World Bank shifts focus from growth to economic equity

World Bank shifts focus from growth to economic equity

Endy M. Bayuni, The Jakarta Post, Jakarta

Breaking with long-held tradition, the World Bank has shifted its
focus, encouraging countries to make economic equity a primary
objective of their economic development, along with growth. The
bank's move to embrace notions of empowering the poor has also
helped appease its critics among the anti-globalization movement.

Its World Development Report 2006, published last week, rules
that inequality within countries as well as between countries
across the globe has become a major impediment to economic
development and to the well-being of societies.

The report dismissed the widely held belief among
developmental economists that there existed a trade-off between
growth and equity, or between economic efficiency and equality.

The World Bank is one of the major global institutions, along
with the International Monetary Fund, which have been pushing for
the globalization of the world economy. Both are based in
Washington and are largely controlled by the United States as
their major shareholder. Former U.S. ambassador to Indonesia Paul
Wolfowitz, who moved to head the bank in April, is considered a
member of President George Bush's inner circle.

Has the World Bank gone socialist all of a sudden?

"No. Socialism is concerned with outcomes, while our report is
more concerned with processes," Michael Woolcock, one of the
authors of the report, said at a briefing for the Indonesian
media on Monday. The report was officially launched in Indonesia
following its unveiling in Washington last week.

Woolcock said the shift in focus to equity reflected the
change in the way the bank's economists are looking at global
economic problems.

Why should equity matter for development?

"... The primary focus of this report is on the instrumental
relationship between equity and development, with particular
emphasis on two channels: the effects of unequal opportunities
when markets are imperfect, and the consequences of inequity for
the quality of institutions a society develops."

The anti-globalization movement has long criticized the
failure of major financial institutions to address the negative
aspects of globalization, particularly the growing gap between
the poor and the rich, within and between countries.

The World Bank's latest annual report, however, does not call
for a slowing down of economic globalization. If anything, it
reaffirms earlier calls for countries to play by the principles
of the free market, which underpin globalization, as they pursue
the equity objective.

The report uses the example of two South African children born
on the same day in 2000. One is a black girl born to a poor
family, and the other a white boy born to a wealthy family. The
report tries to project their respective paths, the challenges
they face as they grow up into adults and it came to the
conclusion that "the opportunities these two children face to
reach their full human potential are vastly different from the
outset, through no fault of their own."

The black South African girl, for example, faces a higher
chance of dying in her first year, lower life expectancy, far
shorter formal schooling, has less access to clean water,
sanitation and good schools. When the children become adults, she
will have less access to credit.

The World Bank says many people are born into what it calls
"inequality traps" set up through the interaction of political,
economic and sociocultural inequalities.

While recognizing that the problems are "institutional" in
nature, the bank refrained from prescribing total reforms or
overhauls of the economic, social and political systems of
countries to make growth and equity objectives compatible.

Tamar Manuelyan Atinc, another member of the team that wrote
the report, told the briefing that changes should come at the
initiatives of the peoples in those countries, and that the
report could be used as a basis for discussion as countries
sought to find appropriate ways to promote economic growth and
equity.

Are there models to emulate?

Woolcock and Atinc cited Chile in South America, Singapore and
South Korea in Asia and Nordic countries, particularly Finland,
as model countries that have been most successful in pursuing the
double goals of development: growth and equity.

(The full report can be downloaded from the World Bank's
website http://econ.worldbank.org/wdr/wdr2006/).