Is it time for a rethink on the definition of aid?

Crushed by my humiliation at the hands of Claire Melamed, it would just make matters worse to come back for another round of post-2015 jousting, so let’s move on.

I actually quite like blogging about meetings held under Chatham House rules, as they allow me to write about the discussion without worrying about who said what. And to take the credit for anything clever, of course.

So last week, I found myself in a heated debate on the future of aid, with a bunch of NGOs and aid boffins. The topic was ‘is it time for a re-think?’ Why? Because the aid world is changing:

-          New donors, such as foundations, philanthropists and emerging economies such as China and India are starting their own aid programmes, often outside the traditional donor club of the OECD DAC

-          Increasing diversity of sources of ‘financing for development’, from domestic taxation to remittances to private investment

-          Austerity driving many traditional donors to cut aid, either overtly or sneakily, by trying to count lots of non-aid flows as aid, or both (see FT letter here). A reminder that in terms of its increasing aid budget, the UK is really an outlier these days – ‘we are talking in the vicarage, here’.

-          The post-2015 discussions raising lots of questions about sustainable development goals and collective action on everything from climate change to tax havens, which have been traditionally fenced off from the aid discussion.

Underlying all this was a sense that the definition of aid corresponds to an old order (rich northern countries give cash for big push in the South to get public services functioning and the economy humming). That world has little to do with many of the preoccupations of modern development – fragile states and conflict, climate change, leaky financial systems, migration etc etc.

But does that mean aid needs to be overhauled? All were agreed that the current levels of aid, running globally at around $130bn a year, are a precious achievement, the only flow of resources aimed specifically at helping poor people, with a reasonably tight definition, making it easier to defend from dilution. Lots of talk of not throwing babies out with bathwater. (And tanks on lawns, heads in sand – mixed metaphors threatened to get seriously out of control.)

Which brought us to the political context – the march of the Austerians means that any decision to open up discussions on the definition of aid (which governments such as Netherlands and Germany are already doing) is much more likely to lead to a watering down/dilution of aid, with lots of other stuff being included – I pointed out that, in contrast to Pandora’s Box, the nasties will fly in when this one is opened.

Broadly, aid donors will want ‘what allows you to reach your aid target without spending any more money’, while aid recipients will want to keep everything separate, so additional cash for things like climate finance is not counted as aid. One old hand said ‘and the donors will win.’

Which made me line up on the ‘conservative’ side of the table – the risks are largely downside, so try and resist efforts to redefine aid and defend what you’ve got. Others felt that the debate was already happening, and we had no option but to engage.

Everyone was for improved data and transparency (who isn’t?) on non-aid flows, so that donors, governments and others could see what is already happening before allocating their cash (lots of praise for the new DFI/Oxfam Government Spending Watch database of how much poor countries are spending on the MDGs, with seasoned aid officials saying they had spent years trying to get this data out, without success). Another piece of good news is that Development Initiatives are working on an annual report on Investments to End Poverty, which documents all resources available for poverty eradication – watch out for it in September and see some of the material here.

Lots of discussion on the 0.7 target, with the technocrats seeing it as arbitrary and weird, and the advocates seeing its use in driving government action, even in countries that haven’t endorsed it, like the US. Interesting suggestions that 1% of government spending (a penny in the pound) might make a more sensible and communicable target than 0.7% of Gross National Income.

As for the new southern aid donors, the wonks reckoned that they are not interested in targets, but are interested in what counts as aid – one cited Turkey which, when obliged to count it, found it was giving much more aid than it had realised, partly because it had assumed a narrower.

Other interesting discussions on ‘fair shares’ – how you could modify the 0.7 target to take account of a country’s stage of development, perhaps using the UN formula for assessing members’ contributions to its budget. Anyone done that?

Overall, I did feel that there is an institutional problem here – at some point the aid discussion needs to be taken out of the OECD, even though it’s been doing a pretty good job so far. Otherwise, it risks being seen as a project of the declining North, with minimal buy in from others. But would the UN (the obvious alternative) do a better job?

My conclusion? At this political moment, I think there is a real danger in trying to stretch the debate on aid to include everything that contributes to development (we wonks always like to do this – look at post-2015). Right now the test of any proposal should be ‘what is most likely to increase rather than reduce funds going from rich countries to poor countries for good purposes?’ For example, stretching ‘aid’ to include most peacekeeping fails that test badly  -   irrespective of all the good sense about security and development reinforcing each other. Better to try and keep the aid definition (and debates) tight and work on the rest in other fora – Government Spending Watch, tax havens, climate change etc. We won’t win them all – for example there is clearly substantial overlap between climate finance and aid, so insisting on ‘additionality’ is very unlikely to succeed, but I see little benefit in helping others prize open the Pandora’s Box of aid.

