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Report: Economic Mobility in Developing Countries Has Stalled for the Last 30 Years

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Generations of poor people in developing countries are trapped in a cycle of poverty determined by their circumstance at birth and unable to ascend the economic ladder due to inequality of opportunity, says the World Bank Group’s Fair Progress? Economic Mobility across Generations Around the World’ report, released today.

Mobility has stalled for the last 30 years, says the report, which tracks economic mobility between parents and their children through the prism of education, a critical asset that influences an individual’s lifetime earnings. It looks at people born between 1940 and 1980, and finds that 46 out of 50 countries with the lowest rates of mobility from the bottom to the top are in the developing world.

Gender gaps, however, are closing with girls in high-income countries now out-performing boys in tertiary education and catching up in the developing world. In the not too distant future, the share of girls with more education than their parents will exceed the equivalent share for boys globally.

The ability to move up the economic ladder, irrespective of the socioeconomic background of one’s parents, contributes to reducing poverty and inequality, and may help boost economic growth by giving everyone a chance to use their talents, the report notes. People living in more mobile societies are more optimistic about their children’s future, which is likely to lead to a more aspirational and cohesive society.

“All parents want their children to have better lives than their own, yet the aspirations of too many people –especially poor people – are thwarted by unequal opportunities,” said World Bank Chief Executive Officer Kristalina Georgieva. “We need to invest in children from a very early age so that they are well-nourished and well-educated; ensure that local communities are a safe place for children to grow, learn, and thrive; and level the economic playing field by creating good jobs and improving access to finance.”

The report draws on a newly developed Global Database of Intergenerational Mobility with unprecedented coverage of 148 countries, home to 96 percent of the world’s population. It paints a uniquely detailed picture of socio-economic mobility and inequality of opportunity around the world. It also sheds light on the patterns and drivers of income mobility and their relationship with educational mobility by examining available data from 75 countries.

The data show that, on average, upward mobility from the bottom has declined and the numbers of people remaining trapped at the bottom has increased in developing economies. For individuals born in poorer households, the opportunity to climb up the ladder is narrowing in many economies in which average living standards are already much lower compared with high-income economies.

Countries with higher mobility in education are better placed to generate future growth, as well as reduce poverty and inequality. And, conversely, stalled mobility raises concerns about future progress, particularly for Africa and South Asia, where most of the world’s poor live and where the prospects of children are still too strongly tied to the socioeconomic status of their parents,” said Carolina Sanchez, Senior Director of the Poverty and Equity Global Practice at the World Bank.

But the report also finds huge variation in the extent of intergenerational mobility in the developing world. For example, only 12 percent of the people born in the 1980s in the Central African Republic, Guinea, and South Sudan have achieved education levels higher than their parents, compared with 89 percent of people from South Korea and 85 percent from Thailand.

A close examination of six large developing countries – Brazil, China, Egypt, India, Indonesia, and Nigeria – reveals that economic mobility rose in all of them from the 1940s to the 1980s, albeit to varying degrees. However, since the 1960s, progress has slowed in four of these countries and completely stalled in China and Nigeria. The global trends in gender convergence are seen in Brazil, China, Egypt, and Indonesia, where the mobility gaps between girls and boys are close to zero. No such convergence has taken place in India or Nigeria, where the gender gaps are almost as large today as they were a half century ago.

However, the rise in educational mobility in many high-income economies and in parts of East Asia, Latin America, and the Middle East gives some room for optimism, suggesting that inequality of opportunity can be reduced with the right policy actions. Educational mobility in Brazil, Egypt, and Indonesia, for example, increased significantly from people born in the 1940s to those born in the 1980s – even though income mobility remains low in these countries.

“This report paints a sobering but nuanced picture of economic mobility and inequality of opportunity in the developing world. On the one hand, the average developing country has very low rates of economic mobility across generations and, most worryingly, there has been no real improvement in the last three decades. On the other hand, the experience of some countries shows that with political will and the right policies, that can be changed,” said Francisco Ferreira, Senior Advisor on poverty and inequality at the World Bank.

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Russia Among Global Top Ten Improvers for Progress Made in Health and Education

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Russia is among the top ten countries globally for improvements to human capital development over the last decade, according to the latest update of the World Bank’s Human Capital Index (HCI).

