The Case For Equity

	Interview with Francisco Ferreira, one of the report's lead authors.

September 20, 2005  — With graphic yet simple examples, a new World Bank report spells out how inequities start at birth and ultimately hamper a country’s development. 

The 2006 edition of the annual World Development Report opens by calling on people to consider two South African children born on the same day in the same year.

One is black, female and born to a poor family in a rural area, while the other is white, male and born to a wealth family in Cape Town.

One child has a 7.2 percent chance of dying in their first year – more than twice that of the other. 

One can be expected to live until 68 – 18 years longer than the other. One is also likely to have 12 years of formal schooling…while the other will be lucky to have one full year in the classroom.

In each case, it’s the young black female child who’s the loser. 

As the World Development Report 2006 points out the opportunities the two children have to reach their full potential are vastly different from the outset, through no fault of their own. And those disparities in opportunities translate into different abilities to contribute to South Africa’s development.

These examples highlight the central message of this year’s World Development Report 2006 - that equity, giving everyone the same chance in life, is vital to achieving economic growth and prosperity.

It’s a message reinforced by the Bank’s Chief Economist and Senior Vice President for Development Economics, Francois Bourguignon, who guided the team producing the report. “Equity is complementary to the pursuit of long term prosperity,” he says.

A Country’s Loss

The report’s lead author, Francisco Ferreira, says if equity’s not taken into account, then a country loses out.

“When a large share of the population is excluded from the main opportunities in development – they don’t have good education; they don’t have the same investment opportunities; their property rights aren’t respected; they don’t even have the same political influence and the ability to influence their governments, then these people innovate and invest less,” Ferreira says.

“A lot of human productive potential of society goes to waste.”

Ferreira says the report shows the playing field is not level in developing countries.

“We have data that shows in some countries infant mortality are four times as high for the poor as they are for the rich. Similar inequalities exist in the coverage of immunization systems and access to good schools, in access to credit and even in coverage of the law.”

The report says on a global scale the inequities are massive.

“The inequities start at birth,” Ferreira says. “Seven out of every 1,000 American babies die in the first year of their lives, but in Mali, the figure jumps to 126 babies out of every thousand.

“And the babies who do survive – not only in Mali, but in Africa and in the poorer countries of Asia and Latin America – are at much greater nutritional risk than those born in rich countries.”

And if the children born in the poorer countries do go to school, their schools are substantially worse than those attended by children in Europe, Japan or the United States.

Combating Elites' Domination

The report points out high levels of economic and political inequality lead to economic institutions and social systems that systematically favor the elite – those with more influence.

Ferreira says it’s a circumstance that undermines a country’s potential for growth and its ability to reduce poverty.

“Inequitable institutions impose economic costs. 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.”

The report says the adverse effects of unequal opportunities and political power on development are all the more damaging because the economic, social and political inequalities are reproduced time and time again across generations.

It leads to what the report calls “inequality traps – where the cycle of underachievement continues.”

Another lead author of the report, Michael Walton, says 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,” he says.

Leveling the Playing Field

In order to boost equity in developing countries, the report calls for policies aimed at leveling the economic and political playing field. They include:

• Investing in people by expanding access to health services (right from birth and targeting the most needy); expanding access to schooling, and providing safety nets for the working poor, those unable to work and special vulnerable groups.
• Taxes for equity – the report advocates broad based taxes – on the basis that leveling the playing field will require adequate resources
• Building equitable justice systems and achieving greater equity in access to land, and infrastructure with a special focus on poor people and poor areas
• More equal access to finance by broadening financial systems
• Promoting fairness in the labor market – so workers are protected and not discriminated against in any market

An example of a pro-equity policy change is 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 also helps level opportunities to increase prosperity. Studies in India, Kenya and Zimbabwe, among others, show the poor pay much higher interest rates than the rich. This means the poor invest less in small businesses than they would if credit markets functioned properly, the report says.

Ferreira says much can also be done globally to help level the playing field and improve the lives of people in the developing world.

“Freer trade, including freer trade in agriculture and textiles, and more and better used aid can all help developing countries,” he says.

The report also advocates helping workers from poor countries overcome existing hurdles in migrating to richer countries – where they could earn more money.

It says allowing greater temporary migration into OECD countries, as well as allowing poor countries to use generic drugs and developing financial standards more appropriate to developing countries should all be considered to help level the playing field.