What is Social and Solidarity Economy and why does it matter?

UNRISD Deputy Director Peter Utting introduces the theme of his organization’s big conference in May

Having had my professional and political interests shaped during the somewhat heady days of the 1980s in Sandinista Nicaragua, I’ve long been interested in the potential and limits of collective action—of people organizing and mobilizing through associations, unions, cooperatives, community organizations, fairtrade networks and so on. The Sandinista “revolution” soon gave way to the “neoliberal” 1990s. As in much of the world, collective action went on the backburner or assumed new forms via NGO networks and identity politics. Fast forward two decades and we are witnessing a significant rebound in collective action associated with workers, producers and consumers. Whether in response to global crises (finance and food), the structural conditions of precarious employment or new opportunities for cultural expression and social interaction afforded by the internet age, old and new forms are on the rise.

The term social and solidarity economy (SSE) is increasingly being used to refer to a broad range of organizations that are distinguished from conventional for-profit enterprise, entrepreneurship and informal economy by two core features. First, they have explicit economic AND social (and often environmental) objectives. Second, they involve varying forms of co-operative, associative and solidarity relations.  They include, for example, cooperatives, mutual associations, NGOs engaged in income generating activities, women’s self-help groups, community forestry and other organizations, associations of informal sector workers, social enterprise and fair trade organizations and networks.

In addition to diversification, we see signs of upscaling. SSE appears to be moving beyond its niche, peripheral, project or community-level status, and becoming more significant in terms of macro-economic, commercial and social-economic indicators, as charted in a 2011 ILO report:

• In the UK some 62,000 social enterprises contribute £24 billion ($37.1billion) to the economy and employ 800,000 people.
• In Europe; 2 million SSE organizations represent about 10% of all companies.
• In India, over 30 million people (mainly women) are organized in over 2.2 million self-help groups; and the country’s largest food marketing corporation, the cooperative organization Amul, has 3.1 million producer members and an annual revenue of $2.5 billion.
• In Nepal, 5 million forest users are organized in the country’s largest civil society organization.
• The global fairtrade market has grown to €4.9 billion ($6.4 billion) and involves some 1.2 million workers and farmers producing certified products.
• Mutual benefit societies provide health and social protection services to 170 million people worldwide.

Beyond the statistics, why the growing interest in SSE? Theory and anecdotal evidence tell us that such an approach can be a key mechanism through which poor or disempowered people in society gain greater control over resources and decision-making processes that affect their lives. Economists and political scientists have long espoused the benefits that can derive from co-operation or group behaviour in terms of addressing market failures and making demands on more powerful entities. Sociologists have emphasized other virtues related to social cohesion, identity and job satisfaction.

But the contemporary interest in SSE also relates to the fact that we are living in an era that seems to be crying out for new models of development. Not only have we to deal with multiple and recurring crises (finance, food and energy), but there is growing recognition that today’s normative agenda has to be much more encompassing. Some may hark back to the glorious days of post WWII “embedded liberalism”, of welfare states protecting citizens and corporations upholding some principles and practices of “decent work”. But for all its benefits and ongoing pertinence, this model ignored some key issues related to gender equality and environmental pollution, and is struggling to reproduce itself in contexts of economic liberalization and informalization of labour markets.

The discussions and debates taking place in the build-up to 2015—the date that has been set for a new or revised set of Millennium Development Goals (MDGs) and Sustainable Development Goals (SDGs)—signal that the old development formula of economic growth plus social protection is no longer sufficient. Other aspects, associated with the realization of rights, empowerment, equality, women’s care burden, and transformations in production and consumption patterns, need to be factored in. The theoretical attraction of social and solidarity economy lies precisely in the ways it lends itself to addressing these multiple dimensions of development. It simultaneously fosters economic dynamism, social and environmental protection and socio-political empowerment.

But achieving in practice what is promised on paper is another ballgame. SSE’s recent revival has been, organic, a largely grassroots phenomenon.  And therein lies the rub—in two respects. First, collective action needs to connect at multiple scales via networks, movements and alliances. If the SSE is to be sustained, enabled and scaled-up on terms compatible with its values and objectives, action cannot remain local; it must cohere at other levels (municipal, provincial, national, regional and global) where governance, advocacy and politics play out. Second, in order to expand and really move beyond the fringe, the SSE must interact far more with states, for-profit enterprise and global value chains. Such interactions inevitably generate tensions and dilemmas given differences in development priorities and approaches, as well as differentials in bargaining power.