The 2020 Human Capital Index includes health and education data for 174 countries covering 98 percent of the world’s population up to March 2020.

Russia’s improvements were largely in health, reflected in better child and adult survival rates and reduced stunting. Across the Europe and Central Asia region, Russia, along with Azerbaijan, Albania, Montenegro, and Poland, also made the largest gains in increasing expected years of schooling – mainly due to improvements in secondary school and pre-primary enrollments. The report also shows that over the last 10 years Russia has seen a reduction in adult mortality rates. However, absolute values of this indicator remain high in the country with this progress now at risk due to the global Covid-19 pandemic.

Human capital contributes greatly to improving of economic growth in every country. Investments in knowledge and health that people accumulate during their lives are of paramount concern to governments around the world. Russia is among the top improvers globally in the Index. However, challenges persist and much needs to be done to improve the absolute values of Index indicators,” said Renaud Seligmann, the World Bank Country Director in Russia.

The HCI, first launched in 2018, looks at a child’s trajectory, from birth to age 18, on such critical metrics as child survival (birth to age 5); expected years of primary and secondary education adjusted for quality; child stunting; and adult survival rates. HCI 2020, based on data up to March of this year, provides a crucial pre-pandemic baseline that can help inform health and education policies and investments for the post-pandemic recovery.

Of the 48 countries in Europe and Central Asia included in the 2020 Human Capital Index (HCI), 33 are among the upper-third in the world, and almost all are in the top half. However, there are significant variations within the region.

In Russia, a child born today can expect to achieve 68 percent of the productivity of a fully educated adult in optimal health. It is at the average level for Europe and Central Asia countries and the third result globally among the countries of the same income group. There is a stark contrast between education and health subscales in Russia. While the education outcomes of the country are high and outperform many high-income peers, its health outcomes are below the global average.

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Accelerating Mongolia’s Development Requires a Shift “from Mines to Minds”

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A new report by the World Bank estimates that out of every dollar in mineral revenues Mongolia has generated over the past 20 years, only one cent has been saved for future generations. The report argues that to break this cycle, Mongolia should use its mineral wealth to invest in people and institutions, while gradually reducing its dependence on the sector.

This is particularly true as demand for key minerals is likely to tumble due to climate change concerns, a shift of investors’ preference toward sustainability, China’s ambitious goal to reduce coal consumption, and persistence of the COVID-19 shock, according to Mongolia’s Mines and Minds, the World Bank’s September 2020 Country Economic Memorandum for Mongolia.

Since the advent of large-scale mining in 2004, Mongolia’s economy has grown at an average rate of 7.2 percent per year, making it one of the fastest-growing economies in the world. Growth has translated to rapid decline – although at times partly reversed – in the incidence of poverty and improved quality of life. The report also notes that Mongolia enjoys relatively strong human capital, and its infrastructure capital has improved for the last few decades, though remains scarce given the size of the country and low population density. This performance has been made partly possible through a generous but inefficient social assistance system and a large public investment program supported by mineral revenues and external borrowing.

However, a number of enduring challenges have grown in the shadow of this success. Mongolia’s rapid growth has been obscured by its extreme macroeconomic volatility and frequent boom and bust cycles. Growth has almost entirely come through capital accumulation and the intensive use of natural capital rather than through sustained productivity growth. Meanwhile, the country has not only consumed almost all its mineral outputs, but has also borrowed heavily against them, bequeathing negative wealth to the next generation.

Instead of maximizing the benefits of its mineral wealth for diversified and inclusive growth, Mongolia has increasingly become more addicted to it. At the same time, human capital has been underutilized and institutional capital has eroded.” said Andrei Mikhnev, World Bank Country Manager for Mongolia. “Such inability to capitalize on the country’s endowments has resulted in limited diversification of outputs and exports and has further amplified its vulnerability to the swings of the global commodity markets. Breaking this gridlock calls for a fundamental shift in approach that puts investing in minds on an equal footing with mines.”

