37250 \ B () I T TIll.\.) I \.) S I ].: he World Development Report 2006 argues that T equity is an important consideration in formu - 1ating international development policies and practices. It examines primarily the relationship between equity and economic growth as a means to an end, and maintains that equity, understood as equality of opportunity and avoidance of extreme deprivation, will, in the long run, foster prosperity. Following on the findings of the WDR 2006, this edi - tion of Development OUTREACH features a speCial report which further explores how greater equity and growth can be achieved through the design and implementa - tion of the right kinds of policies in various regions of the world. Central to this discussion are the local and international institutions that can help promote equity. Also explored are ways of increasing the democratic participation and representation of the disenfranchised in government. Recently, in his opening address at the Annual Bank Conference on Development Economics, which took place in St. Petersburg, Russia, Fran~ois Bourguignon, the Bank's Senior Vice President and Chief Economist, cited the finding of the World Development Report 2006 and urged the international community to help prevent elites from blocking the institutional reforms needed to achieve greater equity, when these changes are against their interests. This specific concern is echoed in two articles of the Development OUTREACH special report. Kenneth Sokoloff discusses how dominant groups in Latin America have maintained political power in the course of history, fostering their own interests, and how this situation has slowed down the advance of democratic institutions and, consequently, economic growth in comparison with the countries of North America. Vijayendra Rao examines the phenom- enon of "inequality traps," which he describes as "sit- uations where ... dimensions of inequality (in wealth, power, and social status) interact to protect the rich from downward mobility, and to prevent the poor from being upwardly mobile." I hope that this Development OUTREACH speCial report will contribute to an already stimulating inter- national debate on the important issue of how expand- ed opportunity and inclusion of the excluded can ben - efit us all. Sunetra Puri EX ECU TIVE EDITOR VOLUME EIGHT, NUMBER ONE"" FEBRUARY 2006 PAGE 11 PAGE H PAGE 27 SPECIAL REPORT EQUITY AND DEVELOPMENT 2 Fostering Greater Equity 21 Equality and Efficiency: What history Guest Editorial teaches us about the trade-offs PETER LINDERT GIOVANNA PRENNUSHI , FRANCISCO FERREIRA, AND MICHAEL WALTON The article shows that it is possible to both promote equality The authors argue that greater equity is a key ingredient and achieve economic growth through pro-growth strategies. of long-term prosperity. 24 Social Equity in China: Building a 7 Addressing Unequal Economic "xiaokang" society in an all-round way Opportunities: A case study of land LU MAl AND CALLA WIEMER tenure in Ghana China is committed to completing the process of building a MARKUS GOLDSTEIN AND CHRISTOPHER UDRY "xiaokang" (moderately well-off) society through reforms. This article traces the connection from property rights over land to agricultural investment and productivity in Ghana's 27 Tackling Roma Exclusion in Europe Eastern Region. DENA RINGOLD Efforts are underway, through the Decade of Roma Inclusion 10 On "Inequality Traps" and Development program, to overcome centuries of entrenched poverty and Policy discrimination of one of Europe's most vulnerable populations. VIJAYENDRA RAO 31 Ensuring Access to Low-Cost Drugs in a "Inequality traps" describe situations where dimensions of inequality interact to protect the rich from downward mobility, Patent-Protected World and to prevent the poor from upward mobility. JEAN O. LANJOUW The author discusses ways of balancing patent protection with 14 Political Inequality in Latin America: policies that make drugs accessible to the poor. A historical perspective KENNETH L . SOKOLOFF How political inequality affects development is demonstrated 36 BOOKSHELF by comparing the historical experiences of the societies of the Americas. 38 KNOWLEDGE RESOURCES 18 The Scandinavian Model and Economic 40 CALENDAR OF EVENTS Development KARL OVE MOENE AND MICHAEL WALLERSTEIN The authors argue that the Scandinavian model is not an end state, but a development strategy that can be applied to developing countries around the world . FIGURE 1: INFANT MORTALITY RATES VARY GREATLY WITHIN AND ACROSS COUNTRIES - 1 Inlant mortality rate per 1,000 live births 1 rates, which vary from ~5 per 1000 live births in Colombia to Greater equality of opportunity is good almost 150 per 1000 in Mozambique-almost six times as for development much. The bars indicate, for each country, the infant mortali - ty rates for children whose mothers have no education (at the THE REPORT PRESENTS two main reasons why inequities, in top) and for children whose mothers have secondary or high- addition to being unjust, are detrimental to development. er education (at the bottom) . The differences are striking: in First, in the presence of market imperfections, individuals some countries, such as El Salvador, children of illiterate with power and wealth are able to exploit markets to their mothers are four times more likely to die before their first advantage while others are unable to fully use their talents and birthday than their more fortunate peers- through no fault of potential. The poor may have limited access to credit, or their own. access it only at very disadvantageous rates. Differences in the When economic, political and socio -cultural inequalities opportunity cost of capital across social groups leads to an reinforce one another, individuals belonging to excluded inefficient allocation of productive resources, and to wasted groups may be caught in Hinequality traps". They experience development opportunities. Second, narrow, powerful elites barriers to access and participation that persist over genera- tend to put in place and maintain economic institutions that tions, leading to sustained inefficiencies and performance benefit only themselves, at the expense of the wider public. below potential. In his article, Vijayendra Rao explores in In their article, Markus Goldstein and Christopher Udry depth the interrelated economic, political, social and cultural illustrate one of the many mechanisms through which power mechanisms whereby inequality traps persist over time. combines with market imperfections to produce inefficient results. They describe how a system of land tenure in Western 4 Development Outreach WORLD BANK I NSTITUTE Ghana that is shaped by local power structures leaves large that compressed wages to increase employment. profits unexploited for those who do not have power-most Where there are trade - offs between equity and efficiency, notably women. The authors also note , however, that the sys - looking at policies through an equity lens helps to emphasize tem plays an important safety net role. the longer-term benefits of equity and to move beyond the Kenneth Sokoloff focuses on the second mechanism, false dichotomy between "policies for growth" and "policies namely the capture of institutions by elites. He discusses how for equity". Economic growth is an aggregation of income dominant groups in Latin American countries have histori - changes along the distribution, and all policies have differen- cally managed to maintain a disproportionate share of politi - tiated impacts along that distribution. Based on his award- cal power, when compared to their winning book Growing Public (~oo4) North American counterparts . This and his Presidential Address to the concentration of power has contributed Economic History Association, Peter to slowing the advance of institutions- Lindert expands on the issue of equi - such as universal suffrage, the effec - ty-efficiency trade - offs. He argues tiveness of local government, and the that countries need not adopt policies provision of universal access to educa- that promote growth at the expense of tion- that might threaten the status of equity and presents a checklist to find dominant groups, but which also policies that are anti -growth and anti - proved to be key ingredients in subse - poor and that could be changed with quent growth. benefits in terms of both efficiency and equity. Policies can. bring about The importance of equity for long- greater eqUity term prosperity is apparent in many countries today, including China. In AFTER DISC USSING the reasons why their contribution, Lu Mai and Calla unequal opportunities hinder develop - Wiemer describe the growing divides ment, the WDR ~oo6 discusses what between rural and urban areas and can be done to bring about greater equi- between inland and coastal regions. ty. The report advocates an approach to Building on the China Human determining development priorities Development Report, they suggest dis - based on bringing more equal opportu- mantling barriers to the mobility of nity from the bottom up: public action rural households to cities, so migrants should seek to expand the opportunity can take advantage of economic sets ofthose who, in the absence of pol - opportunities, while at the same time icy interventions , have the least providing health and education pro - resources , voice and capabilities. grams specifically aimed at them, to Achieving this may, however, involve ensure that they and their families can reducing the privileges of those who enjoy greater well- being. The authors reap special benefits from existing also stress the importance of fostering institutions and policies. Such a focus greater public participation, of would aim to level the playing field in enhanCing transparency, and of anti - the crucial areas of human capacities; corruption efforts. justice and the rule oflaw; access to land Where inequality traps involve and infrastructure; and in the broad social and ethnic discrimination, spe - functioning of markets and the macro - cific policies (such as some kind of economy. Consistently with what is affirmative action) may be called for. argued in Rao's article, the report takes Dena Ringold describes recent efforts the view that there is no single recipe to overcome discrimination of Roma that can work everywhere. What will minorities in Central and Southern work in each country depends on context- institutions, cul - Europe. The keystone of these efforts is a fund to help inte - ture, politics- and state of development. grate Roma children in schools. Nevertheless, examples can be instructive, and something The WDR ~oo6 also examines the functioning of global can always be learned from the experience of other countries. markets for labor, capital, goods, and ideas, and finds that In their contribution, Karl Ove Moene and Michael certain aspects of their governance tend to favor rich coun- Wallerstein argue that Scandinavian countries can be a useful tries, to the detriment of those where most poor people live. model. They dispel the notion that Scandinavian pro - equity Actions that would bring about greater global equity include policies arose from homogeneous societies with a preference progress on removing barriers to trade and agricultural subsi - for equity; rather, equity arose as a result of a set of policies dies, greater avenues for legal migration, and intellectual FEBRUARY 200 6 property rights protection that does not place drugs out of the trade talks; and slow (if any) progress on global governance. reach of poor people. In her contribution, the late Jenny Pro - equity actions will have a greater chance of being imple- Lanjouw describes a proposal to enhance access to drugs in mented if the governance mechanisms of international insti- poor countries, at effectively no cost to the incentives for tutions enable poor countries to participate more effectively. innovation by large pharmaceutical companies. While no one knows how to engineer change, we do know that some factors playa role. Equity-enhancing changes in How does change occur? policies and institutions can come about through government action, informed leadership, and grassroots mobilization. CHANGING DOMESTIC POLICIES and institutions in a pro- Rigorous and unbiased analysis and research can help inform equity way is difficult. Vijayendra Rao reminds us ofthe need to alternatives, contribute to a more constructive debate and, "design public action in ways that foster greater ' equality of hopefully, to the adoption of better policies. We see the arti- agency' with respect to social hierarchies." Policies should try cles contained in this issue of Development Outreach as part of to compensate for the lack of voice of the excluded. One exam- that process, and hope that you will enjoy reading them. pIe is to expand democratic participation at the local level, as in the participatory budgeting process developed in Porto Alegre, Giovanna Prennushi is Lead Economist with the Poverty Reduction Brazil. But success requires some preconditions: transparency, Group, The World Bank. effective inclusion, methods to resolve conflicts as they arise Francisco Ferreira is Lead Economist with the Development Research from participatory processes and maintain dialogue. Group, The World Bank. Changing global policies and institutions is also difficult. Michael Walton is Lecturer in International Development at the The current global context is not encouraging, and rising Kennedy School of Government, Harvard University. demands for greater equity are not being met. Against some modest increases in aid over the last two years and some steps made by the G8 towards full debt cancellation for the poorest countries, we continue to witness widespread tolerance of human rights abuses; near-complete failure to move ahead on A G...OBAL SEMINAR FOR SENIOR Pol.JcYMAKERS Capital Flows and Global External Imbalances Paris, France, April 3-6, 2006 With global current account imbalances having widened to unprecedented levels and oil prices remaining high, the global economy is faced with down- side risks. This policy seminar pro cutting edge analysis of the current issues in managing capital flow volatility, while discussing causes and implications of the global imbalanc~ d policy options for macro stability. It first discusses stylized facts on ~ capital flows and global imbalances and implications to developing cOUlltries. Financial sector issues, herding and contagion, and sovereign debt debt crises are then discussed in the context of imbalanced external ~ s. The third module moves on to discuss factors determining the q.ietrlal positions of various groups of countries including the exchange .tate arrangements: monetary unions, pegged exchange rates and th~ ilaplications. The last module of the seminar focuses on reform of in~n81 financial architecture, and policy options to deal with the glob . d their correction. CONTACT Task Manager: Yan Wang Tel: 1-202-4581411, fax 1-202-676-9810 Program Assistant: Diane Billups Tel: 1-202-473-5818, email: dbillups@worldbank.org http://www.worldbank.orglwbilcapitalflows 6 Development Outreach WORLD BANK INSTITUTE Addressing Unequal Economic Opportunities A case study of land tenure in Ghana MARKUS GOLDSTEIN rights lower the certainty of reaping the returns. If property AND CHRISTOPHER UDRY rights are not the same for all, the distribution of returns will be skewed to those who have the power to enforce their rights . INSTITUTIONS EVOLVE . As they do, their impact on the dis- We examine this relationship in the context of agriculture in tribution of economic opportunity changes. One of the pri - Ghana's Eastern Region. Our work traces the connection from mary ways in which institutions matter for economic opportu- a set of complex and explicitly negotiable property rights over nities is their role in defining property rights. These property land to agricultural investment and, in turn, to agricultural rights, in turn, determine incentives for investment. Weak productivity. Using survey and focus group data, we find that FEBRUARY 2006 7 while the land tenure institutions may have some benefits, they Africa is farmed under shifting cultivation, so fallowing result in drastically lower productivity for those not connected remains the most important investment in land productivity- to the political hierarchy (which includes most women). despite the fact that it may weaken land rights. The complexity and flexibility of property rights in West Land transactions and land rights Africa is apparent in our study area inAkwapim, Ghana. Most of the land cultivated by farmers in these villages is under the ulti - I N MUCH OF AFRI CA. explicit land transactions- sales, cash mate control of a paramount chief and is allocated locally rentals , sharecropping- have become more common over through a matrilineage (abusua) leadership. This is not to say recent decades. However, the consensus of the literature is other forms of ownership/ contracts over land do not exist- that "the commercialisation ofland transactions has not led to sharecropping and other rental contracts coexist, but land allo - the consolidation of land rights into forms of exclusive indi - cated through the abusua is the dominant form of land tenure. vidual or corporate control comparable to Western notions of While individuals may have rights to the use of some land private property" (Berry 1993, 104) . Instead, land "is subject as a result of their membership in an abusua, this right does to multiple, overlapping claims and ongoing debate over these not define which individual member of an abusua will culti - claims' legitimacy and their implications for land use and the vate which particular plots. Individual claims over land over- distribution of revenue " (Berry, ~001, xxi) . Individuals' lap. Which person ends up farming a plot is the outcome of a investments in a particular plot might in turn influence their complex, sometimes contentious, process of negotiation. claims over that piece of land in complex patterns: "individu- Moreover, land rights are multifaceted. The act of cultivating a ally rewarded land rights are further strengthened if land con - given plot may- or may not- be associated as well with the verters make long-term or permanent improvements in the right to the produce of trees on the land, the right to lend the land, such as tree planting. Land rights, however, tend to plot to a family member, the right to rent out the land, the become weaker if land is put into fallow over extended peri - right to make improvements, or the right to pass cultivation ods. " (Quisumbing et al., ~001, 55) . rights to one's heirs. A person's right to establish and main- In an environment where fertilizer is expensive, land is tain cultivation on a particular piece of land, and the extent of relatively abundant and crop returns sufficiently low, fallow - her claims along the many dimensions of land tenure are ing is a primary mechanism by which farmers increase their ambiguous and negotiable . As a consequence, "people's abil - yields . A significant portion of the agricultural land in West ity to exercise claims to land remains closely linked to mem- 8 Development Outreach W O RLD BAN K IN ST I TUTE bership in social networks and participation in both formal the poverty line. The productivity gain which would result from and informal political processes" (Berry, 1993, p . 