the foreword to the report. "It should do so in a manner that respects and enhances individual freedoms, as well as the role of markets in allocating resources."

To increase equity within developing countries, the report calls specifically for policies that correct for persistent inequalities in opportunity, by leveling the economic and political playing fields. Many such policies will also increase economic efficiency and correct market failures. These policies include:

• Investing in people, by expanding access to quality health and education services, and providing safety nets for vulnerable groups;
• Expanding access to justice, land, and economic infrastructure such as roads, power, water, sanitation and telecommunications;
• Promoting fairness in financial, labor, and product markets, so that poor people have easier access to credit and jobs, and are not discriminated against in any market.

Examples of pro-equity policy changes include land reform. In the Indian state of West Bengal, for example, a land tenancy reform increased security of tenure for sharecroppers, while also guaranteeing them at least 75 percent of output. Land productivity rose by 62 percent as a result. Increasing poor people's access to credit and insurance has proven to be another effective way of leveling opportunities to increase prosperity. Studies in India, Kenya and Zimbabwe, among other developing countries, show that the poor must pay much higher interest rates than the rich. "We would thus expect the poor to under-invest, certainly relative to the rich, but also relative to what would happen if markets functioned properly," the report concludes.

In addition to domestic reforms, the report also calls on nations to promote greater equity in the global arena, notably in the international markets for labor, goods, ideas and capital. To achieve this, it urges rich countries to allow greater migration for unskilled workers from developing countries, to press ahead with trade liberalization under the Doha Round at the WTO, to allow poor countries to use generic drugs, and to develop financial standards appropriate to developing countries. It also reiterates the importance of increased and more effective development aid.

And so on.... Reports can be downloaded by following the links.