News Highlights
Author:
Maha,Al-Azar,
Media Relations Officer,
Office of Information and Public Relations,
ma110@aub.edu.lb
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World Bank Official Says Equity is Good for Economy
 | Minister Haddad, Dr. al-Khalil, President Waterbury and Dr. Prennushi
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Ensuring there is equity among all the peoples of the world is not just important from the humanitarian aspect, but also from the economic aspect, said a senior World Bank official in a seminar held at AUB on Thursday January 26. Dr. Giovanna Prennushi, lead economist in the World Bank's Poverty Reduction Group, told a full Auditorium B-1 in College Hall, that increasing equity also improves efficiency and production which in turn improves incomes and standards of living.
Prennushi was presenting an overview of the recently released World Bank Development Report 2006, which took equity for its theme. The seminar was jointly organized by AUB's Issam Fares Institute for Public Policy and International Affairs in collaboration with the World Bank, and attracted a strong turn-out that included Economy and Trade Minister Sami Haddad, Economics Professor and former Economy Minister Samir Makdisi, Omar El- Razzaz, World Bank country manager for Lebanon, and a number of AUB professors. |
 | Dr. Prennushi
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AUB President John Waterbury introduced Prennushi, noting that the Fares Institute's aim is to promote dialogue and discussion on such types of topics. "Although the institute is very much in its first stages, we hope that it will become one day a leading think tank on Middle Eastern issues, and nothing could be more important than equity and development," he said.
The annual world development report, which has been issued for the past 30 years, has been focusing on poverty reduction since 2000, when the United Nations declared in its millennium goals that, by 2015, it should halve poverty in the world. "By taking the theme of equity for this year, we don't mean to move away from the issue of poverty, but to deepen the analysis on the subject," she said. |
 | Prennushi lectures to a full auditorium
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Prennushi acknowledged that defining equity is difficult, but the World Bank considers that two principles govern equitable societies: first, equal opportunity is provided and extreme deprivation is avoided. "In other words, equitable societies do not allow people to starve or go without healthcare," she said. Moreover, several factors are examined to measure the extent of equity in each society. These include the opportunity to life and the opportunity to consume and earn.
While both the average life expectancy and number of years of schooling have increased, incomes have not improved, noted Prennushi. However, there's cause for hope when one compared countries of similar wealth, noting significant improvements in one over the other. "Clearly something can be done to narrow these differences, through policies," she said. Indeed, studies have shown that combining improved access to nutrition with intellectual stimulation improves efficiency and productivity. |
Why does equity matter? Because inequalities in wealth and power combined with imperfect markets of credit, insurance, land and human capital, create large inefficiencies, said Prennushi. In other words, Prennushi explained that poorer entrepreneurs may have limited access to credit, implying that capital is not allocated efficiently; credit constraints prevent parents from keeping their children at school; lack of access to insurance markets means that poorer farmers may opt to choose crops with lower expected returns, because they are less risky.
"The traditional response to global inequity has been aid and debt cancellation," said Prennushi. "But aid is only part of the answer."
Other options that can help narrow the gap of inequity include, lowering tariffs and offering aid for trade, opening up markets between developed and less developed countries, and providing access to generic drugs.
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"Equity is about leveling the playing field so that opportunities are available to everyone, regardless of their background," concluded Prennushi, whose presentation prompted a lively discussion, including comments from Yussef al-Khalil, a senior official at the Banque du Liban, Minister Haddad, Professor Makdisi and Professor Paul Salem, the director of the Fares Foundation, as well as others.
Dr. al-Khalil posed a question to challenge the World Bank, saying: "The World Bank deals with governments made up of elite groups who are not ready to give up some of their power, so how can you reconcile that with your proposal for increasing equity?" he said. |
While Prennushi acknowledged the truth in this statement, she added: "We hope to convince these elites that, in the long term it's not in their interests or their children's interest to maintain negligent policies. After all, economies with high levels of inequity are short-lived."
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Brief biography on Giovanna Prennushi:
An Italian national, Giovanna Prennushi has been working at the World Bank since 1993. Before joining the WDR 2006 team, she was Lead Economist in the Poverty Reduction Group, Poverty Reduction and Economic Management Network, where she worked on poverty analysis, monitoring, and evaluation and on poverty reduction strategies and the PRSP program, particularly in Ethiopia and Nepal. Earlier, she worked as a country economist in the South Asia region.
She holds a Laurea in Discipline Economiche e Sociali from Universita' Bocconi in Milano (Italy) and completed her Ph.D. in Political Economy in 1993 at Carnegie Mellon University in Pittsburgh. While at Carnegie Mellon, she conducted research on the political economy of union behavior and on labor-management practices and their impact on productivity in the U.S. steel industry.
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