104) . increased security in tenure in these four regions would cover approximately 13 to 19 percent of the national poverty gap. L and tenure is a political process Given that maize and cassava are central subsistence crops in Ghana, the poverty implications of improved tenure are decid - T HIS G ENE RA L PATT ERN of negotiated access to land through edly large. membership in a corporate group is found elsewhere in Ghana, through many parts of West Mrica and in some other A safe ty ne t of sort areas of Mrica, although there is considerable variation in the details. Summarizing the conclusions of several studies from This would seem to be a simple case for the formalization of across the continent, Bassett and Crummey state: Hthe process land tenure rights, with careful policy attention to remove the of acquiring and defending rights in land is inherently a polit- role of political influence from tenure security. However, no ical process based on power relations among members of the institution arises in a vacuum. We took the initial results from social group. That is, membership in the social group, is, by our research back to the survey area to discuss them with focus itself, not a sufficient condition for gaining and maintaining groups. The focus group participants revealed that one of the access to land. A person's status ... can and often does deter- central roles of the abusua based land allocation process was mine his or her capacity to engage in tenure building." to provide land for those in need. The efficacy of the system in (Bassett and Crummey, 1993, p . ~o) this regard is fairly clear-even the poorer individuals in these In our sample, there are a number of individuals (about ~6 communities have some land to farm . However, the exact def- percent of men and percent of women) who hold an office of inition of need was quite ambiguous . Indeed, several focus social or political power in their village or abusua . Typical group discussions led to the argument that fallowing land sig- offices include lineage head (abusuapanyin) , chief's nalled that one did not need the assistance of the abusua. spokesman (okyeame), lineage elder or subchief. These are Further statistical investigation seems to support this argu - not formal government positions. They instead represent ment of imperfect information as to the need for land: those positions of importance within local political hierarchies. In connected to political power leverage this power to communi - our initial examinations of the quantitative data, we found that cate need without having to continuously cultivate their land. these individuals were much more likely to make the most Those less well - connected cannot stop to fallow as often for it important investment in this shifting cultivation agrarian sys - would signal that they are no longer in need of assistance. tem: leaving land to fallow. Indeed, the initial, large differ- In the end, this system presents a thorny problem for pol - ence we found in yields between plots controlled by men and icy makers, particularly as population pressure leads to short - those controlled by women disappeared once we controlled er fallowing periods. The abusua based land system seems to for fallowing. The major variable that explained fallowing was serve as a safety net of sorts, making sure that the everyone the fact that an individual held an office- office holders, most who needs land gets at least some. However, the cost associat- of whom are men, fallow their land significantly longer than ed with this safety net is large, land is farmed inefficiently others. Further statistical examination reveals that this is not with large losses of potential profits for those (many of whom a result of wealth nor the quality or quantity of land- it is due are women) not well connected to the political hierarchy to their position in the social hierarchy. which allocates the land. This insecure tenure comes with significant costs. For most farmers (i.e. the non- office holders) an additional year of fal - Markus Goldstein is an Economist with the Poverty Reduction Group, lowing would be associated with increased steady-state output The World Bank. of between ~o and 50 percent. This is indicative of how the Christopher Udry is the Director, Economic Growth Center, and the political system of land tenure is leaving large realms of profit Henry J. Heinz II Professor of Economics at Yale University. unexploited for those who lack the proper connections. A speculative calculation can help to put this local level result This artic le is based on the Yale University working paper, "The Profits of Power: Land Rights and Agricultural Investment in Ghana." The paper can into broader perspective. Approximately 434,000 hectares of be found online at http://www.econ.yale.edu/-cru2/pdf/goldsteinudry.pdf Ghana's farmland is planted to maize and cassava and located References in four Regions where we might expect the land tenure system Bassett, T. and D. Crummey (993). Land in African Agrarian Systems. to be similar. If the yield losses from inefficient fallowing are Madison : University of Wisconsin Press . similar on all of this land, then we estimate the aggregate costs Berry, S. (993). No Cond ition is Permanent: The Social Dynam ics of at 198 billion cedis to ~9~ billion cedis or 1.4 to ~.1 percent of Agrarian Change in Sub-Saharan Africa . Madison: University of Wisconsin the 1997 GDP. We can take another cut at putting this figure Press. into perspective by looking at the depth of poverty. Using 1998 Berry, S. S. (2001) . Chiefs Know their Boundaries: Essays on Property, Power national household survey data, the poverty gap is estimated at and the Past in Asante, 1896- 1996. Portsmouth: Heinemann. BerryOl ; ID: 2680. 14 percent of the poverty line (the poverty gap is a measure of the mean level of the poor below the poverty line) . We can use Quisumbing, Agnes R., Ellen Payongayong, J.B. Aidoo, and Keijiro Otsuka . ' Women's Land Rights in the Transit ion to Individualized Ownersh ip: this figure to calculate the aggregate poverty gap (i.e. the Implications for the Management of Tree Resources in Western Ghana,' amount which, if perfectly targeted, would bring all the poor to Economic Development and Cultural Change, 500): 157- 182. 2001. FEBRUARY 2006 9 On "Inequality Traps" and Development Policy BY VIJAYENDRA RAO the poor are poor," an inequality trap would say that "the poor are poor because the rich are rich. " THERE ARE INEQUALITIES IN THE WORLD. among individ- Inequality traps are similar to poverty traps in that they uals and among groups, that get reproduced across genera- serve to keep people poor and destitute. But they differ from tions . In the World Development Report 2006 these are referred them in that they refer to a reinforcing system of economic, to as "inequality traps." But how does an inequality trap differ political and social structures that lead to what social scientists from a poverty trap? Speaking a little facetiously- if a poverty have called" durable inequality" (Tilly 1998). Poverty traps tell trap describes a situation where "the poor are poor because us about situations where people at the low end of the income 10 Development Outreach WORLD BANK I NSTITUTE distribution are stuck in a cycle of pover- ty because a lack of resources generates more resources constraints. Inequality traps, on the other hand, describe situa - tions where the entire distribution is sta - ble because the various dimensions of inequality (in wealth, power and social status) interact to protect the rich from downward mobility, and to prevent the poor from being upwardly mobile. An easy way to see this is to consider the status of women in patriarchal soci- eties. Women are often denied property and inheritance rights. They also have their freedom of movement restricted by strictly enforced social norms that serve to create separate "inside" and "outside" spheres of activity for women and men respectively. The consequence of this is that girls are less likely to be sent to school, and women less likely to work outside the home. This reduces the options for women outside marriage and increases their economic dependence on men. All this not only makes women earn less than men, it also makes them less likely to participate in important decisions both within and outside the home. In other words men are "rich" while women are "poor. " This nexus of unequal social and eco - nomic structures tends to be eaSily reproduced. If a woman has not been educated and has grown up to believe that "good," "decent" women abide by existing social norms, she is likely to transmit this to her daughters and to enforce such behaviors among her daughters-in-law. Thus an a dominant group defined by race or caste, while tenants inequality trap is created which prevents generations of belong to a subservient group. Since the members of these women from getting educated, restricts their participation in groups face severe social constraints from inter-marrying, the labor market, and reduces their ability to make free , group -based inequalities are perpetuated across generations. informed choices and realize their full potential as individu - Economic and political inequalities do not occur in a vacu- als. This reinforces gender differences in power that tend to urn. They are embedded within unequal social and cultural persist over time. institutions. The social networks that the poor have access to The unequal distribution of power between the rich and the are substantially different from those that the rich can access . poor -between dominant and subservient groups, helps elites For instance , a poor person's social network may be primarily maintain control over resources. Consider an agricultural geared towards survival with limited access to networks that laborer working for a large landlord. Illiteracy and malnour- would link her to better jobs and opportunities. The rich on ishment are likely to make him unable to break through the the other hand, are bequeathed with much more economical- cycle of poverty. But he is also likely to be heavily indebted to ly productive social networks that facilitate the maintenance his employer which puts him in the landlord's control. Even if of economic rank-for instance parents are able to use their there were laws in place that would allow him to challenge his social connections to ensure that their child gets into a good landlord's dictates, being illiterate he would find it particular- school, or call up a few good friends to make sure that their ly hard to navigate the political and judicial institutions that son gets a good job, while poor parents are more subject to the would help him assert his rights. In many parts of the world vicissitudes of chance . Connections open doors and reduce this distance between landlords and laborers is compounded constraints. by entrenched social structures-landlords typically belong to Thus, social networks constitute a form of "capital" which FEBRUARY 2006 II is unequally distributed. access to economic opportunities, to tives, and in particular, assure that Social networks are closely allied with legal rights, to opportunities to make poorer, subordinate groups have cultural factors . By "culture" we mean their voices heard, and to a reduced risk voice and opportunities for redress. those aspects oflife that deal with "rela- of violence. tionality"- the relationships among indi- This has two important implications Implications for policy viduals within groups, among groups, for public action: and between ideas and perspectives. · from a focus on individuals to a DEVELOPMENT INITIATIVES need to Subordinate groups may face adverse be shaped in ways that recognize the "terms of recognition" (Appadurai relative disempowerment of weaker or 4oo4)- the cultural framework within subordinate groups in cultural, eco - which they negotiate their social lives. nomic and political terms . This One obvious expression of this is approach involves understanding how explicit forms of discrimination which context matters in ways that are condi- can lead to an explicit denial of oppor- tioned by such inequalities and the tunities and to a rational choice to need to design public action in ways invest less on the margin. that foster greater "equality of agency" But it can also be less overt. A per- with respect to social hierarchies , son born into a low social class or an including those involving public, pri - excluded group may internalize the vate and international actors. dominant group's value system. Religious beliefs may help in this Policy design process of internalization- women may At the level of the policymaker, a point take on gendered beliefs on their eco- of departure is the recognition that nomic and social role, discriminated actions occur within unequal social, cul- castes may absorb the view that upper tural and political structures. Since a core castes have on their "inferior" status. concern is the lack of influence or agency This may also be transmitted via insti- of poorer or excluded groups, policy tutionalized mechanisms such as choices to compensate for this are likely schools- a discriminated race may face to be an important element of strategy. a "stereotype threat" where they inter- To understand local conceptions of nalize the view that the dominant race well -being the recipients of public has on their ability to perform in stan- action need to be engaged as central dardized tests, or in occupations that agents in the formation and implemen- have historically been controlled by tation of policy. This implies that the dominant groups (Steele 1999). This theory and practice of development will can affect a discriminated group's be more difficult and, necessarily, more "capacity to aspire" (Appadurai)- the participatory. However, it also implies better- off are better able to navigate that participation in itself is not a their way towards potentially actualiz- panacea, preCisely because of the social ing their aspirations. It also implies inequities inherent within group -based that "voice," the capacity of an individ- relations. This, consequently, leads to a ual to influence the decisions that proposal that should be self- evident, but shape their lives, is also unequally dis - is rarely put into practice in multi -later- tributed and that "effort" and "ability" al agencies: social and historical analysis are not necessarily exogenous (Rao should inform policy design just as much and Walton 4oo4a, for more on such as economic analysis, and they should be "inequalities in agency") . placed on an equal footing. Thus, economic, political, cultural and social inequalities are usually cor- Learning by doing and the related and reinforce one another. An incorporation of context individual born a woman or into a dis- recognition that relational and Political and culturally informed pub - criminated racial group or region is not group -based phenomena shape and lic action is not easy. The process only more likely to be poorer than influence individual aspiration, requires paying close attention to context someone born into the majority group , capabilities, and agency; in shaping interventions both globally he or she is also more likely to be at the · to provide for debate and decision- and locally. It therefore argues against receiving end of material and