The report recommends key policy actions to build the foundation of a diversified and sustainably growing  economy. These include:

  • Implement countercyclical fiscal and monetary policies – supported through transparent fiscal rules, an independent fiscal council, a market-driven exchange rate, and a well-functioning stabilization fund – to smooth consumption over the business cycle rather than maximize current consumption.
  • Undertake bold investment climate reforms to enhance competition, secure investor rights, and create a more level playing field that enables productive firms to invest and grow.
  • Move away from the mindset of diversifying products to expanding endowments, especially in terms of better utilization of Mongolia’s young and educated, especially female, labor force.
  • Accelerate the implementation of fundamental governance reforms (especially on the government effectiveness and control of corruption) to reduce political interference, increase transparency, and improve regulatory quality throughout the economy.

“Fortunately, there are many encouraging signs of improved macroeconomic management in 2017-19, providing the new government an opportunity to advance its reform efforts,” said Jean-Pascal Nganou, World Bank Senior Country Economist and lead author of the report. “Some impressive fiscal outcomes were achieved not by introducing new reforms but by effectively implementing existing ones. They demonstrate that with the right political will and leadership, similar improvements are possible in other areas including monetary and exchange rate policy, the financial sector, the business environment, and the labor market. The new administration has, therefore, an opportunity to institutionalize these reforms and avoid policy regression in the future.”

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Nearly 9 in 10 People Globally Want a More Sustainable and Equitable World Post COVID-19

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In a new World Economic Forum-Ipsos survey of more than 21,000 adults from 28 countries nearly nine in ten say they are ready for their life and the world to change.

72% would like their own lives to change significantly and 86% want the world to become more sustainable and equitable, rather than going back to how it was before the COVID-19 crisis started. In all countries, those who share this view outnumber those who don’t by a very significant margin (more than 50 percentage points in every country except South Korea). Preference for the world to change in a more sustainable and equitable manner is most prevalent across the Latin America and Middle East-Africa regions as well as in Russia and Malaysia.

Next week’s World Economic Forum Sustainable Development Impact Summit will address the achievement of the sustainable development goals and the appetite for transformation which will drive the “decade of delivery”.

Clear majority ready for a more sustainable and equitable world

Globally, 86% of all adults surveyed agree that, “I want the world to change significantly and become more sustainable and equitable rather than returning to how it was before the COVID-19”. Of those, 46% strongly agree and 41% somewhat agree, while 14% disagree (10% somewhat and 4% strongly).

Russia and Colombia top the list of countries that strongly or somewhat agree with that statement at 94%. They are followed by Peru (93%) Mexico (93%) Chile (93%) Malaysia (92%), South Africa (91%) Argentina (90%) and Saudi Arabia (89%). The countries that are most change averse – disagreeing somewhat or strongly disagreeing with the statement – are South Korea (27%), Germany (22%), Netherlands (21%), US (21%) and Japan (18%).

Dominic Waughray, Managing Director, at the World Economic Forum said, “The Great Reset is the task of overhauling our global systems to become more equitable and sustainable, and it is more urgent than ever as COVID-19 has exposed the world’s critical vulnerabilities. But the technology to transform things tends to outpace the human will to change. In six months, the pandemic has systematically broken down this cultural barrier and we are now at a pivot point where we can use the social momentum of this crisis to avert the next one.”

Ready for significant personal change

Across all 28 countries, 72% want their lives to change significantly rather than returning to what it was like before the COVID-19 crisis (30% strongly and 41% somewhat) while the other 29% disagree (21% strongly and 8% somewhat).

Latin America stands out for its optimism, with Mexico, Colombia and Peru in the top five countries strongly or somewhat agreeing. Agreement is also high South Africa (86%), Saudi Arabia (86%, Malaysia (86%) and India (85%). By contrast, at least two out of five adults in the Netherlands, Germany, South Korea, Japan, Sweden, the US, UK and Canada long for their life to just return to how it was before the pandemic.

MethodologyThese are the results of a 28-country survey conducted by Ipsos on its Global Advisor online platform. Ipsos interviewed a total of 21,104 adults aged 18-74 in United States, Canada, Malaysia, South Africa, and Turkey, and 16-74 in 23 other countries between August 21 and September 4, 2020. Where results do not sum to 100 or the ‘difference’ appears to be +/-1 more/less than the actual, this may be due to rounding, multiple responses or the exclusion of don’t knows or not stated responses.

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