Key Socio-Economic and Political Issues in Development Assistance Michael Woolcock Development Research Group The World Bank Washington, 17 May 2006

Four Key Issues Managing Risk Negotiating Conflict Understanding Inequities Building Coalitions for Reform Common denominators: Crafting accessible, accountable, legitimate institutions Innovation and evaluation

1. Managing Risk All people everywhere face the prospect of unwelcome events in their lives; the difference between rich and poor is the sophistication and effectiveness of the institutional technologies that they can invoke to reduce or mitigate (ex ante) or cope (ex post) with those events. The invention of institutions for managing risk is one of the most important, but least appreciated, in history. Virtually every aspect of modern life is affected by—indeed is made possible by—them.

Rural vs. Urban Risk Rural Risks Crop failure Climate, weather shocks Insect invasions Non-existent public services Most of our empirical evidence base on risk management in poor communities comes from rural areas, because it’s where we have both extensive panel data and rich ethnographic evidence

Rural vs. Urban Risk Rural Risks Crop failure Climate, weather shocks Insect invasions Non-existent public services Most of our empirical evidence base on risk management in poor communities comes from rural areas, because it’s where we have both extensive panel data and rich ethnographic evidence Urban Risks Poorly defined property rights, resulting in housing demolition and resettlement Health risks from frequent infections due to unsanitary living conditions Exposure to organized crime, drugs, and political violence Unemployment (and/or unsafe working conditions) Overwhelmed public services Adverse effects of macro-economic shocks (since, lacking land, the poor depend upon jobs based in manufacturing or services)

Policy Research Agenda The quality and quantity of research on these issues, across the social sciences, has improved markedly in the last decade, but much remains to be done to enhance our understanding of how to build effective… Credit systems Insurance markets Weather, health, accidents, death Early warning systems (e.g., tsunamis) Social protection

2. Negotiating Conflict Prosperity and violence go hand-in-hand (Bates 2000) Project and policy failure can generate conflict… Squandered opportunities, dashed expectations, frustration from delays, corruption …but so can success Empowering marginalized groups is likely to generate serious resistance from elites Key lesson of social history: revolutions occur when conditions are getting better (not worse)

Policy Research Agenda What prevailing political arrangements, especially at the local level, are likely to be challenged (or consolidated) by project interventions? What types of project interventions seem to work in low- or post-conflict settings? Ensure that all projects have clear, accessible, and effective channels for complaints, feedback

3. Understanding Inequities Increasing recognition of the instrumental and ‘intrinsic’ costs of inequitable development processes (WDR 2006) Instrumental: reduced growth, lost opportunities Intrinsic: violation of ‘fairness’ norms We are familiar with economic inequality (Gini indexes, etc); but inequity can take many other forms, with similar effects Political: citizenship, voting Social: gender, caste, status, health

Policy Research Agenda Non-economic inequities may not always be readily observable or ‘measurable’ Therefore need comprehensive mixed-methods (qual and quan) approaches Central to understanding project implementation realities (e.g., ‘elite capture’, ‘participation’, fault lines) ‘Correcting’ inequities is an important but very difficult task How will it done? By whom? Resistance (by elites) is likely; conflict…

4. Building Coalitions for Reform “Policies for the poor are poor policies” Larry Summers For ‘pro-poor’ policies and projects to be enacted, they need broad political support Forging coalitions with the middle classes is vital; this becomes harder as inequalities rise, and ‘the rich’ opt for private solutions to public problems (e.g., health, schooling, transport, security)

Policy Research Agenda How have ‘pro-poor’ policies and projects forged broad (enough) political support? How were they initiated? How were constituencies built? How was resistance overcome? To what extent are lessons from one setting transferable to another?

Common Denominators From “institutions matter” to: how can accessible, accountable, legitimate institutions be crafted that serve to Provide key public services Act as an effective source of countervailing power? No-one really knows how to do this… …though too often we thought the answer was self-evident: what works in ‘rich’ countries, now Need more space for local experimentation and adaptation, but with rigorous evaluation