symbolic making when there are several dis- the idea of "best practice "- that an inter- power structures that restrict their tinct culturally determined perspec- vention that worked wonders in one con- 12 Development O utreach WORLD BA N K IN STITUTE text would do the same in another. Good inter- ventions are very difficult to design ex-ante . A cultural lens thus teaches us that public action, particularly when it is participatory, aspira- tion-building and aware of "common-sense", requires an element of experimentation and learning. Ironically the best practice may be the absence of a best practice. Projects need to be closely monitored and evaluated, not just in terms of their impact but also in the processes that led to that impact in order to understand how to they can be shaped and modified in a manner that matches the diversity inherent in the local cultural context. All projects will make mistakes, but so long as these mistakes are recognized and the lessons from them incorporated into the next stage of design, this helps incorporate common sense into the development process. A key lesson is that development is not easy. It is, at its core, a political, social and cultural process though it also applies to the whole range of external actors, that requires gradual learning from the ground -up in order to from bilateral donors, to UNESCO, international non-gov- be effective and sustainable. A development culture that ernment agencies such as OXFAM and multinational compa - forces projects to be completed in ~ or 3 years before they are nies. I touch on three areas here: either rapidly and meaninglessly scaled up , or abandoned, is not conducive to social change or to learning- by- doing. Supporting development design within countries The discussion of implications for local puhlic action Shaping institutions to manage difference applies with equal force to the international sphere. Policy The recognition that societies consist of different groups, design needs to take account of local conditions, including the often structured in hierarchies, with unequal social and cul - interaction between culture, power and economic structures. tural capital, suggests that mechanisms of inter - group This does not mean eschewing generalization from interna- exchange and deliberation need to be set up in a manner that tional experience or giving up the documented lessons of his- changes the "terms of recognition." In this area, as in many tory on economic and social change. Indeed a central function others, there are no magic institutional solutions. One possi - of such agencies should preCisely be the sharing of knowledge bility is to employ "deliberative democracy" as in the partici- - by understanding situations and processes by which policies patory budgeting process developed in Porto Alegre in Brazil- can be made more effective in improving the conditions of the but this has some preconditions. The promotion of democra - poor. However, the debate over what makes effective policy cy is key, but in order for democracy to work at the grass - within a country has to be informed by a process of dialogue roots, it has to be deepened and local institutions need to be and deliberation within the country-rather than the mindless transparent even to people at the lowest rungs of society. force -feeding of "best practice" guidelines that are little Similarly, effective education initiatives may need multi - informed by the social and historical context. cultural designs with curricula that are tailored to reflect the reality and lingua -franca of students rather than of elites who International policy design tend to design curricula. Comparable arguments can be made An Inequality Trap perspective is directly relevant to some for the design of health projects, commons management, etc. areas of international policy. Trade liberalization and foreign The recognition that sub-groups can often have conflictual investment are typically desirable for income and employment interactions leads to the need for effective methods of conflict objectives, but the effects of enforced globalization on the liv- management- for instance, mechanisms for inter- group dia - ing conditions and aspirations of workers can be complex. logue and opportunities for social and cultural interaction, and Typically the diagnostic frame of an inequality trap would not fair and effective courts that can adjudicate differences and suggest reversing globalization, but strengthening the agency which poor communities can easily access. of adversely affected domestic groups to influence their capac - ity to influence, choose, or gain from the consequential eco- International policy and the behavior of external agents How can international action become more culturally attuned? The issue is most commonly framed in terms of the INEQUALITY TRAPS policies and cultures of international agencies, such as the c on t inu e d on page 34 World Bank, the IMF, and the World Trade Organization, FEB R U A R Y 2 0 0 6 13 Political Inequality in Latin Arrierica A Historical Perspective BY KENNETH L. SOKOLOFF certain other important activities in society as well , the distri- bution of effective influence on government action often has ONE OF THE MOST CRUCIAL DIMENSIONS along which major implications for how a society's resources are distrib - inequality operates is in access to political opportunity. As uted across the population, as well as for the pace of econom- governments are generally responsible for the design and ic growth. There are of course many channels through which enforcement of the laws, and have a monopoly of power over the preferences of private parties can have an impact, and the 14 Development Outreach WORLD BANK INSTITUTE conventional wisdom holds that polit- ical inequality is greatest where less transparent informal mechanisms of influence are predominant. However, even in societies that carry out elec- tions, variations in the rules or organ- ization of how votes are cast, who can cast them, and how the candidates on the ballot are selected, can have a fun - damental impact on the policy choices that the elected representatives-who in some sense constitute the collective government of the electors- make. Historical background THE SIGNIFICANCE of political inequality for long-term paths of eco - nomic development is powerfully demonstrated by the historical expe- rience ofthe societies oftheAmericas. It is now well understood that factor endowments play a major role in explaining why the great majority of the colonies established in Latin America by the Europeans came to be characterized by extreme inequality. Spain was the first power to make a major project of settling the Americas, and she chose to focus her efforts and resources on areas, such as Mexico and Peru, that seemed to offer the best economic prospects, with large abo - riginal populations whose labor could be tapped to extract value from the abundance of natural resources. Enjoying the fruits of their relatively scarce human capital, privileged legal standing, and substantial grants of land and claims on native labor, and concerned with maintaining them, the creole population descended from the first waves of European settlers were able to secure stringent limits on further immigration. part of North America, which became the United States and Inequality in Spanish America, therefore, was rooted in its Canada, developed with relative equality and population endowment with a large population of Native Americans, and homogeneity, because there were relatively few Native in the introduction of a relatively small number of people of Americans and the climates and soils favored a regime of fam- European descent that composed both the economic and ily farms centered on grains and livestock instead of one of political elite. Extreme inequality also arose in the colonies of large slave plantations. the Caribbean and in Brazil, because their soils and climates AI though most societies in the Americas had attained inde- gave them a comparative advantage in growing sugar and other pendence and were nominal democracies by the mid - 19th cen- lucrative crops produced at lowest cost on large slave planta - tury, those with high economic inequality made very different tions. With the consequent importation of enormous num- choices from those with low inequality as regards how broadly bers of slaves, small elites of European descent dominated a to extend political influence. The elites in Latin American population consisting largely of black slaves, and later (after nations were more successful in obtaining legal frameworks emancipation) non-white freedmen and their descendants. that ensured them a highly disproportionate share of political In contrast, the European colonies located in the northern power than were their counterparts in the U.S. and Canada. FEB R U A R Y 2 0 0 6 15 Nearly all of Latin America retained severe limitations on who Unequal political power and its could vote (at least in secret) well into the ~O 'h century. Even the consequences most progressive Latin countries (namely. Uruguay. Argentina. and Costa Rica) were more than a century behind in THE HISTORY OF TH E AMERICAS also provides ample evi - the proportion of the population who voted in elections. It is dence of how differences (or changes over time) in the distri- remarkable that as late as 1900. none ofthe countries in Latin bution of political power fed back on other public poliCies and America had the secret ballot or more than a miniscule fraction the distribution of access to economic opportunities in ways of the population casting votes. The that affected long- run paths of institu - great majority of European nations. as tional and economic development. well as the United States and Canada. Investments in public schools provide a achieved secrecy in balloting and uni - telling example. Although most New versal adult male suffrage long before World societies were so prosperous by other countries in the western hemi- the early- 19'h century that they had the sphere. and the proportions ofthe pop - material resources to support the ulations voting in the former were establishment of a widespread network always higher. often four to five times of primary schools, only a few did so on higher. than those in the latter. a scale sufficient to serve the general Although many factors contributed to population before the ~oth century. the low levels of participation in South The exceptional societies, in terms of America and the Caribbean. wealth and leadership in investing in institutions literacy requirements were serious of primary education, were the U.S. and binding constraints. Some societies Canada, and it is not coincidental that maintained wealth - based suffrage the so- called common school move - restrictions until the mid -twentieth ment got under way in the 18~os in the century. but most joined the United U.S. , following closely after the move - States and Canada in moving away from ment to extend the franchise . Canada economic requirements in the nine - lagged the U.S. slightly in extending the teenth century. However. whereas the franchise and in the movement for states in the United States frequently common schools. The wave of laws that adopted explicit racial limitations strongly encouraged or required locali- (until the constitutional amendments ties to establish free schools that were following the Civil War ended this prac - open to all children and supported by tice) . Latin American countries typi - general taxes put these societies on an cally chose to screen by literacy. In accelerated path of investment in edu- many nations. such literacy require - cational institutions that served a broad ments endured. and were effective lim- range of the population and made them itations on who voted. into the second the most literate in the world. half of the ~Olh century. The contrast between the--!tS. and The importance of Canada. on the one hand, and Latin public education America. on the other, was not so evi - dent at the outset. Despite the senti- MOST OF LATIN AMERI CA did not ments sometimes attributed to its invest heavily in public schools or Founding Fathers. voting in the U.S. attain even moderate levels of literacy was largely a privilege reserved for until well into the ~O 'h century. white men with significant amounts of Indeed. in 1900 literacy rates for those property until early in the 19th centu- born in prosperous and relatively pro - ry. At that time. a movement to do away with wealth require - gressive Argentina were simply on par with those of non- ments and extend the right to vote to all white adult men was whites in the U.S. Multivariate statistical analyses indicate led by states in labor- scarce frontier areas striving to attract that lower per capita income provides but a partial explana - migrants. Their broadening of formal political influence was tion of the pattern, and highlight the association of inequali- but one of a set of policies targeted at that goal. It is striking ty with low literacy. Argentina. Chile, and Uruguay. began to how this context resembles that of Argentina and Uruguay boost their investments in providing broad access to primary when they introduced similar reforms. In both cases. eco - schools and raising literacy at roughly the same time that they nomic circumstances. not the threat of civil disorder. gave intensified their efforts to attract migrants from Europe, and elites the incentive to extend access to privileges and opportu- before their suffrage reforms. but most Latin American nities. nations made only slow progress until they liberalized the 16 Development Outreach WORLD BANK INSTITUTE franchise. It is notable, moreover, that although these soci- eties were extremely frugal as regards supporting primary schools, they have a history tracing back at least as fa r as the NEW FROM THE WORLD BANK early 19 th century of relatively generous public support for universities and other institutions of higher leaning geared Cities in a toward children of the elite. Where the wealthy enjoyed dis - Globalizing World: proportionate political power, they were able to procure Governance, Performance, schooling services for their own children and to resist being & Sustainabilily Edited by Frannie Llfaulier taxed to underwrite or subsidize services to others. Although the children of the elite may have been well schooled in such Cllies in a Globalizing World: Governance, Performance and polities, most of the population was not so fortunate. No soci - SusliJinabililyexplores the latest trends ety realized high levels of literacy without public schools, and in city development in the era of this likely foste red the persistence of high inequality and globalization and highlights what local governments can do hampered growth over the long run. to attract investments and overcome economic challenges in their cities. How do the pressures of globalization affect the quality of life The deferring of public investment in a city? What makes some cities prosper in this new environment, while others seem to stagnate? THIS PATTERN of elite - dominated governments deferring on Using theoretical and empirical analyses, the book explores public investments that would have broadened access to eco- the possibility that well-governed cities are more global and nomic opportunities and stimulated growth seems to have more global cities are better governed. It discusses how the twin pressures of having to respond to stiffer competition extended beyond schooling. In the U.S. and Canada, with only that comes with globalization and the need for responsiveness a few brief exceptions during and after major wars, local gov- to citizen needs that comes from good local governance work ernments were the largest component of the overall govern - together to enhance even further the performance of cities. ment sector throughout the 19 th century. This is especially World 8ank Institute Learning Resources Series. 2006 striking in that the main priorities of local governments were 143 pages. Stock no. 16553 US$2o. schools, roads, and other infrastructure that generate broadly Social Cohesion distributed social returns. Moreover, their heavy reliance on through Education: the property tax, together with their large sp.are of the govern- Case Studies and Tools tor Using ment sector, made for a rather progressive tax structure when Textbooks and Curricula considering all levels of government together. In both the U.S. Edited by Eluned Roberts with Vincent Greaney and Krezentia Ouer and Canada, property and inheritance taxes accounted for the bulk of the revenue collected by the government sector overall In a world where students will have to co-exist with people different from through the early decades of the 20 th century. In stark contrast, themselves, sensitivity and openness to despite holding the same authority to levy taxes and the same diversity-ethnic, religious, linguistic, responsibilities for basic schooling and local infrastructure as and ability-related-is a core part of any good education. their North American counterparts, local governments in Social Cohesion through Education provides case studies Latin America never developed into a significant provider of and tools to help educators, policymakers, and the development public services. In ' these societies local governments were community improve the ways in which education systems can promote tolerance and respect for diversity through stunted, and both power and activities were concentrated in improved management of existing inputs such as curriculum centralized government structures that relied almost exclu- and textbook reform. sively on indirect taxes and placed less of a tax burden on elites The book address different issues in different countries and with higher levels of wealth. It was only later in the 20 th centu- regions, but the fundamental message is the same: the explicit ry' when returns to schooling grew, when import-substitution and implicit messages about inter-group relations that children receive in school shape the form and sensitivities of young poliCies sharply reduced the revenues that could be captured minds with respect to other human beings. If education is to from imports, and when the broadening of political influence contribute to economic and social development, it is critical took hold, that government public finance and other policies that we understand those messages and the means of their began to change in more progressive directions. transmission. World 8ank Institute Learning Resources Series. 