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World Bank: inequality blocks development
10/2005
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[ World Development Report 2006 ]
World Bank: inequality blocks development
Unequal economic and political opportunities cause development failures, poverty and considerable variations in indicators such as life expectancy, education and income. This is true both within developing countries and between rich and poor countries, as the World Bank elaborates in its World Development Report 2006, which it released in September entitled “Equity and Development”. The document defines social equity as equal opportunities plus protection against extreme deprivation. The authors understand “development” as both economic development in the narrow sense and as human development as defined by the UN Development Programme (see page 359).
The World Bank notes two causes for opportunities being unequal: first, key markets (notably those for capital, labour, land and education) tend to fail and thus exclude disadvantaged groups despite their productive potential; secondly, the unequal distribution of political influence means that those in stronger positions are systematically favoured in the allocation of resources through markets and government institutions alike. According to the report, both of these factors do not only result in inequity, but also in inefficiency.
The fundamental obstacle to greater social equity is thus seen in the unequal distribution of political influence, along with the absence of effective government institutions to correct market failures. This is a remarkable statement for the World Bank, which is traditionally somewhat reserved in passing judgements on political power relations. It would have been consistent for the Bank to release a policy recommendation on how to redistribute political power at the national level. If one follows the World Bank’s analysis, after all, democratisation and overcoming authoritarian structures are essential for achieving greater social justice.
However, the authors of the report do not reach any such a conclusion. Rather, they argue for intervention in the areas of education, health and social security (building up and protecting human capital), land reform, infrastructure and justice (improving access to production factors and justice), regulation of capital, labour and product markets (to grant market access to all). This is how the two objectives of social equity and economic growth can be achieved at the same time, according to the World Bank. The report does indicate how the policies proposed in the various sectors could also result in a broader distribution of political power. However, the authors do not make any recommendations for an immediate policy of democratisation. Instead the report favours reforms to initiate a process which will gradually lead to a broader distribution of political power, and thus to a stable foundation for greater social equity. It is doubtful whether this approach will be successful in authoritarian regimes with considerable economic and political inequalities.
The report also discusses the structural disadvantage which poor countries have on world markets and in international rules and regulations. The World Bank sees a need for reform in, among other things, regulations of migration in a manner consistent with development, reductions of trade barriers, strengthening of the negotiation capacities of poor countries in the WTO and stabilisation of international financial architecture. However, the recommendations in this respect are somewhat vague – too vague, perhaps, to become politically influential.
Matthias Krause
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