Social Justice thru ‘Equity’: World Development Report 2006

The 28th Report in the annual series of World Development Reports produced by the World Bank is titled “Equity and Development”.

The Report essentially vindicates the stands of such luminaries from the developing world as Periyar (who joined the cause of social justice in South India – then led by the Justice Party - in the 1920s, and turned it into a mass rationalist & social reform movement), and the economist / academician Prof Amartya Sen (into the latter half of the 20th century and the early years of the 21st century) on the importance of social justice.

The World Bank staged a Press Conference on 20 Sep 2005 in Washington DC to mark the release of the World Development Report 2006: “Equity and Development”. The Press Conference was chaired by Mr François Bourguignon, Senior Vice President and Chief Economist of the World Bank - the Frenchman who had guided the production of the Report. The Report was presented by Mr Francisco Ferreira, one of the Lead Authors (co-authors) of the Report and a long-time economist with the World Bank. Some of his remarks during the presentation and subsequent Q&A are excerpted below:

The influence of caste and stereotyping on performance in India

MR. FERREIRA:

…… an example from an experiment that was conducted with a number of children from villages in India, and it speaks to the influence of caste and stereotyping, according to a social category like caste, on performance.

Let me tell you a little bit about this example. Here, what they did was the experimenters got groups of children, six at a time, always three kids from a high caste and three kids from a low caste, and asked them to fill out a maze, and if you filled out the maze correctly, you got a rupee in the piece rate treatment; or in the determined treatment, you got 20 rupees if you were the guy who filled out most mazes.

The experiment consisted of doing this, sometimes telling the kids what their castes were and sometimes not telling them what their castes were. And the remarkable result is that when you didn't tell them what their castes were, the experimenters found that the high caste and low caste children did exactly the same; whereas when caste was made salient and announced, and the kids knew that they were high caste or they were low caste compared to others in the group, there was a statistically significant difference between the low caste and the high caste.

Notice that the high caste didn't go up very much; it's the low caste that lost. And therefore, in aggregate terms for this society, there is an aggregate loss. There is a loss in performance, there is a loss in productivity, that comes from the impact of stereotyping and segmentation.

If this happens outside the experiment--if it happens in school classrooms, if it happens in factories, shops, and in farms--there is an aggregate loss to productivity in India because of this. And there are experiments like this for other places as well, including the United States.

'Trickle-up' development, instead of the 'trickle-down' (of Reaganism)

QUESTION:

……….While the Vice President (Mr François Bourguignon) tried to underplay the radical nature of these recommendations and findings, some of us feel that we have been fed the trickle-down theory over the years by many of the World Bank economists. We feel that it is quite radical. It reminds one of the old base of North-South dialogue around [inaudible], that kind of era………..

MR. FERREIRA:

Just to add very quickly to that, it's funny that you mention trickle down because we very much see this Report as a reversal of that and a proposal of trickle-up development which sees the poorest people in society not as the recipients of charity but people with enormous potential to contribute in this generation but perhaps in the next generation towards the development of their countries and we see retargeting and refocusing public subsidies and policies in the direction of the poorest people as a sensible investment in trickle-up development.

Brazil: skewed nature of education

MR. FERREIRA:

I think we have described in this Report and in other reports the Brazilian state as a truncated welfare state in the sense that it's been very good at taxing people and redistributing only amongst the rich. So what we've chiefly failed to do in Brazil is to make sure that we spend on the things that the poor people need, and chief amongst them is education where the ratio of expenditure on a tertiary student to the expenditure on a primary student is much higher in Brazil than it is say in Korea. I don't have the exact numbers with me now, but here the order of magnitude is about three or four times larger, that ratio.So we subsidize rich people who have gone to private school and are now going to free public universities as opposed to subsidizing the poor kids who are going to state schools very early on.

So that's one example, but that percolates through a range of types of public expenditure in Brazil. There have been improvements over the last 12 years, but they are small improvements compared to the nature of the problem. Bolsa Familia and a number of other interventions from both the last, the Cordoza government and from the Lula government, have moved in the right direction, but we still have a long way to go in terms of using the state's redistributive power to actually provide opportunities to the poor. (Note 1) (Note 2)

A revolution, but a patient and peaceful one

MR. FERREIRA:

If I could just add to that as well. I think we are asking for a revolution, but it's a revolution that has got to be patient, peaceful and pro-market……and what we're asking for is a joint resolve by developing countries to see their poor people and their masses as resources that are not getting a chance to contribute and to start investing in them in a major way.

It will require some measure of conflict because some of the current subsidies will have to be taken away from elites, but elites should see this as an investment in their children and grandchildren living in a more peaceful society where trust is greater and where more people are productive, and the key thing about being pro-markets is that we'd like, in fact, markets to be more competitive, not less, and by being more competitive, we mean that more people, often poor people, can have access to them and participate in them.

Mr Francois Bourguignon had the following to say, as excerpted from an essay carried by The Business Times (22 Sep 2005):

Equity as the “equality of opportunities”

Equity is not the same as equality. By equity we mean equality of opportunities, where opportunities are the factors that make it possible for people to generate a certain income and achieve a certain level of well-being. In an equitable society, all have the same opportunities to pursue a life of their choosing, whether this is in terms of acquiring an education, obtaining credit, finding a job or participating in the public debate, regardless of their country of birth, the wealth and social status of their parents, or their gender, race, caste, ethnicity or social class.