2006 Kenneth L. Sokoloff is Professor of Economics at UCLA. 162pages. Stock no. 16465. US$2o. This article draws from the more extensive treatments of these issues provid- AVAILABLE AT BETTER BOOKSTORES ed in Stanley L. Engerman and Kenneth L. Sokoloff, "Factor Endowments, Please visit htIp:llpubllcations.worldbank.orglbooksellers Inequality, and Paths of Development Among New World Economies," to find your local World Bank Publications distributor Economia, 3 (Fall 2002): 41 -102; Stanley L. Engerman and Kenneth L. Sokoloff, "The Evolution of Suffrage Institutions in the Americas," Journal of Economic History, 65 (December 2005): 891-921; and Kenneth L. Sokoloff and Eric M. Zolt, " Inequality and the Evolution of Institutions of Taxation in the Americas," in New Perspectives on Latin American Economic History, ~ ~ Wp 0bRI LD BANK U Icatlons Tile reference of chOice on development Sebastian Edwards, Gerardo Esquivel, and Graciela Marquez, eds., (Chicago: University of Chicago Press): forthcoming 2006. FEB R U A R Y 2 0 0 6 17 The Scandinavian Model and Economic Development BY KARL OVE MOENE on generosity towards the poor and protection against market AND MICHAEL WALLERSTEIN competition, the argument goes, the Scandinavian model is only possible in consensual, homogeneous and affluent soci- Praised but dismissed eties with an extraordinary commitment to equality. In third world countries that are conflict- ridden, heterogeneous, and TODAY THE EUROPEAN UNION looks to the Nordic countries poor, the model has no relevance, it is claimed. in search of role models for how low inequality can be combined In Moene and Wallerstein (~005) we present a more with good economic performance (Herald Tribune, 17.9.05). agnostic view, which we summarize below. We argue that the Yet, in spite of recent praise, the Scandinavian model is still dis - Scandinavian model is not an end state, but a development missed as an infeasible model for developing countries. Based strategy. Scandinavian consensus, homogeneity, and afflu- ence are products of the model, not prerequisites. We claim that wage compression attained through highly coordinated wage-setting was the central policy. As we see it, the econom- ic benefits of wage compression would be as significant in South Africa, Brazil, or India today as they were in Scandinavia between 1935 and 1970. The political feasibility of a policy of wage compression, however, is open to doubt. Hence our agnosticism regarding whether or not the Scandinavian road to affluence can be repeated. Wage compression institutionalized SOCIAL DEMOCRATIC GOVERNMENTS came to power in Sweden and Norway in the midst of the Great Depression committed to reducing unemployment and alleviating pover- ty. Both governments increased government spending on policies such as unemployment benefits, public housing, and agricultural price supports. In retrospect, the key innovation was not the Keynesian policies that were adopted in the 1930s, but the institutional response to the problem that threatened the recovery pro- gram. To keep the increased government spending from rais- ing the wages of insiders in the labor market, rather than increasing employment, wages were taken out of market com- petition and out of the hands of local unions. The attempt to coordinate wages by centralized wage setting was the start of a gradual process of wage compression. Over 18 Development Outreach WORLD BAN K I NSTITUTE time it generated the most egalitarian distribution of wages and more productive activities, but the effect on the incentives for salaries in the world. In the 1950s, wage compression was workers to change occupations was mixed. While wage com- adopted as an explicit goal of the unions in both Norway and pression would increase job loss in industries with low pro - Sweden under the title of" solidaristic bargaining." ductivity and job creation in industries with high productivi - ty, employers in highly productive firms lost the ability to Equity as a byproduct of efficiency? attract workers with the offer of higher pay. The government, unions and employers responded to the problem with an array IN THE '950S , two Swedish trade union economists, Costa of active labor market policies that subsidized the movement Rehn and Rudolf Meidner, argued that equalizing wages of workers from one industry to another with training pro - across Swedish firms and industries would promote econom- grams and grants to cover moving expenses. ic development by forCing wages up in low-productivity firms To keep highly productive employers from undermining (or industries) and keeping wages down in high-productivity firms. In a decen- tralized bargaining system, wages vary according to the productivity of the firm and the industry. In a centralized sys- tem, in contrast, wages are relatively insensitive to the profitability of the enterprise. On the one hand, industries with low levels of productivity are prevented from staying in business by paying low wages with a centralized system of wage deter- mination. On the other hand, workers in industries with high levels of productivi - ty are prevented from capturing much of the productivity differential in the form of higher wages. By reducing profits in low-productivity firms and increasing profits in high-productivity firms, labor and capital would be induced (or coerced) to move from low productive to high productive activities, increasing aggregate efficiency as well as improving equality (Moene and Wallerstein 1997, Agell and Lommerud 1993). A study of productivity growth in Sweden by Hibbs and Locking (~ooo) finds evidence that the gain in efficiency was substantial and the cumulative impact on the distribution of wages and salaries was large. Solidaristic bargaining extend- ed the principle of .. equal pay for equal work" from one industry to the entire economy, and then moved beyond the demand for "equal pay for equal work" toward the goal of .. equal pay for all work. " Structural change and generous welfare spending MANY OTHER FEATURES of the Scandinavian model follow from the policy of wage compression. Wage com- pression directly encouraged the move - ment of capital from less productive to FEB R U A R Y 2 0 0 6 19 the policy of wage restraint by offering workers generous ben- Ends against the middle efits (which were harder than wages to monitor at the central level), the Swedish employers' confederation lobbied the gov- WHAT MAKES THE SCANDINAVIAN experience exceptional ernment to nationalize the provision of health care and pen- was that the policy of wage compression was voluntary, not sions (Swenson ~oo~). coerced, and implemented by a union movement that includ- Moene and Wallerstein (~001 , ~003a) show that expendi - ed as members many of the high-wage workers whose wages tures on social insurance against the loss of income due to would be restrained in the name of greater equality. Thus, the unemployment, disability, sickness and occupational injury great challenge faced by those who would apply the rise as wage inequality declines. If insurance is a normal good, Scandinavian lessons in the third world today is political. How a policy that raises the income of the majority of workers with can a democratic political movement with close ties to the below average incomes increases the political demand for unions implement a development strategy that centers on social insurance policies. The compression of wage differen- wage restraint? tials' in sum, had far - reaching economic and political conse - One of the central groups who supported centralization in quences, one of which, we argue in the next section, was to the 1930s and 1940S and solidaristic bargaining in the 1950S increase the pace of economic development. and 1960s were the employers (Swenson 1989, 1991). Employers much preferred to bargain with the "sensible" T he pace of economic development leadership of the union confederations, rather than with the militant leadership of the shop floor union bodies. Moene and IN MOENE AND WALLERSTEIN (~005) we explore the poten- Wallerstein (1997, ~003b) demonstrate that employers may tial importance of wage compression for economic develop - be able to increase aggregate profits by reducing wage ment within a dual model of industrialization. The central inequality relative to the wage schedule associated with aspect of development that model incorporates is that the decentralized bargaining and even relative to the wage sched- growth of a modern sector at the expense of traditional pro - ule associated with a competitive labor market where employ- duction depends on the size ofthe market for modern goods . ers set wages unilaterally. The model distinguishes between modern and traditional The other important group that supported the policy of sectors depending on the technology they apply. While old wage compression was the leadership of unions of low-wage technolOgies are assumed to have decreasing returns to scale, workers. Since the union movement was encompassing, both new technolOgies are assumed to have increasing returns. low and high wage earners had influence in union policy. Increasing returns to scale imply that the profitability of mod- While the policy of wage compression was controversial in ern plants depends on the size of the market. The dependence unions of high-wage workers, it was enthusiastically support- of the growth of the modern sector on the size of the modern ed by unions oflow-wage workers . Thus, the political coalition sector creates a feedback loop. The result may be a poverty trap, that prevailed in the 1950S and established the pattern of sol- in which growth fails to occur, or sustained development in idaristic bargaining that was to last until the 1980s was com- which initial growth of the modern sector encourages further prised of the low-wage unions and employers. modern sector growth until the traditional sector disappears. High paid unions were prevented from leaving the central - Whether the economy develops or not, depends on the ized negotiations by the threat oflockouts. It is unlikely that the profitability of modern production. Modern employers must low-wage unions and the leadership of the union confederation receive a minimum share of the surplus to be willing to invest. would have been able to force the high -wage unions to accept an This share would decline as modernization goes on as prof- egalitarian wage policy without the backing of employers and itability increases with the size of the market. the threat of lockouts against recalcitrant unions. One obstacle to modernization was therefore strong local unions whose wage premiums restricted the expansion of the Scandinavian exceptionalism? most productive sectors. Large wage differences between the modern and traditional sectors could therefore block eco - WE DON OT BEll EVE that Scandinavian workers are inherent- nomic growth. Reducing the share of surplus received by rel - ly more egalitarian than other workers. Rather, our belief is atively privileged workers, we suggest, was the essence of the that a preference for greater equality is widespread. The pref- social democratic development strategy. erence for greater equality can only be acted upon to the extent Essentially, centralization took wage setting out of the that wages are set centrally. When wages are set at the plant hands of the unions representing relatively high -paid workers level, for example, wage compression can only occur within the and put wage setting in the hands ofleaders ofthe labor move - plant. When wages are set at the industry level, wage compres- ment as a whole . Thus the social democratic approach was not sion occurs within the industry. When wages are set at the to ban unions in order to raise profits. On the contrary the strategy was to strengthen unions as institutions and to struc - ture collective bargaining in a highly centralized manner that SCANDINAVIAN reduced the influence of highly paid workers in the wage set- c on t inu e d on p age 3 5 ting process and increased profits. 20 Development Outreach WORLD BANK INSTITUTE Equality and Efficiency What History Teaches Us about the Trade-Offs BY PETER H. L1NDERT about trade - offs. It has never been true that the only way to improve efficiency and raise GDP per capita is to accept TO PROMOTE GROWT H, must a developing country adopt greater inequality, and what we know about the political policies that make incomes more unequal? Do countries that process says that no country must accept such a choice today adopt pro - growth strategies tend to choose policies that widen (at least not yet). On the second question, history suggests an the gap between rich and poor within the country? intriguing long- run evolution. In the earliest phases of eco - History and common sense say "no" to the first question nomic development, the countries achieving greater growth FEB R U A R Y 2 0 0 6 2I were indeed those choosing institu- Report 2006). That pioneering study tions that rewarded rich groups. Yet identified several policy levers that midway through the evolution- governments could use to raise both around the year 1800 for the North the growth rate and the share going Atlantic region-the countries lead- to the poor. The list of egalitarian ingthe growth race became those that policy options included one direct implemented more egalitarian (and form of redistribution, namely rural pro -growth) policies, a choice that land reform, later given the softer was always available and still is avail- name "access to infrastructure and able today. land." Aside from that, the featured The task of judging whether policy egalitarian growth options were, and choices must trade, or have chosen to are, available using these policy trade, between equality and efficien- tools: cy is complicated by the role of · human investments for those who national luck and by the multiplicity are credit-constrained, espeCially of policy options. Prosperity and children and the poor; equality come more easily for coun- · lifting credit constraints for the tries having a lucky historical geogra - poor and small enterprises; and phy, in the form of natural resources, · fair competition in all markets. safer disease environments, previ - 0usly open spaces, and distance from A political reality check war zones. This is one reason it has been hard to distill policy lessons WHAT WE KNOW about the political from the growth and inequality out- process rejects the first version of comes we observe around the globe . the trade - off question, the one asserting that policymakers must Which policy levers? trade away some equality to get more effiCiency. Ask yourself: What coun- THE OTHER COMPLICATING FAC - tries do you know that have exhaust- TO R prolonging debate over policy ed all opportunities to promote both trade-offs is that there are so many growth and equality? Even the levers that the political process push European welfare states, which have or pull in choosing poliCies and pressed relatively hard to equalize institutions. With so many forces incomes, still sacrifice both effi- operating at once, it is not surprising ciency and equity by protecting that the debate over a trade-off agricultural landholders at the between equality and efficiency has expense of food purchasers and continued for so long. Some have general taxpayers. They also protect emphasized policies that can raise senior high -paid workers at the efficiency and GDP by redistributing expense of younger job entrants. in favor of the rich, while others have Similarly, the United States protects emphasized policies that raise effi- agricultural landholders while rais - ciency and GDP by favoring the poor. ing the cost of food, and it subsi- The classic mechanism that sup- dizes (civilian) medical care only for posedly linked inequality to growth those residents who have already related to savings rates. Keynes, survived to the age of 65 , at the Kaldor and others believed that the expense of public care for the young rich had a higher marginal propensi- and the poor. Developing countries ty to save, so that redistributing from have passed up even more policy poor to rich would raise national sav- opportunities