For a graphic illustration of these tensions, look no further than fair-trade. In 2011 there was a major split in the international fair trade movement asthe US labeling organization (then known as Transfair USA) left the international federation, FLO (since renamed Fairtrade International).

Closer integration with powerful market actors underpinned the split. Fair-trade had expanded significantly over the years but quite different approaches were being promoted. The US organization leaned towards engagement with corporations like Starbucks and was keen to source from large commercial tea and other plantations, something not possible under FLO rules. Such relationships with big business had implications for the price that buyers were prepared to pay to small farmers and the quality of sustainability standards. Meanwhile, various labeling organizations and producer groups that were key stakeholders in FLO wanted to stick to the original principles and practices of fair trade, based on smallholder empowerment and agro-ecology.

What immediate policy implications stem from this reflection? Governments and international organizations clearly need to be paying far more attention to the SSE, and question how its developmental and emancipatory potential can be realized. And they should also be asking themselves whether current priorities or biases in policy approach in the field of development are not missing, or indeed undermining, what could be a major new game in town. These include the tendency to focus on

i) individuals or entrepreneurship, rather than groups,

ii) economic, rather than political, empowerment;

iii) idealize the integration of small producers and communities in global value chains; and

iv) social (and environmental) protection, rather than equality and emancipation.

It is these and other issues we’ll be debating at UNRISD’s conference on Potential and Limits of Social and Solidarity Economy from 6-8 May at the ILO in Geneva.  Please join us!

Peter Utting is writing in his personal capacity.

The Rise of the South: Human Progress in a Diverse World. Synthesis > novelty in a big new UN report.

Of the big reports that spew forth from the multilateral system, some break new ground in terms of research or narratives, while others usefully recap the latest thinking on a given issue. Last week’s 2013 Human Development Report, The Rise of the South: Human Progress in a Diverse World, falls into the latter category, pulling together the evidence for a tectonic North-South shift in global economic and political affairs, summarizing new thinking on inequality, South in the North etc and asking what happens next. If you’re currently sunk in the depths of Europessimism or US political stalemate, you may find such an upbeat story refreshing (or even disturbing). You can read the exec sum online, but it doesn’t seem to allow you to cut and paste (v annoying for lazy bloggers like me).

Some useful numbers to demonstrate the extent of the shift: From 1980 to now, developing countries’ share of global GDP rose from 33% to 45%, their share of world goods trade from 25% to 45%, and South-South trade as a % of the world total rose from 8% to 26%.

How has this happened and so what? The HDR’s approach is to learn from the success of 18 of the more than 40 countries in the developing world that have done better than expected in human development terms in recent decades, with their progress accelerating markedly over the past ten years. Not just China and India, but countries like Turkey, Ghana and Mauritius. Again, nothing new there – the Growth Commission had a go at that five years back – but still infinitely preferable to maths-led regression-tastic nonsense that ignores history and politics.

Compared to the Growth Commission, the HDR’s conclusions are more interventionist, and more political. The Report identifies 3 main drivers shared across the success stories:

1. A proactive developmental state

2. Tapping into global markets

3. Determined social policy innovation

On the role of the state, successful countries ‘share some key characteristics. Most were proactive “developmental states” that sought to take strategic advantage of opportunities offered by world trade. They also invested heavily in human capital through health and education programs and other essential social services. More important than getting prices right, a developmental state must get policy priorities right. They should be people-centred, promoting opportunities while protecting against downside risks.’

In case you missed it, that’s a not-very-subtle two fingers to the Washington Consensus and its preference for ‘getting the prices right’.

The report points to some downside risks that threaten this progress: ‘short-sighted austerity measures, failures to address persistent inequalities, and a lack of opportunities for meaningful civic participation.’ But overall, as the South rises, the focus will shift to ‘long-term challenges shared by industrialized countries of the North’ – both commonly shared issues like ageing and jobs, and collective action problems like climate change.

Its recommendations for continuing this amazing progress include

1. Developing countries need to move their focus from ‘growth first’ to human development

2. Enhanced South-South learning and integration

3. Greater representation for civil society and the South in the international system. Global institutions have not yet caught up with this historic change (the international system’s loss rather than the BRICS’). China, with the world’s second largest economy and biggest foreign exchange reserves, has but a 3.3 percent share in the World Bank, less than France’s 4.3 percent. India, which will soon surpass China as the world’s most populous country, does not have a permanent seat on the UN Security Council. And Africa, with a billion people in 54 sovereign nations, is under-represented in almost all international institutions.

