World Development Report 2003
WDR 2003 "Sustainable Development with a Dynamic Economy"
Staff Director: Zmarak Shalizi
Announcement by World Bank President James Wolfensohn
Growth in material well-being is a central element in advancing human welfare and reducing poverty. Growth requires investment in productive physical capital. And a development strategy focused narrowly on physical investment and growth can be successful for a period. However, if policies to increase aggregate wealth waste natural resources, inflict unnecessary damage on critical environmental processes, undermine social cohesion, or fail to rapidly reduce poverty, they can generate serious problems. These problems can be ignored for a while, but not indefinitely. Unattended, these social and environmental problems can fester to the point where they gradually or abruptly undermine the scope for improvements in human welfare. Sustaining growth over the long term therefore requires that such problems be addressed integrally in current growth strategies and investment programs. It is better to address these problems well before they become crises, since the lead times can be long.
Examples of such problems are:
(a) Socio-economic inequalities. When communities are relatively isolated, they may be able to sustain very different degrees of total wealth and income inequality for long periods. As globalization removes barriers to the mobility of people, ideas and information, individuals grow more aware of opportunities and living standards elsewhere, and of the nature of many of the obstacles they face. Much milder combinations of inequality and rising expectations than those seen today within and among countries have often fueled social tension and upheaval in the past. (
b) Demographic stresses. Even though there is evidence that developing countries are undergoing a demographic transition from high to low population growth rates, the transition is far from complete. This has a number of consequences. Already, the bulk of the population in many developing countries is young. Even with a moderately low population growth over the next 30 years, there will be an additional 2 billion people to accommodate in developing countries. Improving livelihoods and quality of life for this growing population will require substantial investments in education to create a more literate and skilled labor force, in productive job creation to employ the growing labor force, and in infrastructure and housing to accommodate the service and amenity needs of the new firms and households (many of which will be in urban areas). If large proportions of the population remain outside the mainstream of development they will have no alternative but to eke out an existence from marginal lands or activities, with consequent pressures on both fragile ecosystems and inherited social institutions. The demographic transition varies across countries. Its impact is complicated by the incidence of diseases, including HIV/AIDS, malaria, and tuberculosis which will have profound effects on demographic processes and expenditure patterns in some countries.
(c) Natural resource rents. Valuable natural resources (minerals, forests, etc.) are major sources of revenue in many poor and middle-income countries in Asia, Africa and Latin America. Since the presence of these resources is not the result of human effort, their exploitation can generate large returns at low cost. The struggle for control of these resources is a leading cause of social conflict, indeed of civil wars in many countries. Even in the absence of violence, concentrations of natural resource revenues can contribute to widespread corruption and sustain significant inequalities of income, thereby undermining social cohesion and sustainable development. Strategies for the responsible use of natural resource rents are key to sustainable development.
(d) Environmental degradation. Self-regulating and self-repairing natural processes provide many essential, environmental services at local, regional, and global levels that are taken for granted. However, the scale of human activity is now so great that it interferes with many of these self-regulating and self-repairing natural functions at all levels. Inappropriate management of our interaction with the environment can have costly, unanticipated (and sometimes irreversible) effects on the physical base on which we and other species depend--as for example in the case of the dust bowl in the U.S. in the 1930s, or flooding in China in the 1990s. Most environmental degradation hits poor people particularly hard, with problems of water supply, clean cooking and heating being of special importance.
Our understanding of these problems and their consequences continues to evolve. Human ingenuity can mitigate some of these problems through improved knowledge and technology. Overall, though, the greater challenge for the future is to modify social institutions and behavioral incentives so individuals and communities can better manage human, social, physical, and natural assets over longer time periods. People change society and the environment because they have incentives to do so. Social and environmental problems arise, however, when people are either unaware of the consequences, or are aware, but unconcerned because the burdens fall on others. We have a challenge of social action. In looking at social and environmental issues, the needs of the most vulnerable groups require special attention. The poor (globally and within countries) are least able to protect themselves from the adverse effects of prolonged neglect of environmental and social consequences, or from well-meaning programs to protect the environment and society which do not address the needs of the poor.
As part of the Bank’s continuing commitment to understanding the key drivers of development and appropriate development policy--especially over the medium and long term--, WDR 2002 will address the interaction between growth, poverty reduction, social cohesion, and the environment. From a similar perspective, WDR 2000 Attacking Poverty and the upcoming WDR 2001 Institutions for Markets have specifically addressed the institutional structures needed to facilitate markets and growth, and to spread the benefits of this growth to all segments of society, most particularly the poor--with poverty being defined more broadly than just income. This WDR will be timed in relation to the Rio+10 activities of 2002 and will provide an understanding of sustainable development which goes beyond the narrow focus on a few selected aspects of environmental degradation.
This topic has been selected because it is at the center of much of the Bank's work and research in recent years and focuses on crucial aspects of development and poverty reduction going forward. As in the past, WDR 2002 will be integrated into the work programs of the Bank, and DEC in particular. The WDR team will also work closely with ESSD on both the environmental and social challenges to sustainable development. In addition a consultative network of ‘Friends of the WDR’ from throughout the Bank will be established. ESSD and DEC will work together on external consultations.
The report will be prepared under the general direction of Nicholas Stern, Chief Economist and Senior Vice President, Development Economics. I am pleased to announce the appointment of Mr. Zmarak Shalizi as Staff Director for the WDR 2002. Mr. Shalizi is currently a Research Manager in DEC. He has extensive experience in the Bank having worked in Operations, Networks and DEC. He was chosen for his intellectual leadership in a number of fields, his demonstrated ability to lead productive teams, and to manage fruitful consultations with partners.
The topic of the WDR is a challenging one, and I am sure I can count on your fullest cooperation to make it a success. I hope that the very process of preparing the WDR itself will help enhance our commitment to an understanding of these issues, which are so much at the center of our development efforts.
James D. Wolfensohn