to promote growth ings and the growth rate. through the poliCies listed above. In The opposing view was put most economics jargon, no country's gov- clearly in the 1970s, led by the World ernment has ever reached the policy Bank book Redistribution with Growth pOSSibility frontier by exhausting (Chenery, Ahluwalia, et aI., with a every chance to improve both equal- fresh revisiting of the same issues ity and efficiency. and ideas in the World Development 22 Development Outreach WOR LD BANK I NSTITUTE Hints from long-run history Rather it is an outcome of everything that affects the economy, not just the policies that governments implement. TO JUDGE THE SOFTER IDEA that countries tend to choose That said, the econometric literature has indeed suggested between equality and efficiency, even ifthey don't need to , we some interesting patterns. One is that growth may be badly should turn to some hints from history. Economic history has served by sudden changes in inequality in either direction begun to reveal a long run -pattern of policy choices. Before (Banerjee and Duflo ~003) . Another is that growth may be about 1800, the policy and institutional changes that most helped by letting the gap between rich and middle get wider, advanced growth in the North Atlantic region were ones tpat but would be damaged by a wider gap between middle and did raise inequality. A key to the emergence of Northwest poor (Voitchovsky ~005). Europe as a world leader was the royal granting of more secure property rights to merchants and creditors. This was the world F in.ding the fing~ rprints of anti-poor that Adam Smith saw, when emphasizing private freedoms as antI-growth policIes the key to progress. Thus growth appeared in places that expe - rienced rising inequality, as the merchants and investors THE FACT THAT NO COUNTRY has ever exhausted its policy prospered. The same securing of private property rights, rais - options for egalitarian growth alerts us to a new way to search ing efficiency at the expense of equality, has proved crucial in for policies serving both equality and effiCiency. We need only countries that are restoring order in the world's worst war find cases where the unequal sharing of political power has zones, and in China's industrial reforms of the late 1980s and caused countries to adopt inefficient and inegalitarian poli- early 199os. cies. The procedure is straightforward: studying the specifics But as the North Atlantic economy grew and became more of a country's policies, just find cases where the Redistribution skill-intensive after about 1800, the leader countries came to with Growth prescriptions have not been followed . Such dis- be those that fostered the accumulation of human capital and coveries are not difficult for developing countries, either had distributed land more equally. American history fits this today or in the past. Just look for fingerprints like those illus - mold, even though the United States has always been a coun- trated in the accompanying box, and reverse those policies to try resisting progressive social transfers to the poor. This serve both equality and effiCiency. country advanced by being a pioneer in tax-funded primary schooling, and by distributing new lands relatively equally. Peter H. Lindert is Distinguished Professor of Economics at the On the equality- efficiency trade - off, many have misread University of California-Davis, and a Research Associate of the British history. One often hears the view that Britain's growth National Bureau of Economic Research. suffered in the welfare state era between the 1940S and 1970s, in contrast to an acceleration of growth during the inegalitar- Footnote 1: Specifically, this means having a higher ratio of (Public tertiary- education expenditures per pupil) I (public pre-primary + primary expendi- ian Industrial Revolution era (traditionally put at 176o-183o). tures per child of primary-school age) than prevails in the core OECD coun- There are several things wrong with this common view. Over tries. See Lindert, "Voice and Growth." all of British history, the best growth rate was in that income- leveling era of the welfare state, between the 1940S and the 1970s. In the earlier era of rising inequality during (and References before) the Industrial Revolution, growth rates were slower Banerjee, Abhijit and Esther Duflo. 2003. " Inequa lity and Growth: What Can and did not accelerate at all. In fact, Britain's policies in that the Data Say?" Journal of Economic Growth 8 (September) : 267-299. era were anti -growth, such as the Corn Laws and special taxes Chenery, Holl is, Montek Ahluwalia et al. 1974. Redistribution with Growth. on business contracts and industrial goods . New York: Oxford University Press for the World Bank. Thus the only historical settings in which countries clearly Lindert, Peter H. 2003. "Voice and Growth: Was Churchill Right? " Journal of tended to choose efficiency at the expense of equality were Economic History 63 , 2 (June) : 315-350. those early phases when property rights were first being Voitchovsky, Sarah . 2005. "Does the Profile of Income Inequality Matter for secured. The long subsequent history features growth under Economic Growth?" Journal of Economic Growth 10: 273-296. more egalitarian policies. World Bank. 2005. World Development Report 2006: Equity and Development. Washington: World Bank. Econometrics cannot decide A recent econometric literature has tried valiantly to see if countries tend to choose between efficiency and equality in recent times, by regressing the level or growth of GDP per capita on the level or growth of inequality, while controlling for other things . This literature has hit some limits, even though it reveals some suggestive patterns. While the scientific standard of these studies is high, the tests have a basic limitation: Inequality is not a policy variable, so its movements offer no guide to what policy has done . FEB R U A R Y 2 00 6 23 SOCIAL EQUITI IN CHINA Building a 'Xiaokang" Society in an All-Round Way BY LU MAl investing in physical capital to provid- AND CALLA WIEMER ing public services and investing in human capital. TH E CHINESE LEADERSHIP under President Hu Jintao and Premier Wen Two kinds of inequity Jiabao has committed itself to the "all- round building ofaxiaokang (or TWO DIMENSIONS of social inequity moderately well - off) society." The are the main cause for concern. One is term xiaokang has its origin in the the urban vs rural dimension which classic Book of Songs and was memori - carries over to a gap between rural alized by Deng Xiaoping as that stage migrants to cities and native urban- of development lying between basic ites; the other is the coastal vs inland needs satisfaction and true prosperi - dimension. Disparity in both dimen- ty. Twenty-five years of reform and sions is the product of a complex array opening have brought xiaokang status of historical forces . government poli- to a portion of China's population. cies' and other factors . The task now is to bring it to those left The vast pool of low productivity behind as others, under Deng's dic - labor that today burdens the rural areas tum, "got rich first ." is a legacy of the Maoist development The official Chinese press is rallying strategy. That strategy involved gov- public opinion to the cause. The Gini ernment mobilization of high national coefficient hitting 0.45 has been held up savings for investment in heavy indus- as a "yellow alert" and the 74,000 "mass try. The counterpart of high savings incidents" that occurred in 2004 have was low consumption enforced in sig- been marked as evidence of the threat to nificant part by blocking migration to social stability posed by mounting the cities where higher standards of inequities. To bring about the desired living prevailed and where in any case all - round xiaokang society, nothing the pattern of industrialization afford- short of a shift in the form and function ed little job creation. The household of government is called for, according to registration system adopted in the the China Human Development Report. 1950S to cordon off the rural popula- 2005 (see References) . This report lays tion is only gradually being relaxed. out a detailed proposal for the transfor- Movement across the rural -urban mation that calls for a more transparent divide butts up against a system of and participatory government to go urban entitlements with regard to edu - hand in hand with a reorientation of the cation, health care , pensions, and government's role in society from engi - other benefits extension of which to nee ring economic development and outsiders is simply unaffordable . 24 Development Outreach WORLD BANK INSTITUTE Coastal vs. inland disparity is also deeply rooted. The than just income distribution, however. On broader human process of reform and opening was spearheaded on the coast development grounds, China has long held claim to a profile with preferential treatment granted to engage in trade, host resembling that of a middle income country even as its per foreign investment, and generally develop a market economy. capita GDP placed it squarely within the low-income ranks. Inland regions were hindered in their transition not only by The positive side of the Maoist development strategy was its delayed policy relaxation but by a legacy of bigger more emphasis on broad based rural public health. This had the entrenched state enterprises that remained shielded from effect of raising life expectancy to a respectable 68 years, an market discipline to protect vested interests. Of course too, achievement that has been only incrementally furthered the coast has a natural geographic advantage in conferring under more than two decades of reform and rapid economic ready transportation links to the outside world and ready eco- growth to bring life expectancy to 71 years now. Underlying nomic links to Hong Kong and Taiwan. this slight increase nationally, however, the rural - urban gap in life expectancy has widened in consequence of deteriorat- Positive results notwithstanding ing rural public health services. At the same time though, inequity rural areas have seen an increase in school enrollment rates under a government policy to institutionalize 9 -year compul- INCOME DISTRIBUTION IN CHINA at the outset of reform sory education nationwide. On balance then, the mix of and opening was characterized by low inequality within, but improved rural educational attainment and expanding rural - substantial inequality between, rural and urban areas. Overall urban gaps with respect to per capita income and life inequality actually narrowed in the early 1980s as rural expectancy has resulted in a marginal decline in the rural incomes shot up faster than urban incomes at the outset of human development index relative to its urban counterpart. reform. The national Gini coefficent fell to below 0 .3. But By contrast, inter-regionally the human development index then the tide shifted and the Gini pushed upward again has shown a narrowing trend due to reduced disparity in both through the 1990S as rural reform exhausted its potential to life expectancy and education components. raise living standards in the countryside and foreign trade and While income disparity has inevitably, albeit perhaps to a investment led an economic boom in coastal cities. The ratio worrisome degree, increased during the era of reform and of urban to rural per capita income in monetary terms now opening, the effect of the generally rising tide has been to res - stands at around 3.z, and jumps to above 4 if non- pecuniary cue unprecedented masses of humanity from poverty. By the entitlements are taken into account. This is a very large gap by World Bank's reckoning using a standard of US$! of income international standards. per day, 400 million Chinese have been lifted from poverty Judgment as to the state of social equity must rest on more over the last z5 years. That said, 150 million remain to be FEB R U A R Y 2 0 0 6 25 brought in tow. And if the bar is set higher than this most building of capabilities and the laying of foundations for life - minimal of standards to the xiaokang level, the numbers still time learning. With respect to health care, the government's to be reached become much greater. focus should be on public health and disease prevention aimed at such threats as AIDS, tuberculosis, and schistosomiasis. Challenges and goals Basic subsidized health care should be made available to the poor, but beyond that responsibility must be borne by patients THE CHINESE GOVERNMENT has set ambitious goals and imple- themselves with government acting mainly to guide develop- mented supporting policies in the effort to overcome poverty ment of efficient private systems of health care delivery and and dispel inequity. Some interim targets have been met, for insurance. As for social security, the focus of public subsidies example with respect to children's health indicators, and China should be on poverty alleviation. Government should reduce its is well on the way to meeting most of the support of social insurance for the well- Millennium Development Goals for the to - do. Endowment insurance for retire - year ~o15. Other targets have thus far ment of urban workers should be under- been elusive, notably with respect to written mainly by individuals and rural sanitation and public spending on employers. Farmers depend on their education which remains below 4 per- land for security in old age. Those who cent of GDP. The stage is now being set lose it to development should be com- to move more aggressively. pensated in part with pension plan cov- To achieve the goal of building a erage paid for by the land acquirers . xiaokang society in an all- round way, Third, the report recommends that the China Human Development Report, the shift in fiscal spending take place 2005 proposes three guiding princi- within an overarching context of pro - pIes be adopted in policy- making. moting human development as the start- First, poliCies aimed at achieving ing point for social equity. This will social equity should be market-based. require a reorientation of government In particular, it is critical that the labor function toward providing public servic- market be made to function more effi- es and away from managing capital for- ciently in order to stimulate the mation. In support of a public service employment growth necessary to orientation of government, the following absorb the rural under- employed into are directions that should be taken: fos - productive non-farm jobs. This means ter mass participation in public affairs unifying the labor market and disman- and the deciSion-making process, and tling barriers to mobility, most criti- in particular develop channels for the cally the household registration system poor and disadvantaged to express their that blocks the rural population from views and defend their interests; obtaining jobs in cities . Further, enhance transparency and reduce cor- development of the informal sector ruption by among other things making and entrepreneurship should be fos- government salaries public information tered. Credit is essential for this, and and monitoring the assets of public ser- in that vein entry to the financial serv- vants; uphold the rule of law, whereby ices sector should be relaxed including the law is to apply equally to all citizens accommodating international organizations and charities to and government is to operate under the dictates of the law, and engage in lending to small business under appropriate regula - develop a rights culture; encourage charitable activity through tion and supervision. the expansion of non-government organizations; and build Second, the report argues that China should increase public government administrative capacity and responsiveness to the spending on social welfare programs. Given the realities of public interest. China's huge population and low per capita GDP, standards must be modest if broad applicability is to be achieved. With Lu Mai is General Secretary of the China Development Research respect to education, while administration should rest with the Foundation. localities, provinces must bear responsibility for ensuring ade- Calla Wiemer is a Fellow of the Department of Economics at the quate fiscal support and the center should aid those provinces National University of Singapore. unable to meet this responsibility. Education at the primary China Human Development Report, 2005: Towards Human Development level should be free and compulsory. SpeCial schools for with Equity. The report has been prepared by the China Development migrants should be allowed to operate as a stopgap until urban Research Foundation and published by the UN Development Programme. It represents the first Ch ina Human Development Report to be prepared by public schools can build the capacity to absorb the influx. a Chinese organization. Finally, the curriculum should be reformed so as to approach http://www.undp.org.cn/modules.php?op=modload&name=News&file+ education not as mere impartation of knowledge but as the article&topic=40&sid=228 26 Development Outreach WORLD BAN K I NST I TUTE Tackling Roma Exclusion in Europe BY DENA RINGOLD poverty and discrimination of one of Europe's most vulnera - ble populations. T he launch of the Decade Roma are a global ethnic minority with origins in northern India. They