And in a nice table-turning touch, the report ‘urges the convening of a new “South Commission” where developing countries can take the lead in suggesting constructive new approaches to effective global governance.’

Nothing earth-shattering, but a useful exercise in synthesizing the evolving understanding of development and repositioning the multilaterals within it. So what have I missed?

And here’s the rather frenetic animated version

From pinstripes to poverty: a refugee banker’s first 100 days at Oxfam

Oxfam is always keen to employ unusual suspects, none more so than Will Martindale, a banker turned “do gooder” (right, and no, that isn’t his Oxfam desk). Here he reflects on his first 100 days working among the (supposed) angels.

Banking. Most hate it. Few understand it. And I miss it.

I miss the pace, the energy, and the super smart people fluent in numerous languages. I miss the neon ties, the pinstripe suits and the sales guys with shiny shoes. I miss the IT geeks with their dozen monitors and knee-high coffee flasks. I miss the chic hotels, the business-class flights and French restaurants.

But I left – and was looking to move for a while – because underneath all the flash, my work had absolutely zero social worth. I worked in the more exotic side of credit default swap trading: a financial product far removed from the real economy.

So 100 days ago I joined Oxfam, eight years after I started JPMorgan’s graduate scheme, and I’m excited to have made the change.

At first “NGO-speak” was a babble of acronyms, the array of recycling bins brought on a mild sweat, and I can confirm that hot-desking is not cool. But there are super smart people fluent in numerous languages at Oxfam too. There is energy, but of a different sort; less pace but more space – to think, to challenge. There is an excitement that our work – my work – is changing people’s lives for the better. And contrary to my preconceptions, Oxfam is agile, radical and fundamentally progressive.

So the transition has been stark, but I survived, not least because I find my role fascinating.

With my colleague, former City-boy Rob Nash (ex Lehman Brothers), our objective is this: to create the space for progressive bankers to make financial stability, transparency, financial inclusion, a return to real economy banking and socially productive investment the norm, not the exception. And to sideline tax evasion, disproportionate remuneration, unsustainable leverage, high volatility and endemic price rigging.

This is a challenge. On the surface, the all male, all macho City stereotype prevails. A Christmas party involved a London treasure hunt in taxi cabs. A quiet day in the markets turned into a Krispy Kreme doughnut eating competition. A colleague’s mistake prompted a manager to send an email in size 100 font with the letters: “WTF”. And being a “tree-hugging banker” (as I was named), a trader thought it would be funny to slowly and methodically pour spaghetti bolognese into the paper-only recycling bin opposite my desk.

Yet, as with most sectors, dig a little deeper and you’ll find thousands of influential and hard-working bankers who care deeply about good banking and – like Oxfam – want a pro-poor financial sector that is inclusive, sustainable and responsible.

Both internally and externally, many ask why this is relevant to Oxfam.

On the negative, predatory land investments in the world’s poorest countries have made thousands of people homeless and hungry; commodity speculation has driven volatile food prices; the City finances arms companies and corrupt mining companies; and facilitates tax avoidance that starves poor countries of much needed tax receipts.

On the positive, there’s more low carbon and climate financing; new technologies make funds available to poor people in remote rural areas; and bridging loans provide upfront funding needed for humanitarian disasters. And in my short time at Oxfam, I have met many financiers who are focusing their efforts and expertise in innovative products and business models designed to meet the most urgent social and environmental challenges of our time.

The financial services are central to this. But arguably, there is the subtle but more important concept of financial stability. I remember a senior trader once told me that “as long as you don’t mess with people’s lives, finance is ok”.

But even the far removed credit default swap market messes with people lives. Credit default swaps replicate the risk of trading bonds, but whereas bonds are paid for upfront, sellers of credit default swaps pay in arrears. And as we found out, nobody had the money to pay. As the markets tanked, more payments were triggered needing yet more scarce cash, so the markets tanked some more. And thus began a credit crunch which affected everyone, particularly poor people.

Take the LIBOR scandal. LIBOR is the benchmark interest rate for pretty much every floating rate trade that exists. So when it was kept artificially high, interest rate payers paid too much, including poor countries servicing debt payments.

Finance is everywhere. Banks, central banks, international finance institutions and governments are a public private hybrid, controlling national wealth, capital allocation and redistribution (or not).

We believe 2013 presents a unique opportunity to place Oxfam’s voice at the heart of financial reform as the City rebuilds its business and reputation in the wake of the credit crunch and the ongoing Eurozone crisis.