Equity amidst Inequality

The distribution of incomes, education levels, wealth and other assets will typically be unequal in an equitable society, because people differ in the effort they make, in their desire to bear risks, or in the way they process information. Such inequality of incomes is not only acceptable, but often desirable for the incentives it provides.

What is not acceptable is inequality that derives from lack of opportunities and discrimination. A lower-caste girl born in the slums of Mumbai faces a grim future, unlike a boy born to university-educated parents in a well-heeled neighbourhood of the same city, or the vast majority of people born in the developed world. An Aids orphan in rural Zambia will have fewer opportunities than a child of privilege in the capital.

Citizens of developed countries live on average about 20 years longer, get at least six more years of schooling and have better health, and choose from a wide range of options to fulfill their potential than their peers in low-income countries…….

The huge differences within and between countries are not only morally unacceptable; they also hamper growth and poverty reduction……

Equity fosters growth

There are two main reasons why equity is good for growth. First, lack of opportunities harms initiative and deprives societies of the talent and efforts of some of its members. A poor woman who would like to set up a small shop will generally have a hard time finding credit and may never start the business, however profitable it may be. Bright children from disadvantaged castes may never get a chance to go to school. Poor farmers without access to crop insurance grow safer but less profitable crops. More equal access to credit, education, insurance and so on would lead to greater growth.

Second, equity is good for growth because societies with an equitable distribution of resources tend to have more equitable political arrangements where a majority of the citizens, and not just an elite, participate directly or indirectly in public decision-making. In turn, societies with more equitable political systems have better economic institutions: for example, better protection of personal and property rights, greater rule of law, less corruption that lead to faster growth. This is illustrated powerfully by the contrasting historical experiences of North and South America.

Inequity and its perpetuation

If equity is such a good thing, then why are many societies deeply inequitable? Societies that start off with an inequitable distribution of resources tend to put in place inequitable economic and political institutions. So inequity is perpetuated across generations, because elites control power and capture the benefits from economic activities. This is not only unjust; it is economically inefficient. Elites that capture power to their own benefit prevent large parts of the population from realising their economic potential and therefore slow down the progress of the whole community towards a healthy and prosperous life.

While history is important in determining equity, change is possible. Indeed, history is full of examples of governments effecting change, spontaneously when reforms good for both equity and efficiency are available, or in response to political changes. Where there is a political base for action, many policies and programmes can extend opportunities to the poor. But expanding equity so as to foster growth can also require actions that limit elite capture: opening up the financial system, reducing the concentration of market power in certain sectors, controlling the negative consequences of corporatism, ensuring transparency and accountability of government action at the central and local level, and so on……..

I believe that equity needs to be brought back to the centre of discourse and action in poverty reduction and economic development. Equity matters not only for its own sake, but for its role in shaping a dynamic, innovative and efficient economy both at the national and at the global level.......

Note 1:

The education situation in Brazil is not unlike that in India: see post on India's economy & social justice: responding to Ngiam Tong Dow (24 July 2005)


Note 2: Social justice / Equity, Singapore-style

Singapore’s Prime Minister Lee Hsien Loong promised first-class education to ALL during his second National Day Rally speech (marking Singapore’s 40th anniversary as an independent nation) on Sunday 21 August 2005.

It was reported as follows by the Singapore press:

“We must have an education system which offers first-class education to all and not just an elite few at the top ….. We want to develop every talent, not just those who are academically inclined. And we want to prevent the problem of low skills and low incomes from going on into the next generation….. That’s why Singapore works. It is not just because we have a few stars but a strong Singapore team…… We are aiming for a mountain range, not a pinnacle. We want many routes up, many ways to succeed.” - The Straits Times (22 August 2005), quoting PM Lee

“Big strides are being taken to ensure that all Singaporeans, and not just an elite few, are given equal opportunities to receive a first class education. The Government is making it a top priority to push every student to study beyond secondary level, Prime Minister Lee Hsien Loong promised when he touched on the education system during yesterday's National Day Rally…..” - TODAY (22 August 2005), which headlined its report as 'No child will get left behind'.


Some of the reactions from the public, as reported by the Singapore press:

“The first feature that struck me was how inclusive the speech was. This is truly a Prime Minister for ALL Singaporeans. He went out of his way to emphasise no one will be left behind as Singapore pursues further economic growth and prosperity. He is not going to be happy to just have the elite prosper while the common folk suffer. He went into detail on housing assistance for the poorest and higher education for those who did not do as well in the regular schools, helping those who need help by investing in their future and boosting their drive to do better for themselves. This is a great extension of the vision first enunciated last year; and a fantastic road map moving forward…..”
- Su Guaning, President, NTU (Nanyang Technological University): The Business Times (29 Aug 2005)

“….. I was particularly impressed by PM Lee’s emphasis that the education system should offer a first-class education to all and not just an elite few, and that every talent is important in building up an invincible nation….”
- Chua Thian Poh, Chairman & CEO, Ho Bee Investment Ltd : The Business Times (29 Aug 2005)

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