have no historical homeland and live in nearly all ON A SNOWY DAY in Sofia, Bulgaria, in early ~oo5 nine heads countries of the world, with the largest concentrations in of state made a remarkable commitment to tackle one of Central and Eastern Europe. Roma are diverse, comprising Europe's longest - standing and most pernicious poverty multiple subgroups based on language , history, religion, and issues. In the presence of Roma leadership and the interna - occupations. Despite popular stereotypes of nomadic Roma tional community, the governments of Central and Southeast caravans, most in Central and Eastern Europe have settled-or Europe launched the Decade of Roma Inclusion, ~oo5 - ~o15 , a were forcibly settled-over time, some under Ottoman rule, ground - breaking effort to overcome centuries of entrenched and others more recently during the socialist period. FEB R U A R Y 2 006 27 With the enlargement of the the collapse of the iron curtain in 1989 European Union on May I, ~004, increased information and raised pub - Roma became one of the largest, THE LAUNCH OF THE OECADE lic awareness of the dire situation of poorest, and fastest growing minori - OF ROMA INCLUSION Roma, including emerging human ties in Europe. The total Roma popu - rights violations and humanitarian lation in Europe is estimated at concerns. While the transition brought between 8 and 1~ million, roughly ~ ON FEBRUARY 2, 2005, new opportunities for ethnic minori - percent of the 450 million people who the governments of Bulgaria, ties, including Roma, to express their live in the enlarged European Union. Croatia, the Czech Republic, identity and participate in society, it Approximately 10 million Roma live also led to the emergence of extremist Hungary, FYR Macedonia, in the countries of Central and politics and avenues for public expres - Eastern Europe, of which nearly 5 Romania, Serbia and Montenegro, sion of hatred against Roma. million in the new member states of and Slovakia declared: Second, living conditions of Roma the European Union and in Bulgaria have deteriorated disproportionately and Romania which are scheduled to Building on the momentum of the compared to other population groups. join the EU in ~007' 2003 conference, "Roma in an Many Roma were affected by restruc - The scale of Roma poverty and turing following the economic transi- Expanding Europe: Challenges exclusion is staggering. Roma com- tion in the early 1990s. They were often for the Future," we pledge that prise deep pockets of poverty within the first to be laid- off from jobs, and middle income countries in Europe. our governments will work toward have been most persistently blocked In Serbia in ~003 over 60 percent of eliminating discrimination and from re - enteringthe labor force due to Roma were living in absolute poverty- closing the unacceptable gaps low skill and education levels, and dis - in comparison with 6 percent of the between Roma and the rest of crimination. As a result, many Roma general population (the poverty line is have fallen into a vicious cycle of pover- society, as identified in our based on a monthly adult equivalent ty and exclusion which has kept them Decade Action Plans. from the opportunities presented by consumption of Dinars 3,997 for ~003) . In ~ooo , nearly 80 percent of We declare the years 2005- 2015 transition and EU accession. Roma in Bulgaria and Romania were to be the Decade of Roma Inclusion, Third, Roma issues have gained living on less than $4.30 per day, in and we commit to support the full increasing international attention. comparison with 37 percent of the participation and involvement of Deteriorating conditions within many total population of Bulgaria and 30 Roma communities caught the atten- national Roma communities in percent of Romania. In Hungary, 40 tion of international organizations achieving the Decade's objectives such as the UNDP, the Council of percent of Roma were living under this line, in comparison with 7 per- and to demonstrate progress by Europe , and the OSCE, as well as cent of the total population. measuring outcomes and reviewing NGOs including the Soros Disparities in living conditions are experiences in the implementation Foundation, Save the Children, pervasive. In education, as many as 90 of the Decade 's Action Plans. We UNICEF, and the World Bank. percent of Roma in some countries do Most significantly, Roma issues were invite other states to join our effort. not complete primary school. Of those integrated into the European Union children who are in school, between accession process. In 1993 attention to 50 - 85 percent of Roma children The countries selected fou r priority Roma issues was adopted as part of the across countries attend schools areas lor the Decade- education. Copenhagen criteria for accession. In intended for the mentally and physi - employment. health. and housing- order to meet these criteria, the COUll - cally disabled. In health, life and three cross-cutting themes: tries built institutions and legislative expectancy for Roma is as much as lO - mechanisms to address Roma issues. income poverty, discrimination. and IS years lower than for others. The European Commission made avail- gender. Each country has developed able pre -accession financial support for an action plan that specifies the Roma projects and has encouraged the Why now? goals and indicators that they plan countries which have joined the ROM A HAVE BEEN AMONG Europe's to achieve in these areas during the European Union to make use of EU poorest and most marginalized for coming ten years. The Decade runs grant funds to support Roma inclusion. centuries. Why have governments and The Decade of Roma Inclusion is a in parallel with the Millennium international organizations opted to political commitment by countries to Development Goals. highlight Roma inclusion as a priority reduce disparities in key economic and now? There are three main reasons . human development outcomes for First, political liberalization and Roma through implementing policy increased media freedom following reforms and programs designed to 28 Development Outreach WORLD BANK INSTITUTE break the vicious cycle of poverty and Each country has identified indicators an essential starting point for breaking exclusion. Each of the participating which it will use to measure progress in the poverty cycle. In tandem with the countries has adopted a national action reaching its goals during the Decade. Decade, a new Roma Education Fund plan, defining the outcomes in educa- Monitoring these outcomes will require was established with the support of the tion, health, employment, and housing a combination of designing and imple- international community, including the that it plans to monitor during the menting new surveys, and upgrading World Bank. The Fund aims to build on Decade. Roma participation is a core existing ones to ensure that Roma are past initiatives to support policy change aspect of the Decade. One of the lessons effectively included. The UNDP has in education, by drawing on the lessons of earlier efforts to support Roma inclu- been supporting these efforts through of local NCO projects. sion is that Roma involvement is central implementing a cross - country baseline For example, there have been anum- to project success. survey and convening a data expert's ber of successful pilots in the area of An important objective ofthe Decade group for sharing information. preschool education for Roma, includ - is improving the database for monitor- ing initiatives which involve parents in ing progress. Currently limited data on The Roma Education the classrooms, and introduce Roma Roma exist because of difficulties of Fund teachers' assistants to overcome lan- defining Roma as a group, identifying guage barriers and bridge between Roma in surveys, as well as privacy leg- THERE IS CONSENSUS among Roma school and community. The Fund will islation in many countries which pre- leaders, policy makers, and researchers draw upon these successes, and assist vents official collection of ethnic data. alike that improving Roma education is governments in identifying the policy , THE ROMA EDUCATION FUND FEB R U A R Y 2 0 0 6 29 changes necessary to extend these projects to other areas of discrimination within school systems and diminishing the the country and to integrate lessons into policy-making. role of special schools intended for mentally and phYSically Initiatives in education take various forms and intervene at handicapped students and institutions for Roma. The practice different points within the education cycle. A key priority is of unnecessarily channeling Roma students into special lowering the barriers that prevent Roma children from start- schools in the first place has been under review in a number of ing school in the first place . Many children are discouraged countries, including Hungary and Serbia. from attending school because of deprivation at home and Integration of Roma students from segregated schools and cultural differences, including language. Economic con- classrooms and from schools for the mentally disabled to gen- straints can be loosened by coordinating social assistance and eral schools is a priority across countries. Measures include: education poliCies to ease the cost of education for poor fami - desegregation of schools, including kindergartens; enforCing lies- including school feeding programs (which boost both legal regulations for desegregation; eliminating segregated nutrition and attendance), linkages between child allowances classes and schools; and antidiscrimination measures and and school enrollments, and scholarships fo r low- income media campaigns to support desegregation. Limiting the use students. Social workers can also identify households in need of separate classrooms and schools for Roma can improve of assistance. education quality and reduce divisions between Roma and NGOs can also play important roles. The Open Society non-Roma communities . Other important interventions Foundation initiated the "Step -by-Step" program, modeled on include teacher training and curriculum development to sup- the US "Head Start" initiative, in both Roma and non- Roma port multicultural education. communities. The program takes an integrated approach that These efforts are just a start. The Roma Education Fund can provides training and support to teachers while involving par- only provide a small contribution to the significant resources ents in the classroom. In ~ooo, over 8 , 000 Roma students in 17 that it will take to get the approximately 1.3 million Roma chil - countries in Central and Eastern Europe and the former Soviet dren of primary school age in the Decade countries into Union enrolled in Step -by-Step programs. school. Sound policies, effective implementation, aggressive Initiatives that reduce the dropout rate and smooth the way monitoring, unwavering political commitment, and continu - to secondary and tertiary education can be critical. Mentoring 0us Roma involvement are just some of the ingredients need - programs and extracurricular activities that provide tutoring ed for the success of the Decade and to expand opportunities and supplementary educational events have been introduced for future generations of Roma. in some countries. Experimental secondary schools in Hungary and the Czech Republic integrate Romani studies, Dena Ringold is Senior Economist with the Human Development including language, history, and culture into the curriculum. Sector Unit, The World Bank. Better education for Roma students can boost school attendance and educational outcomes. This requires fighting 30 Development Outreach WORLD BANK I NSTITUTE Ensuring Access to Low-Cost Drugs in a Patent-Protected H'orld BY JEAN o. LANJOUW IN 1995 . the founders of the wro agreed to a set of minimum intellectual property standards (the so - called TRIPS rules). An important aim of TRIPS proponents was to ensure worldwide patent protec- tion on new drug products. Today, after a decade of "transition," we are entering the stage where, indeed, generic versions of patented drugs will no longer be read- ily available on the market anywhere in the world. India's passage of a new TRIPS - compliant patent law in April ~oo5 was a significant turning point in this process. Going forward, poor countries need to retain some credible source for the generic supply of patented drugs, partly to have some leverage in price negotia- tions with producers of patented drugs. Even if generic alternatives are not used, having the option of turning to generics can be just as important because alterna- tives give a country some bargaining leverage in price negotiations with the patent holder. Competition, or the threat of competition, provides a market-based diSCipline on prices, making more direct control unnecessary. Under TRIPS, countries retain the right to license generic sales without the consent ofthe patent holder. If all coun- tries had large markets, then compulsory licensing of local production would suf- fice to ensure availability of a generic supply. However, most poorer countries have markets sufficiently small that sales revenue from anyone country alone can- FE B R U A R Y 2 0 0 6 31 not cover the fixed costs of starting up production. Certainly The second approach is to create economies of scale within one would ilOt expect to see the variety of generic suppliers the group of developing countries themselves. This is the idea needed to get the benefits of competition. behind the Foreign Filing License (FFL) proposal described below. Under this proposal, poorer country markets would be Ensuring availability of generic drugs combined into a "generic region." Production could be based in anyone country, and drugs exported to all other countries in THERE ARE TWO WAYS TO TACKLE this problem. One is to that group, without any of the political and procedural com- look outside of the developing world for economies of scale - plexity associated with compulsory licensing. essentially to allow poorer countries to take advantage of This means that if any country in the generic region had generic production infrastructure that already exists in the the ability to produce a given drug, then all other countries in developed world. On August 30 m, ~003, after nine the region could take advantage of its production months of diplomatic deadlock, WTO members capacity. It would also become more feasible to estab - agreed on procedures and circumstances in which lish new generic production capacity in the smaller TRIPS restrictions would be waived to allow this to poor countries because the facilities could be used happen. The advantage of this approach is that, to serve a set of countries rather than just the in principle, generic supplies could be avail - single domestic market. The development able quickly. of generic supply from within the develop - But the disadvantage is clear. Drugs ing world to address the needs of the produced by generics firms based in the developing world would pose far fewer developed world and exported to low- concerns for the research-based indus - income markets will look like acceptable try. It would also help develop the techni - substitutes for the patented versions in the cal skills and production capacity of low- developed countries, raising concerns by income countries. producers of patented drugs. Further if The primary concern raised by the producers of generics are able to obtain widespread use of generic pharmaceuti - early production experience by selling in cals is that it could undermine firms ' poorer markets, they are poised to enter incentives to develop new products. high- income markets more rapidly when However, two basic facts about drug mar- patents expire. These two facts make pro - kets show that it is possible to improve duction by developed - country generics generic access for the poor while preserv- firms particularly threatening to the ing research incentives. research-based industry. First, diseases commonly associated 32 Development Outreach WO RL D BAN K I NST I TUTE with developed countries , such as cancer or diabetes, are FIGURE 1: THE PROPOSED GENERIC REGION increasingly important causes of death and disability in poor countries. In the high-mortality regions of the world, for example, cardiovascular disease is already estimated to cause a greater share of the total disease burden than malaria and other tropical diseases combined (World Health Organization ~004) ' This fact means that improved access to pharmaceuti- $5,000 cals treating "global" diseases can have large health benefits Countries, for the poor. ordered by Second, while many people in poor countries suffer from real GDP "global" diseases, they are a very insignificant part of the per capita commercial market. Estimates suggest that currently almost fifty percent of the world's people live in countries that together represent less than ~ percent of global spending on drugs for cardiovascular disease (based on data from IMS o HEALTH Global Services at http://www.ims - global.com). Concentrated in Global Given the smaller profit margins in poor countries, this half of Least Developed Countries the world's population would account for an even smaller Disease Classes share of global profits. Firms' incentives would not be under- mined by removing such a small share of profits. Source Lanjouw 2004 It is because of these striking