As you read this, the World Economic Forum is being held in Davos. As ever, the titans of global finance will be prominent in the corridors of Swiss resorts, trading ideas over cocktails and canapés. It is a good day to reflect on what positive engagement with the City might look like. As with Oxfam’s first foray into the sector, the policy document “Better Returns in a Better World”, we are looking to divide the City; to challenge the status quo and to identify, support and encourage progressive, sustainable and pro-poor financial services.

The detail is still to be decided. Here are some of our ideas:

• We feel it’s necessary to start with a map. Who does what where in the City, and more importantly, how and why?

• We will pioneer public “City” workshops to move beyond a bank’s CSR department and reach an audience of finance experts with anuntapped interest in development. We want better banking, not token hand-outs: “we financed a biofuels project which displaced 1000s of people, but not to worry, we built a health clinic in the neighbouring village.”

• We will ask banks and other investors to share their research and provide access to their trading and operation desks. And in the same way that Oxfam hosts trips for policy makers to visit our programmes, we will extend such invitations to those with influence in the financial sector.

• With a greater understanding of the City’s power-base and having built a wider network of City professionals, we will root our work in Oxfam’s priority campaigns; on land, food, tax and climate change. We will publish a series of “investor briefings” in a language and style consistent with the City: more graphs, fewer words.

• Finally, through active campaigning we will hold financial organisations to account; exposing and challenging harmful practices and supporting and encouraging policies with clear and demonstrable development impacts. We seek to end the business-as-usual approach which disproportionately hurts the world’s poorest and contribute to the rise of sustainable and responsible investment as the new mainstream of financial markets.

But to what extent should Oxfam work with the City? Is a pro-poor financial sector a distant dream? What’s your experience of bankers and banking? How can we measure progress? And which issues should Oxfam – a global aid and development charity with a mission to end poverty and suffering – prioritise within the City?

My colleague Rob Nash and I would welcome your suggestions, comments and concerns as we engage with this complex and powerful sector.

Development optimism from Justin Lin: review of ‘The Quest for Prosperity’

‘Every developing country has the opportunity to grow at over 8% a year for 20-40 years, and to get rid of poverty within a generation.’ There’s something very refreshing about listening to East Asian development economists, in this case the prolific Justin Lin, a former World Bank chief economist, launching his new book The Quest for Prosperity, at ODI just before Christmas. The contrast between his can-do optimism and the dark clouds of Eurogloom and Afropessimism could not have been greater. But is he right?

While others in development wonkland are increasingly scathing about blueprints and best practice guidelines, Justin is unabashedly a man with a plan. The book takes his paper on ‘Growth identification and facilitation’, (see my earlier review, and Justin’s reply), and boils his thinking down into what he calls a ‘six point recipe’ for developing country governments.

1. ‘Choose the right target’:  find a country that looks like you in terms of ‘endowments’ – geography, natural resources, markets etc, but that is doing much better, with a per capita income that is, say, double yours. Then imitate it. This is a straight lift from Asian ‘flying geese’ story.
2. ‘Remove binding constraints’: identify which of your own industries look like those in the target countries and find out what’s holding them back (infrastructure, credit, red tape etc). Sort those things out first. Justin draws heavily on Dani Rodrik and Ricardo Hausmann’s work on growth diagnostics.
3. ‘Seduce and attract Global Investors’: Justin goes for Washington Consensus-style openness to FDI, along lines of Bangladesh or Singapore rather than the more protectionist route followed by South Korea and others
4. ‘Scale up self-discoveries’: But he also thinks governments need an active industrial policy to spot and support local innovation and technological upgrading (eg Indian IT or cut flowers in Ethiopia)
5. ‘Recognize the Power and Magic of Industrial Parks’: he won’t make many friends among the trade unions on this one, but (drawing on China and Vietnam), he sees export-processing zones as the best way to overcome dilapidated infrastructure and get exporting quickly
6. ‘Provide limited resources to the right industries’:  a tentative support for an activist industrial policy

What this amounts to is an attempt to mash together elements of the structuralism of the 1950s, the East Asian experience, new thinking from people like Rodrik and Hausmann, and the Washington Consensus of the 1980s, not so much splitting the difference as combining the best bits of all of them. It’s politically cautious, trying to play to both sides of the aisle (for example, he says his recipe is ‘consistent with The East Asian Miracle’, the World Bank’s notorious and largely discredited attempt to rewrite the East Asian tigers as a neoliberal success story).

The ensuing discussion at ODI was pretty critical, although Justin defended his recipe with passion. ODI’s Dirk van de Velde argued that it’s no good having a good recipe if you don’t have any cooks. Justin is much stronger on the economics than the politics, and ‘assumes a tin opener’ in the shape of an effective state both willing and able to implement his recipe. That’s a big assumption. When challenged he is pretty naive on the politics, arguing that leaders will be motivated to do the right thing because they want ‘a good name in history’. Yeah, right.

