The Global Monitoring Report (GMR) is the World Bank’s and the International Monetary Fund’s vehicle to not only report on progress toward the Millennium Development Goals (MDGs) but, equally importantly, to analyze a theme relevant for development in general and the MDGs in particular.
Donor countries are routinely confronted with the problem of how to allocate the aid budget. The debate on aid allocation has called for various types of indicators including institutional capacities and governance but in the practice of aid allocation a multitude of factors, such as strategic geopolitical interests, budget constraints and internal political considerations, still play an important role in most countries. However, if we focus on welfare indicators and on current practices of aid allocation, there are two monetary indicators that have gained prominence over the last few decades: GDP per capita and the poverty rate. GDP per capita is a natural choice of an indicator that is well understood and widely available. The poverty rate is a more recent choice explained by the new status that poverty acquired as a development objective. For a combination of events such as the fall of the Berlin wall in 1989, the publication of the World Development Report on poverty in 1990 and the establishment of the Millennium Development Goals in 2000, multilateral organizations have increasingly adopted poverty reduction as the overarching development goal. This new focus on poverty and the increased availability of expenditure surveys worldwide have also enabled the use of poverty measures to rank countries and allocate aid.
Poverty is indisputably central to the World Bank as we sharpen our mission, but inequality matters too, and we underplay or ignore it at our peril. When this message comes from eminent economist and Nobel laureate Joe Stiglitz, Bank staff and the general public tend to sit up and take notice.
The last few months have been a busy time for inequality. And over the last few days the poor thing got busier still. Inequality is now dancing on two stages. It must be really quite dizzy.
We need an inequality goal. No we don’t. Yes we do
One of the two stages is the post-2015 development goals. At some point, someone seems to have decided that reducing inequality needs to be an explicit commitment in the post-2105 goals. The UN System Task Team on the Post-2015 UN Development Agenda wrote a report on inequality and argued that “addressing inequalities is in everyone’s best interest.” Another report by Claire Melamed of Britain’s Overseas Development Institute argued that “equity, or inequality, needs to be somehow integrated into any new framework.” Last week a group of 90 academics wrote an open letter to the High Level Panel on the Post 2015 Development Agenda demanding that inequality be put at the heart of any new framework.
The extent to which local communities benefit from commodity booms has been subject to wide but inconclusive investigations. This paper draws from a new district-level database to investigate the local impact on socioeconomic outcomes of mining activity in Peru, which grew almost twentyfold in the last two decades. The authors find evidence that producing districts have better average living standards than otherwise similar districts: larger household consumption, lower poverty rate, and higher literacy. However, the positive impacts from mining decrease significantly with administrative and geographic distance from the mine, while district-level consumption inequality increases in all districts belonging to a producing province. The inequalizing impact of mining activity, both across and within districts, may explain part of the current social discontent with mining activities in the country, even despite its enormous revenues.
Read the working paper to know more.
Driven by the rapid growth of urban population in developing countries, the world had become more urban than rural by 2007. This trend is expected to continue in the years ahead. Almost all of the future growth in the world population will be concentrated in the urban areas of developing countries. The United Nations projects that developing countries will almost double their urban population by 2050, adding a further 2.4 billion urban dwellers (figure 1).
There is one simple answer to the “what-will-it-take-to-end-poverty” question: it will take courageous politicians who actually implement the policies we already know are needed. Politicians, even the well-intentioned ones, are too often unable to implement good policies, because bad policies are needed for their political survival. For example, vote-buying, the direct exchange of “gifts” or money for political support during elections is widespread in many developing countries. For the first time, new research provides direct empirical evidence that where vote-buying practices are more prevalent, governments invest less in pro-poor services.
As the 2015 deadline for achieving the Millennium Development Goals approaches, much thought is being devoted to what should succeed that framework for measuring global progress against hunger, disease, and poverty. Any successor framework must reflect global aspirations and arise from a rich consultative process. I believe that the new framework must embrace a broader understanding of development — one that is relevant for all countries, rich as well as poor.
The world today looks very different from a few years ago. Many countries have high levels of debt that could make it difficult to undertake spending initiatives for many years. Financial sector incentives and regulation may have to be rethought, existing growth models refined to deliver sufficient new employment opportunities, and the functioning of the international monetary system revisited.
It is generally thought that two groups are the big winners of the past two decades of globalization: the very rich, and the middle classes of emerging market economies.
The statistical evidence for this has been cobbled together from a number of disparate sources. The evidence includes high GDP growth in emerging market economies, strong income gains recorded for those at the top of the income pyramid in the United States and other advanced economies, as well as what seems to be the emergence of “a global middle class” and casual observations of the rising affluence of Chinese and Indians.
The World Bank’s classification of economies as low-, lower-middle-, upper-middle-, or high-income has a long history. Over the years these groupings have provided a useful way of summarizing trends across a wide array of development indicators. Although the income classification is sometimes confused with the World Bank’s operational guidelines, which set lending terms and are determined only in part by average income, the classification is provided purely for analytical convenience and has no official status.