asymmetries in world mar- kets that many of the poor could be allowed generic access to important classes of drugs without damaging research incen - tives . The foreign filing license approach described below is a capita threshold would be in the generic region for all phar- feasible way to achieve this outcome. maceuticals. Countries higher up, such as India, would have a mixed situation. They would be in the TRIPS environment for The Foreign Filing License approach diseases to the left that are concentrated in the developing world, and in the generic region for more global diseases. For IN ESSENCE . the FFL policy would have inventors in devel - markets in the blue area above the curved line the policy has oped countries make legally binding commitments to their no effect: both the responsibilities and the flexibilities of own governments not to enforce patent rights in certain phar- TRIPS remain unchanged. maceutical markets. These markets would be defined as those The size of the generic region depends on the ceiling constituting the bottom percentage, say ~ percent, of global income level and, more importantly, the percentage of global drug sales in each disease class. sales cutoff (here ~ percent). The resulting "generic region" is shown in the figure at right. Along the horizontal axis ofthe figure are disease class - Implementation es,listed with those concentrated in poor countries toward the left, and those with worldwide incidence toward the right. IMPLEMENTATION WOULD NEED to be coordinated among Along the vertical axis are countries ordered by real GDP per the developed countries that have pharmaceutical research capita. The red area shows the "generic region" that would be activity, including, at least, Canada, Europe, Japan, and the created by the policy. The generic region would be recalculat - United States. The policy would require legislation to amend ed each year to accommodate changes in income and the evo - the patent code in each country. In the United States and the lution of markets. United Kingdom, this would include adding an inventor dec - Because diseases to the left are more concentrated in the laration to an existing foreign filing license process; other developing countries, the ~ percent of global markets cutoff is countries would need to put a foreign filing license provision reached at lower levels of real GDP per capita. It may seem into their codes (see Lanjouw ~OO~ for international legal counter-intuitive to differentiate in this way, but it is precise - details) . The classification of countries and disease classes ly for these diseases that some incentive for new product could be carried out by an international organization and development may need to come from sales in the developing reviewed annually. world. These sales are likely to be financed, at least in part, by Developing countries would not be required to take any the international community. For global diseases, the cutoff is action to implement this policy. They would continue to take reached at higher levels of real GDP per capita, so incentives steps to comply with TRIPS and any bilateral treaty obliga - would come primarily from sales in developed countries. tions. Most important, benefiCiary countries would not need Countries above a certain level of GDP (in the figure this is to seek exceptions or argue over treaty interpretation with assumed to be $5,000 per capita) would not be in the generic developed country governments. Rather, they could proceed region for any drugs. to strengthen their own patent systems to the potential advan- The poorest countries falling below some set real GDP per tage of local inventors. FEB R U A R Y 2 0 ° 6 33 Because implementation requires legislation in the devel- oped countries, industry representatives and development I NEQUALITY TRAPS advocates would need to work together to make it happen. Of continued from page 13 course, it is not obvious that the industry would champion a policy that restricts its control over certain markets . However, firms are aware that their commercial interests lie elsewhere; nomic changes. Thus in arguing for the benefits that may and many have made voluntary commitments not to exercise accrue from more open markets, the seismic cultural shifts patent rights in the poorest countries in recognition of public that would ensue should not be ignored, particularly when they concerns about access. The FFL policy would simply take this may result in new forms of domination and control. This is not existing commitment and embed it as a reliable part of the to say that cultural dimensions of integration are always either global rules-based system. Not only is this fair -all pharma- inequalizing or homogenizing-cross-cultural interactions ceutical researchers would be bound by the same obligations- could also be enriching and productivity enhancing . the longer-term interests of the industry would also be served by a patent system that garnered greater public support. Institutional cultures Success is most likely if those involved see the policy as an Last, but not least, we need to consider the cultures of the opportunity for agreement and are willing to treat it as an ini- institutions themselves . Tales of arrogance in the interactions tiative separate from other issues under negotiation or caus- between international or bilateral agencies and their" clients" ing conflict. The pharmaceutical industry would need to abound. Some would suggest the ease by which borrower refrain from linking support for the required legislation to countries adopt the ideological fashions of international other conditions, particularly involving countries that would development agencies is an example of internalized discrim- not be beneficiaries of the policy. The development commu - ination. Small, less affluent countries eager for a loan are par- nity would need to be enthusiastic about the legislation and ticularly vulnerable to this . However, there is an increasing recognize the industry contribution without, in a similar way, self-awareness within the organizations of this issue. Recent linking support to other areas of discontent. Having discus- policies in the World Bank and elsewhere have been seeking sions outside of the WTO would help to make clear the sepa - to change the asymmetry of dealings with client countries and ration between this initiative and both past controversies and enable a shift towards a culture of partnership and mutual current negotiations. learning with countries. But while institutional cultures are It is tempting to simply make do with what we have-a glob- dynamiC, they also take time to change, and this change is al patent system pushing towards uniformity. It is tempting to helped by being conscious and aware of inequities of agency let the global rules of access be defined by whatever happens to within the world of development policy. come from the lobbying that will surround future patent con- troversies. But it is important to do better. Generic production Vijayendra Rao is Lead Economist with the Development Research for the poorest countries is not an attractive commercial Group, The World Bank. opportunity for any firm and so it will be difficult to maintain competitive generic supply fo r such markets. It makes sense to This essay is a summary of the arguments in Rao and Walton take advantage of all options: including developing rules under (2004a and 2004b) which provide more thorough expositions. which developed country firms can provide a source of gener- ic supply in some cases, and removing patent constraints on References: the development of generic production capacity within the Appadurai, Arjun, "The Capacity to Aspire: Culture and the Terms of poorest countries so that they can supply their own markets Recognition," Chapter 3 in V. Rao and M. Walton (editors) Culture and Public (the FFL proposal) . A system that reflects the real differences Action, Stanford University Press, Stanford, 2004 in global markets can encourage broader generic access with - Bourdieu, Pierre , Outline of a Theory of Practice, Cambridge University Press, out undermining pharmaceutical research. Cambridge, 1977 Bourdieu , Pierre, Distinction: A Critique of the Judgement of Taste, Harvard The late Jean O. Lanjouw was Associate Professor in the Department University Press, Cambridge, 1984 of Agricultural and Resource Economics at the University of Rao, Vijayendra and Michael Walton , " Culture and Public Action: Relationality, Equality of Agency and Development," Chapter 1 in V. Rao and M. Walton (edi- California, Berkeley. tors) Culture and Public Action, Stanford University Press, Stanford, 2004a Rao, Vijayendra and Michael Walton, "Conclusion : Implications of a Cultural References Lens for Public Policy and Development Thought," Chapter 16 in V. Rao and Lanjouw, Jean O. 2002. ' A New Global Patent Regime for Diseases: U.S. M. Walton (editors) Culture and Public Action, Stanford University Press, and International Legal Issues. ' Harvard Journal of Law and Technology Stanford, 2004b 16(1):85-124. Steele, Claude M., "Thin Ice: "Stereotype Threat" and Black College Students," Atlantic Monthly, 284, Pp: 44-54, 1999 Lanjouw, Jean O. 2004. "Outline of the Foreign Fil ing License Approach." Processed . Available online at http://www.who.intlintellectualproperty/ Tilly, Charles , Durable Inequality, University of California Press, Berkeley, CA, su bm issionslForeign Fi ling. Lan jouw. pdf 1998 34 Development Outreach WORLD BANK INSTITUTE References SCANDINAVIAN Agell, J. and K.E. Lommerud . 1993. Egalitarianism and Growth. continued from page 20 Scandinavian Journal of Economics, 95: 559-579. Hibbs, D. and H. Locking. (2000) Wage Dispersion and Productive Efficiency: Evidence for Sweden. Journal of Labor Economics, 18 (4): national level, wage compression occurs at the national level. 755-782. Is the Scandinavian model politically feasible in the third Moene. K. and M. Wallerste in (1997): " Pay Inequality." Journal of Labor world? This, it seems to us, is the critical question. The ele- Economics, 15: 403-30. ments that appear to have been important in allowing wage Moene, K. and M. Wallerstein (2001): "I nequality, social insurance, and differentials to be reduced through collective bargaining were redistribution." American Political Science Review, 95: 859-874. (a) well organized employers, (b) encompassing trade unions Moene, K. and M. Wallerstein (2003a): "Earn ings inequality and welfare that included the low-paid workers and (c) immediate bene - spending: A disaggregated analysis." World Politics, 55: 485-516. fits of wage compression in terms of the earnings of those at Moene, K. and M. Wallerstein . (2003b) Does the Logi c of Collective Action the bottom. These conditions are not notably present in Explain the Logic of Corporatism? Journal of Theoretical Politics, 15: Africa, Asia and Latin America today. But we still understand 271-297. very little of the political dynamics that made wage compres- Moene, K. and M. Wallerstein (2005): "Social Democracy as a Development sion possible in an environment with strong unions and a Strategy." Forthcoming in P.8ardhan, S. 80wles and M.Walierstein (eds) government that considered industrial workers to be its core Globalization and Egalitarian Redistribution constituents. Thus, we are reluctant to conclude that the social Swenson, P. (1989) Fair shares: Unions, Pay and Politics in Sweden and democratic experience cannot be repeated. West Germany. Ithaca: Cornell University Press. Swenson, Peter. (1991) 8ringing Capital 8ack In, or Social Democracy. Karl Ove Moene is Professor of Economics at the University of Oslo. World Politics, 43(4): 513-544. Michael Wallerstein is the Charlotte Marion Saden Professor of Swenson, Peter. (2002) Capitalists against Markets. Oxford : Oxford Political Science at Yale University. University Press. Investment Climate Ca Enhancement Pro ram he World Bank's overall development strategy emphasizes two pillars for long-term growth and poverty T reduction: improving the investment climate and empowering and investing in people. The Investment Climate Capacity Enhancement Program was established in 2003 jointly by the World Bank Institute (WBI) and the World Bank Private Sector Development (PSD) Vice Presidency to support the implementation of this development strategy. The program's objectives are: o To familiarize clients with the importance of investment climate to growth and poverty reduction . o To promote new thinking, share knowledge and d isseminate best practices on how to incorporate investment climate issues in policy formulation . o To enhance clients' capacity in assessing and improving investment climate. o To train local trainers and researchers to build capacity for policy research and training in investment climate. o To provide d irect implementation and capacity enhancement support to client countries and World Bank staff. The target audience for the program incl udes: policy makers, practitioners and stakeholders in client countries, trainers and local partners, representatives from the international donor commun ity, and World Bank staff. For more information, please email icprogram@Worldbank.org. www.investmentclimate.org F E B R U A R Y 200 6 35 B () () k S II I': L F WORLD DEVELOPMENT REPORT Covering an array of economic concepts including scarce 2006: EQUITY AND resources. market power, efficiency, price gouging, DEVELOPMENT, World Bank. 2005. market failure, inside information. and game theory, Two children born on the same day Harford sheds light on how these forces shape our day-to - - one, a white male in Sweden, the day lives. often without our knowing it. other, a black female in South Africa . One can expect to live to the REDUCING POVERTY ON A GLOBAL age of 80, 30 years more than the SCALE: LEARNING AND INNOVATING other. One is likely to complete FOR DEVELOPMENT: FINDINGS 11 .4 years of schooling, the other FROM THE SHANGHAI GLOBAL less than a year. These differences in life chances that LEARNING INITIATIVE, Edited by appear across nationality, race gender, and social groups Blanca Moreno -Dodson. The World Bank, lead to wasted human potential and thus missed 2005. Capturing the findings from the development opportunities. The World Development Report Shanghai Global Learning Initiative, 2006 thoroughly examines this inequality of opportunity- Reducing Poverty on a Global Scale across and within countries-and its impact on contributes to the broader existing knowledge on poverty development. See also the online version at: reduction and the effectiveness of aid. The objective is to www.worldbank.org/wdr2006 enlighten development practitioners about observed achievements towards reducing poverty and the factors WORLDS APART: MEASURING behind them. Each of the chapters extracts \XtORLDS APART INTERNATIONAL AND GLOBAL implementation lessons learnt from a subset of case ...... U.,NG INTtaNATIOHAL AND .LOaAL '''.QUALITY INEQUALITY, Branco Milanovic, studies. A companion CD - ROM contains all of the case Princeton University Press, 2005. study summaries presented at the May ~004 Shanghai At the turn of the twenty-first conference. century, the richest 5 percent of people receive one -third of total THE MICROECONOMICS OF INCOME global income, as much as the DISTRIBUTION DYNAMICS: IN EAST poorest 80 percent. While a few ASIA AND LATIN AMERICA, Francisco poor countries are catching up with H. C. Ferreira. Francois Bourguignon. and I I ANKe MILANOVIC the rich world, the differences Nora Lusting. The World Bank. 2004. between the richest and poorest individuals around the This volume presents a collection of globe are huge and likely growing. Branko Milanovic studies on the dynamiCS of income analyzes income distribution worldwide using, for the first inequality based on Inicro data. Using time, household survey data from more than 100 a simple but powerful empirical countries. He explains the main approaches to the methodology, the authors analyze the problem and offers a more accurate way of measuring roles of prices. occupational choice, and educational inequality among individuals. choice in accounting for household income and its contribution to inequality. It casts doubt on the grand THE UNDERCOVER ECONOMIST: theories of growth and income inequality that have EXPOSING WHY THE RICH ARE dominated discussions in development economics. It RICH , THE POOR ARE POOR-AND paves the way for a full- blown. Inicro -based general WHY YOU CAN NEVER BUY A equilibrium theory of income determination and income DECENT USED CAR!, Tim Harford. inequality. Oxford UniverSity Press. 2005. An econOlnist's version of The Way THE OPPORTUNITY: AMERICA'S Things Work, this engaging volume is MOMENT TO ALTER HISTORY'S Th e part field guide to economics and part COURSE, Richard N. Haass. Public Opportunity expose of the economic principles Affairs. 