Kunal Sen from Manchester argued that the political economy of growth accelerations is very different from growth maintenance. Lots of political regimes produce growth spurts followed by busts, very few can keep it going for Justin’s ‘20-40 years’ and we need to understand better why that is.

Sheila Page stressed the limits to imitation: as the technological product cycle grows ever shorter, it is becoming less viable to rely simply on imitation, because the technology will already have moved on by the time you have absorbed the knowledge. No good arriving ten years late with a really cheap fax machine.

What about finance? I wasn’t clear from Justin’s presentation what role he sees for financial integration, given that financial markets are sources of huge volatility, put pressure on economic policy-makers to follow a more free market route, and often don’t lend to the right people (eg small and medium enterprises).

Is this a genuine recipe, or does it always rely on hindsight? I asked Justin if he would have predicted in the 1960s that South Korea had a ‘latent comparative advantage’ in iron and steel. He said yes, but I have my doubts.

Beyond these concerns, I applaud the intention, but worry that the attempt is flawed on two fronts. Firstly, I share the general scepticism on blueprints, and secondly, I’m not sure it’s actually possible to mix and match such opposing schools of thought in this way.

As for the book, it’s very sweetly written, and dotted with great quotes. My favourite is from Einstein, ‘Theory is when you know everything but nothing works. Practice is when everything works, but nobody knows why. We have put together theory and practice: nothing is working, and nobody knows why.’

Tackling the jobs crisis: new thinking from the World Bank and UNESCO

Oxfam’s head of research, Ricardo Fuentes (right) reviews two big reports on jobs from the World Bank and UNESCO

Youth unemployment is making headlines everywhere – and with good reason. One in eight people between 15 and 24 are unemployed and the problem affects rich and poor countries alike. In Spain, almost half of young adults are unemployed; in the Middle East and North Africa is around one in four. The younger generation in many countries feel cheated: the past was truly a better time. Their perception, at least in some places, is that they will struggle to live as well as their parents.

Two recent flagship publications from large international organizations shed light on the problem of youth unemployment and propose solutions to policy makers. The Education for All Global Monitoring Report from UNESCO (full disclosure, I recently joined their Advisory Panel but didn’t participate in the preparation of this year’s EFA-GMR) and the World Development Report 2013 from the World Bank both tackle employment and employability. They are timely both for short term needs – the protracted global economic downturn has hit the young hard – and long term reasons – as UNESCO points out, the demographic pressures are here to stay since “young people are more numerous than ever; and their numbers are increasing rapidly in some parts of the world. In developing countries alone the population aged 15 to 24 reached over 1 billion in 2010.”

The GMR focuses on how to create useful skills for the young. It is a brave and comprehensive effort, especially because the GMR gives particular attention to the skills required by marginalized groups. The problems start with access to training: “All too often, access to skills is unequal, perpetuating and exacerbating the disadvantage that attends being poor, female or a member of a marginalized social group”. To back this argument, UNESCO recently launched a very comprehensive database on inequality on education that shows the extent of the disparities.

So far, so good. The report is thorough and detailed and describes the types of skills young people need (basic skills such as literacy and numeracy; problem solving and communication abilities and technical know-how). The evidence presented is solid. The element missing in the picture is a thorough discussion on “soft skills” that cannot necessarily be learned in the formal system. These include issues around confidence, self-esteem, and aspirations. This is an important omission; evidence suggests that prejudices and social expectations have an important role in educational and cognitive outcomes. One of the most notable examples is the change in problem-solving results of children reminded of their caste in Uttar Pradesh – two otherwise identical exercises showed different outcomes when personal information of the participants (including caste) was announced at the beginning of the test – children from marginalised backgrounds did worse when their situation was made public as part of the experiment. The point is that providing technical skills to marginalized young people may not be enough to break entrenched patterns of external and self-imposed social exclusion.

In addition, economies around the world are struggling to create the jobs required to keep up with population growth and more young people. This is where the WDR 2013 contributes. The Report tackles that issue of job creation. The team working on the WDR went to great lengths to make explicit that the document is about jobs and development, not labour markets. Even more, in their analysis, jobs are an important element for personal achievement and better social interaction, not only as sources of income.

The Report poses some challenges to readers. I got frustrated during my first two readings of the WDR’s Overview. I couldn’t see heads or tails in the construction of the argument. It wasn’t until the third reading that I realized, to my surprise, that the Report is not following a formal economic model. Forget one size fits all recommendations, where typically, labour markets should be made more flexible and wages reflect labour supply and demand. The WDR 2013 instead suggests a taxonomy for policy makers: depending on the structure of the economy, different policies could create jobs that promote development. They even provide examples of countries that, in their view, have succeeded in the challenges.

