Equity promotes efficiency: A radical insight from the World Bank- The Economic Times

Equity promotes efficiency: A radical insight from the World Bank- The Economic Times: "Equity promotes efficiency: A radical insight from the World BankAdd to Clippings

TIMES NEWS NETWORK[ WEDNESDAY, SEPTEMBER 28, 2005 12:12:07 AM]
Can equity be reconciled with efficiency? Conventional advocates of ‘market forces’ think not. To that extent, the World Bank’s World Development Report (WDR) 2006, which recasts the mutually antagonistic relationship between equity and efficiency into one of reciprocity, is welcome. More so, since the Bank is seen as one of the key institutions providing ideological leadership to the project of liberalisation. The WDR has correctly pointed out that inequities within and between countries in terms of access to quality education and healthcare, and capital, assets and other economic opportunities is bound to severely limit their economic advance. Societies, which have good social development indices, indicate that socialisation and skilling of their members are more in accord with the contemporary logic of production than of those which are caught in the time-warp of a pre-industrial political economy. Reducing malnourishment and improving health of the currently unemployed have, for one, been shown to lead to a rise in the aggregate output in the economy.

Equity, however, becomes empty rhetoric conserving a regressive status quo in the absence of any concerted attempt to correct imperfections in institutions that allocate resources and determine opportunity. The WDR’s advocacy of public action to change prevailing institutions is truly radical and underscores its growing maturity. It questions the deep-seated consensus that the modern market is intrinsically fair. True, the possibility of achieving more equity resides in the tension between existing social institutions and the new aspirations created by the market. But it takes politics to bring the possibility to life. The various national governments can do their bit by making their respective policy regimes amenable to public action. That should, ideally, be the global norm as well. Sadly, “the WDR 2006”, as Neeraj Kaushal pointed out on this page (ET, September 27), “represents the thinking of the bank staff, and not the thinking of the countries that run the Bank”."