2005. lurking behind daily events. Tim Harford ranges from Africa, Asia, Europe, and of course the United States to · The author argues that there is no major power conflict in the world. America's reveal how supermarkets, airlines, and coffee chains- to great military, econOlnic. and political name just a few- are vacuuming money from our wallets. power discourages traditional challenges; 36 Development Outreach WORLD BANK I NST I TUTE BOOh:SIILLI no ideological fault line divides the world into warring blocs. UNDERSTANDING CIVIL WAR India, China, Japan, Russia, and Europe all seek a prolonged (Volume 1: Africa, Volume 2: period of stability that would support economic growth. The Europe, Central Asia, and Other question is whether the United States will be able to integrate Regions) , Paul Collier and Nicholas other countries into global efforts against terrorism, the Sambanis. eds. The World Bank. 2005. spread of nuclear weapons, genocide, and protectionist The two volumes of Understanding policies that jeopardize global economic prosperity. This Civil War build upon the World compelling book explains why it must and how it can. Bank's prior research on conflict and violence, particularly on the work of INDIA AND THE KNOWLEDGE Paul Collier and Anke Hoeffler, ECONOMY: LEVERAGING whose model of civil war onset has sparked much STRENGTHS AND discussion on the relationship between conflict and OPPORTUNITIES, Carl Dahlman development in what came to be known as the "greed" andAnuja Utz, The World Bank. 2005. versus "grievance" debate. The authors systematically apply This book assesses India' s progress the Collier- Hoeffler model to 15 countries in 6 different in becoming a knowledge economy regions of the world. and suggests actions to strengthen the economic and institutional regime, develop educated and skilled workers, create an efficient innovation system, and --- a . , I" ' t , ' . ', .. . ' .... \, HIGHER EDUCATION IN LATIN AMERICA: THE INTERNATIONAL DIMENSION, Hans de Wit, Isabel ";:~-'l:'-l build a dynamic information infrastructure. It highlights Cristina Jaramillo. Jane Knight. and that to get the greatest benefits from the knowledge Jocelyne Gacel-Avila. eds. The World : ,I revolution, India will need to press on with the economic Bank, 2005. This book provides a reform agenda that it put into motion a decade ago. In so : \ I comparative analysis of dOing, it will be able to improve its international internationalization issues, trends competitiveness and join the ranks of countries that are ~--, ...............-: I l.,. and opportunities in higher making a successful transition to the knowledge economy. education in selected Latin American countries at the institutional, national and WORLD DEVELOPMENT regional level. It addresses the specific elements of the INDICATORS 2005 SUITE, The internationalization process, such as mobility, World Bank, 2005. curriculum, linkages, networks, etc. but instead of looking This statistical reference allows the at them in detail they are presented as part of a more reader to consult over 800 indicators comprehensive overview of poliCies, programs and for 15~ economies and 14 country activities at all three levels. groups in more than 80 tables. The World Development Indicators 2005 ACCESS FOR ALL: BUILDING INCLUSIVE FINANCIAL suite of publications includes the SYSTEMS, Brigit Helms, The World Bank, 2006. In the past WDI in print, CD- ROM and online format, as well as the ten years, the world of microfinance has changed Little Data Book, the Little Green Data Book and the World dramatically. The field has moved rapidly from early BankAtlas. innovations in providing loans to help poor entrepreneurs start businesses to a bold vision of creating entire OUR TIME IS NOW: YOUNG PEOPLE CHANGING financial systems that work for the poor. Microfinance has THE WORLD, Sheila Kinkade and Christina Macy. proven to be an effective tool for reducing poverty and Pearson Foundation, 2005. helping poor people to improve their lives. And yet a This book tells the stories of more than thirty young diverse range of potential clients still lack access to an people in over twenty countries who are taking action to array of financial services. The challenge today is to contribute to their local and global communities. The engage more types of distribution systems, more book spotlights the efforts of young leaders who are technologies and more talent to create financial systems addressing a host of urgent global challenges: poverty, that work for the poor and boost their contribution to violence, racism, environmental destruction, and civic economic growth. This title explains what this new vision apathy, to name only a few. of microfinance means in practical, non -technical terms. F E B R U A RY 2 0 0 6 37 · WORLD DEVELOPMENT GENDER AND HEALTH g tCs~ "- -_._ ...... REPORT 2006: EQUITY EQUITY NETWORK (GHEN) AND DEVELOPMENT, is a partnership of national online version. The website and international includes press releases in institutions concerned multiple languages, overview with developing and and full text, a feature story, implementing policies to a video interview, the press conference transcript, press improve gender and health equity, particularly in resource conference photos, and more . constrained environments. On this site you can see who the www.worldbank.orglwdr2006 partners are, read summaries of the country case studies, and find out more about resources on gender and health equity. GHEN produces newsletters once or twice a year. www.ids.ac.uklghenlindex.html INTERNATIONAL SOCIETY ........ ---- =-..::.:..-.. - FOR EQUITY IN HEALTH (lSEQH) promotes equity in ----- ----- --'-'-- -= health and health services EQUINET, the Regional internationally through Network on Equity in education, research, fE. Health in Southern publication, communication Mrica, is a network of and charitable support. It professionals, civil society facilitates scientific interchange of, and disseminates members, policy makers, conceptual and methodological knowledge on issues state officials and others, related to equity in health and health care services; who have come together to advances research related to equity in health; and promote and realize shared values of equity and social maintains corresponding relationships with other relevant justice in health. EQUINET gathers people to overcome international and regional organizations. isolation, give voice and promote networking. We work www.iseqh.orglindex.html through existing government, civil society, research and other mechanisms and institutions in the Southern Mrican Development Community (SADC) region and in southern and East Mrica. INTERNATIONAL JOURNAL www.equinetafrica.org FOR EQUITY IN HEALTH is an open access, peer- reviewed, online journal presenting evidence relevant CENTER FOR SUSTAINABLE to the search for, and DEVELOPMENT AND attainment of, equity in ENVIRONMENT (CENESTA), health across and within based in Iran, is a non- countries. International Journal for Equity in Health aims to governmental, non-profit improve the understanding of issues that influence the organization dedicated to health of populations. This includes the discussion of promoting sustainable political, policy-related, economic, social and health community- and culture- services-related influences, particularly with regard to based development. Its main area of work is Iran and systematic differences in distributions of one or more Southwest Asia. CENESTA experts have also engaged in aspects of health in population groups defined extensive activities in Mrica, Latin America, Asia, and in demographically, geographically, or socially. Published the international arena in general. CENESTA is a member online by BioMed Central. of mCN- the World Conservation Union and is affiliated http://www.equityhealthj.coml with the University ofthe North (Iran). www.cenesta.org 38 Development Outreach WORLD BANK INSTITUTE I, '\ () \ \ L I·: I) (; L I<. L S () I I<. c: L S GENDER AND --_ - _-- .. WORLD SUMMIT ON THE DEVELOPMENT FOR INFORMATION SOCIETY CAMBODIA (GAD/C) is a (WSIS) GENDER CAUCUS is local non- governmental a multi-stakeholder group organization which has a consisting of women and mission to promote gender men from national equity in social, economic governments, civil society and political processes in organizations, non- Cambodia. GAD/C carries governmental organizations, the private sector and the out this mission through advocacy, networking, training United Nations system. The strategic objective of the and research in partnership with other Cambodian NGOs, WSIS - Gender Caucus is to ensure that gender equality international and multilateral organizations, state and women's rights are integrated into WSIS and its institutions and other organizations of civil society. outcome processes. It aims to build on commitments www.bigpond.com.khlusersigad made in the Beijing Platform for Action 1995. http://genderwsis.org/ TRANSFORMATION, INTEGRATION, AND SOCIAL WATCH is an GLOBALIZATION international network of ECONOMIC RESEARCH citizens' organizations (TIGER) has been addressing poverty and the established in Poland to causes of poverty, aiming bring together people and towards an equitable ideas through innovative distribution of wealth and research projects that would have the potential to advance the realization of human economic equity while building democratic and market rights. Social Watch holds governments, the UN system institutions in post-socialist countries and other emerging and international organizations accountable for the market economies. TIGER aims to strengthen human fulfillment of national, regional and international capital by imparting the results of its research to current commitments to eradicate poverty. Social Watch aims to and future leaders in government and business. achieve its objectives through a strategy of advocacy, www.tiger.edu.pl/englishlindex.htm awareness-building, monitoring, organizational development and networking. Social Watch promotes people - centered sustainable development. www.socialwatch.org CENTER FOR THE IMPLEMENTATION OF PUBLIC POLICIES ENERGY,POVERTY,AND PROMOTING EQUITY AND GENDER (ENPOGEN) GROWTH (CIPPEC), was set up to investigate the based in Argentina, role of energy, especially promotes the analysis and renewable energy, in implementation of public alleviating poverty and policies fostering equity and growth in Latin America. It improving gender equity. promotes the development of public entrepreneurs and The project was initiated by the Asia Alternative Energy the implementation of best practices in the public sector; Program (ASTAE), with the support ofthe Government of develops and disseminates tools that enable civic society the Netherlands. to increase its capacity to control and evaluate State www.worldbank.org/astaelenpogen policies; and carries out research projects. www.cippec.org FEB R U A R Y 2 0 0 6 39 <: \(.L.\()\R MARCH 2006 MAY 2006 1-5 Conference of the Parties to the Stockholm 6-8 Energy Week ~oo6 Convention on Persistent Organic Pollutants Washington, DC (UNEP) www.worldbank.org (NEWS/Calendar) Geneva, Switzerland mwilliams@Unep.ch (Michael Williams) 6-9 World Conference on Art Education (UNESCO) www.pops.int Lisbon, Portugal i.le-fournis@Unesco.org (Isabelle Le Fournis) 20-22 World Economic Forum on the Middle East Sharm EI Sheikh, Egypt 16 World Water Forum (UNESCO) middleeast@Weforum.org Mexico City, Mexico www.weforum.org/site/homepublic.nsf/ r.amelan@Unesco.org (Roni Amelan) ContentIWorld+ Economic+ Forum+on+the+ Middle+East 16-17 Conference on World Heritage and Climate Change (UNESCO) JUNE 2006 Paris, France i.le-fournis@Unesco.org (Isabelle Le Fournis) 19- 23 World Urban Forum III Vancouver, Canada APRIL 2006 habitat.press@Unhabitat.org (Zahra Hassan) www.unchs.org/wuf/ 7,006/ default.asp 5-6 World Economic Forum on Latin America www.unhabitat.org Sao Paulo, Brazil latinamerica@Weforum.org SEPTEMBER 2006 www.weforum.orgllatinamerica 19-20 IMFIWorld Bank Annual Meetings 24-28 International Trade Centre Joint Advisory Singapore Group Conference www.imf.org/external!am!7.006/ about.htm Geneva, Switzerland bisson@intracen.org (Elaine Bisson) www.intracen.org/ index.htm OiYtreach Subscription Order Form SUBSCRIBERS FROM DEVELOPING NAME COUNTRIES WILL CONTINUE TO RECEIVE THE MAGAZINE FREE OF CHARGE. TITLE ORGANIZATION SUBSCRIPTION FEE APPLIES TO READERS IN THE FOLLOWING DEVELOPED COUNTRIES: ADDRESS _______________________________________________________ Australia, Austria, Belgium, Canada , Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Kuwait, Luxembourg, CITY AND STATE OR PROVI NCE ________________________________________ Monaco, Netherlands, New Zealand , Norway, Oman, Portugal, Spain, Sweden , Switzerland, COUNTRY _______________________________________________________ United Arab Emi rates, United Kingdom, United States, an d Vatican City. ZIP I POSTAL CODE _________________________________________________ PHONE ________________________________________________________ FAX ________________________________________________________ E-MAIL ________________________________________________________ , sign me up for tJef.etripment Outreach Please do not send cash. Make checks payable to Development OUTREACH/WBI. fQY2006 for just $18 o Check no. in the amount of $_____ is enclosed . (three issues per Mai l order to : calendar year, January- Editor, Development OUTREACH December) The World Bank 1818 H Street, NW, Room J2-200 Washington , DC 20433 USA Introducing the new homepage of WBI's Urban and Municipal Management Program The Business, Competitiveness, and Development Program of the World Bank Institute is pleased to announce the launch of two new products Multi-sectoral Partnerships and Sustainable Development web-based course Corporate Responsibility and Competitiveness web-based course II r' ' I 1 www.wor ldbank.org / wbl / bcd REDEFINE THE Learning Network is a worldwide partnership of learning GEOGRAPHY OF YO ...,"""U'L.... Affiliates) that offer the use of advanced information and communication and specialized distance learning tools to conned people working in DEVELOPMENT BUSIN aroundthe.,o.rli iR~~;;if.;;IiRi w dl·""""""""""""""""""" GDLN Affiliates are located In over distance learning courses on development local knowledge and resources and to 60 countries worldwide. Their issues; development agencies seeking access the very best expertise in any facilities Include classrooms with dialogue with key partners; governments field, anywhere in the world. vldeoconferenclng and high-speed discussing trade with other countries; and Internet resources such as email and non·governmental organizations planning Ell Mark your presence In local, regional, Instant messaging. These are joint activities with partners around the and global development dialogues. combined with facilitation and world. Today, GDLN counts more than 70 learning techniques depending on Affiliates around the world, and an specific users' needs. Through these Ell Rethink capacity building and technical estimated 25,000 people participate in technologies and techniques, GDLN assistance. GDLN events every year. Dialogues and Affiliates enable organizations, Through GDLN, you can deliver learning learning exchanges among developing teams, and individuals to and training activities directly to your countries have become a common feature. communicate across distances In a clients in the field at lower costs, and For example, development practitioners in timely and cost-effective way. participants can immediately apply new Africa, Asia, and Latin America use GDLN knowledge and skills in their work. to share experiences about education III Reach out to your counterparts and Leverage GDLN Affiliates' national and reform, HIV/AIDS prevention, clients quickly and cost-effectively. regional partner networks to mobilize community-driven development, and GDLN Affiliates can connect you with other key development issues. your development partners around the world for meetings, coordination, and knowledge sharing events. Our clients include academic institutions offering GDLN in action: Interactive videa conferences with participants in Afghanistan and Latin America How can we provide poor people with equal opportunities to pursue a life of their choosing? Two children born on the same day - one, a white male in Sweden, the other, a black female in South Africa. One can expect to live to the age of 80, 30 years more than the other. One is likely to complete 11.4 years of schooling, the other less than a year. These differences in life chances that appear across nationality, race, gender, and social groups lead to wasted human potential and thus missed development opportunities. That is why the World Development Report 2006 analyzes the relationship between equity and development. Equity matters for long-term development. This year's World Development Report considers the Equity and Development evidence on inequality of opportunity, within and across countries. It asks how public action can level the political and economic playing fields. Domestically, it makes the case for investing in people, expanding access to justice, land, and infrastructure, and promoting fairness in markets. Internationally, it considers the functioning of global markets and the rules that govern them and the complementary provision of aid to help poor countries and poor people build greater 11---- endowments. ~. World Development Report 2006: Equity and Development A copublication with Oxford University Press. September 2005. 240 pages. Paperback. Stock no. AI6249 (ISBN 0-8213-6249-6). US$26. Hardcover. Stock no. A 16251 (ISBN 0-8213-6251-8). US$50. World Bank Publications Telephone: 703-661-1580 or 1-800-645-7247 Fax: 703-661-1501 www.worldbank.org/publications AVAILABLE AT BETTER BOOKSTORES lIE WORLD BANK Publications The rete,ence of choice on dellOlopmem DEV06