Equity, defined primarily as equality of opportunities among
people, should be an integral part of a successful poverty
reduction strategy anywhere in the developing world, according to
the World Bank's annual 2006 World Development Report (WDR).
"Equity is complementary to the pursuit of long-term
prosperity," said François 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."
The report, entitled "Equity and Development", was produced by
an eight-member team led by economists, Francisco Ferreira and
Michael Walton. It 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 writes in his
foreword. "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 persistent inequalities in
opportunity, by leveling the economic and political playing fields.
Many such policies will also increase economic efficiency and
address 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 the poor'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 a greater migration
of unskilled workers from developing countries, to press ahead with
trade liberalizations under the Doha Round of the World Trade
Organization (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.
A mix of these policies, applied with close attention to
specific conditions in different countries, can help give poor
people more equal opportunities, at once increasing their economic
contribution to their societies, and reducing their own
poverty.
While pointing out the negative consequences of extreme
inequality, the WDR draws a clear distinction between equality and
equity. Equity, the authors say, is not the same as equality in
income, or health status, or any other specific quality. Rather, it
is the quest for a situation in which opportunities are equal, that
is, where personal effort, preferences and initiative -- and not
family background, caste, race, or gender -- account for the
differences between people's economic achievements.
Elite monopoly of institutions undermines
equity
The report makes the case that equity and prosperity are
complementary, citing examples in which high levels of economic and
political inequality lead to economic institutions and social
arrangements that systematically favor the interests of those with
more influence. Such institutions, it argues, undermine a country's
potential for growth and poverty reduction.
"Inequitable institutions impose economic costs," said Ferreira,
a lead author of the report. "They tend to protect the interests of
politically influential and wealthy people, often to the detriment
of the majority. This makes society as a whole more inefficient. If
the middle and poorer groups are not able to exploit their talent,
society loses opportunities for innovation and investment."
One example of inequitable institutions emerges from a study of
women farmers in Ghana, who do not have secure rights to their
land. Because their access to it is uncertain, the women cultivate
their land every growing season, failing to leave it fallow during
some seasons, as they should in order to maintain its fertility.
They do this out of fear that the land will be taken from them by
individuals of higher status, usually men. And the men readily do
so on the pretext that the women are not putting the land to good
use. The productivity of their land declines as a result, creating
a vicious circle of low productivity and widening inequality.
Breaking out of inequality traps
Inequality traps emerge when inequalities between individuals
and groups are perpetuated over time, within and across
generations. These traps are marked by high child mortality rates
and low school completion rates, unemployment and low-income
potential repeated over generations. Opportunities, large or small,
are passed on from father to son, mother to daughter. This
persistence reduces the incentives for individual investment and
innovation, and weakens the development process. They are
perpetuated, the report says, by interlocking economic, political
and socio-cultural mechanisms, such as discriminatory attitudes and
practices relating to race, ethnicity, gender and social class.
To help societies escape these inequality traps, the report
stresses the importance of strengthening the "agency" of poor and
excluded groups, that is, their ability to press for stronger
mechanisms of voice and political accountability. By insisting on
more checks and balances on the abuse of economic and political
power by elites, the poor and excluded -- often women as a group --
can build alliances with middle classes in support of strategies
for equitable change. Such strategies would serve to undermine
oligarchic dominance and level the playing field in the political
arena, without resorting to the kind of unsustainable populist
policies that have failed in the past.
The report's prescriptions complement the conclusions of the
previous reports, namely those of 2004 and 2005, which focused on
enhancing access to services for the poor and improving the
investment climate.
"We argue that an approach to development that is deeply
informed by equity is consistent with the frameworks in the last
two World Development Reports," said Michael Walton, another lead
author of the report. "Indeed, equity is a fundamental part of the
package needed to achieve empowerment and a better investment
climate. It is also essential to achieving the Millennium
Development Goals."
(China.org.cn September 21, 2005)