After I got over my initial frustration, I welcomed this innovation in the WDR. The authors decided to focus on the policy relevance of its recommendations and not on the internal consistency of whatever model. This is where the World Bank can put to use its vast knowledge and create room for policy debate – in suggesting different policies for different settings based on the latest evidence. The Report, however, falls short in failing to clarify what the Bank actually means by ‘development’ – a glaring omission given that they repeat  that jobs are ‘at the center of development’ again and again. Probably I am reading too much in this, but there are paragraphs in the WDR 2013 where the authors move away from the idea that economic growth is the best proxy for development (see, for instance, their box on “Growth Strategies or jobs strategies?”). They should make explicit the alternatives.

Both reports share something that is not quite evident in the first read: with different approaches, they both are concerned about social exclusion and their recommendations aim to change the structures that keep people out of jobs – either because they lack skills or because the economy does not create enough good jobs. The practical angle as well as the myriad of examples that both reports give will make a good initial step for policy makers when solving the youth employment conundrum. Now it’s the policy maker’s turn to do something.

More commentaries on the WDR by Martin Rama and Brendan Martin. Brendan and I both think it’s improved a lot since the first discussions – kudos to the Bank and WDR team on that.

Is effective global governance now impossible? If so, what comes next?

As negotiations on a global Arms Trade Treaty kicked the can down the road last week, adding to a litany of stalemates that includes talks on climate change (UNFCCC), trade (WTO) or sustainability (Rio+20), it’s worth reading a thought-provoking new paper from CGD’s William Savedoff (right) on the reasons for this collapse of effective global governance.

Savedoff distinguishes two basic patterns: ‘global governance’ based on expanding various functions of the nation state to a global level (e.g. UN, IMF, World Bank, WTO, EU, WHO), and a more fluid ‘multipolarity’ of ‘mixed coalitions’ of the willing, including non-state actors (examples: International Campaign to Ban Landmines, the Global Fund). Savedoff argues that we are ending an anomalous period of global governance, and returning to a status-quo ante of multipolarity. Some highlights:

“Multipolarity is actually the norm in international relations. The growing power of countries like China and India represents a return to the global distribution of power preceding the acceleration of economic and military expansion in the United States, Europe, and Japan. The rise of mixed forms of international cooperation, of opportunistic alliances, is not new; rather, such mechanisms for addressing international issues preceded the rise of global governance institutions in the post-WWII period. In other words, the world we are living in today is normal; the world of 1945–1990 was the aberration.”

“The global-government paradigm generally seeks fixed membership of nation-states for a wide range of activities that can be carried out by international institutions. The resulting laws and institutions are usually established on the basis of unanimity, which allows them to be binding on all members. Yet achieving unanimity for international cooperation often requires accepting (or at least compromising with) the position staked out by the most cautious or least cooperative member state. While some issues genuinely require unanimity, it could be useful to distinguish those issues that do not require unanimity. For these kinds of issues, a different voluntary and non-unanimous approach might be preferable.

Such a voluntary and non-unanimous approach to international cooperation might be described as following a mixed-coalition paradigm. Such an approach is more fluid than the notion of global government institutions. It assembles interested parties—which may include some nation-states but also NGOs, private foundations, for-profit firms, and civil society groups—around specific initiatives.”

Why the anomalous 1945-90 period of global governance? Post-war US primacy allowed it to force other countries to swallow their objections to ceding elements of sovereignty. The erosion of US supremacy has now triggered a return to the more fluid patterns of 19th century diplomacy. Savedoff illustrates his thesis by discussing three areas of global public goods: health, finance and environment. The implications are mixed, but not good, overall.

“In most of the rich countries, we have powerful elites bent on removing safety nets, regulations, and other instruments of collective action to pursue common goals. And internationally, we have created bureaucracies that seem clumsy and unresponsive.” 

As for the resurgent form of mixed coalitions, they can move faster than cumbersome international processes based on unanimity, but they are mainly good at innovation, spending money and adapting to evolving circumstances: “the most promising thing about mixed coalitions is that they are part of a global conversation on acceptable social norms and standards, which are always changing.”

Unfortunately many of today’s global threats require something much more coercive and self-sacrifing from national governments and economies. As Savedoff concludes: “What concerns me most is a particular class of issues that involve irreversible damage—and this is where I think mixed coalitions are both the only path forward and not at all assured of success.” As examples he cites microbial resistance to drugs, financial regulation and, of course, climate change.

