A Closer Look | Inequality and Development: What Does the World Bank Have to Say?

While inequality has emerged as a chief byproduct of economic globalization, the issue has not received its due attention from key international institutions. That is, until 2006, when the World Bank dedicated that year’s World Development Report to the relationship between equity and development. Just last week, Francisco Ferreira, lead economist at the World Bank, provided an overview of the report at an event hosted by the Elliott School of International Affairs, George Washington University.

Dr. Ferreira began by highlighting the prominent theoretical frameworks used to understand equality, including those of Amartya Sen and John Roemer. He went on to provide a wealth of quantitative evidence demonstrating how inequalities in opportunity and circumstances (based on gender, class, caste, and race) have tremendous impacts on education, health, economic, and other outcomes. He wrapped up by explaining why equality matters in the field of development, pointing out not only the moral imperatives for equality, but also the effect that inequality has on market efficiency and on the quality of institutions that a society develops.

While there are many academic initiatives dedicated to the study of inequality (like those at Cornell, Stanford, and Columbia), it is refreshing and absolutely critical that a global institution like the World Bank is turning its attention to such a fundamental challenge in development. Dr. Ferreira and others at the World Bank have the opportunity, through their work on inequality, to refocus the Bank’s projects, initiatives, and lending patterns on issues that deeply affect the fulfillment of people’s basic needs and their pursuit of various life opportunities, rather than simply on macroeconomic considerations.

As an aside, there is quite a debate as to whether global inequality is increasing (divergence) or decreasing (convergence). Branko Milanovic, Lead Economist in the World Bank’s research department, and Xavier Sala-i-Martin, professor of economics at Columbia University, are two of the major combatants in this debate, Milanovic being a strong proponent of the divergence view and Sala-i-Martin arguing forcefully for convergence.