His last para is doggedly optimistic, but hardly reassuring:

“I remain optimistic that our complex mix of global governance and mixed coalitions will eventually resolve the many challenges that require international cooperation. But it is not an optimism based on any deterministic trend or teleology. Rather it is an optimism that comes from reading historical accounts about the “end of the world” and realizing that, at least so far, we’ve survived—and even progressed.”

Yeah, right.

Why is migration a Cinderella issue in Development?

Last week I had to speak on ‘Why is migration not a bigger development issue?’ at an IPPR/CGD seminar. The seminar (and the question)

really got me thinking. The main speaker was Michael Clemens, CGD’s migration guru (as well as part-time bête noire of the Millennium Villages Project). He was brilliant – going well beyond the standard arguments (migrants contribute more to an economy than they receive in benefits etc) and the huge benefits that flow home (remittances are about the most resilient form of capital inflow, barely dipping during the global financial crisis, and run at three times the volume of aid). ‘What percentage of poverty reduction in Haiti is owed to migration?’, Michael asked. Answer ’All of it.’

He reinterpreted the fall of apartheid as the abolition of borders between white South Africa and the Bantustans, and showed that everyone benefitted from this sudden upsurge in migration – the incomes of blacks and coloureds increased rapidly, and whites lost nothing. Effectively, he was making the economic case against borders of any kind. Sometimes ’seeing like an economist’ can be mind-blowing.

So back to my question – if migration is that good (and is being stifled by politics), why isn’t it top of the development agenda? Here are a few thoughts (helped along by another guru on migration and development, Gonzalo Fanjul).

‘Sedentary prejudice’: Development organisations cherish a mental image of happy peasants, tilling fields or resting of an evening in a flourishing village with schools, water and the like. I think many people in development therefore see migration as a failure – the talk is all about people forced to migrate, rather than choosing to. At least that point of view is reinforced by European history (think of the forced and miserable emigration of the Irish famine), but makes even less sense for New Worlders in countries built on migration.

Radioactive politics for campaigners: the gulf between politics and economics is probably wider on migration than any other issue. It’s always at the top of public concerns, and politicians know what’s in store if they’re seen as ‘soft on immigration’. Campaigning organizations

are also keenly aware of the public mood, so the issue stays with the thinktanks like CGD until that mood shifts.

But I also wonder if there’s a more subtle political problem – supporting migration sets you up to oppose poor people in the UK. Lining up with a bunch of liberal economists to inform your fellow citizens that they are wrong (and quite possibly racist too) is not a comfortable exercise for any progressive spirit.

Brain drain: despite plenty of arguments to the contrary, a lot of people still see ‘stealing their doctors and nurses’ as an act of neocolonial plunder.

So what might shift the impasse?

Firstly, I think time is on our side, in the sense that it’s young people and those living in the areas of the highest migration who have the least problem with it. It’s odd, but the most passionate anti-migrant views appear to coincide with the places were fewest are to be found.

Second, an aging population in many Western countries, and the need to staff the proliferation of care homes over the coming years, is surely likely to lead to demands for more migration – young people could become a scarce resource over the next few decades. Migration might also move up our agenda as an issue that truly transcends old North-South divides. The flow of people binds us together even more fundamentally than the more anonymous flows of goods, services and capital.

Unfortunately, in today’s development organizations, I see little sign of movement on this, although we are increasingly engaging with

Diaspora groups on humanitarian work, which may start to influence opinions. But DFID has wound up its migration team, and discussions among the NGOs get nowhere (I’ve more or less stopped raising it in the UK, although Oxfam affiliates in the US and Spain are more engaged). Maybe we could shift public opinion on some wedge issues, such as refugees, but first we would need to be clear about why we currently don’t see migration as a development issue, and decide that that has to change.

That’s as far as I’ve got, but I still feel pretty baffled about why migration never makes our agendas, so any help is very welcome. Over to you.

But last word (for now) to another frustrated economist:

‘Migration is the oldest action against poverty. It selects those who most want help. It is good for the country to which they go; it helps break the equilibrium of poverty in the country from which they come. What is the perversity in the human soul that causes people to resist so obvious a good?’
J.K. Galbraith, The Nature of Mass Poverty, 1979

What kind of sustainable development goals should emerge from Rio?

This post was also published today on the Guardian’s Poverty Matters blog

I attended an ‘expert panel’ discussion recently on the Sustainable Development Goals (SDGs). Originating in a proposal by the Colombian government for what comes after 2015, when most of the Millennium Development Goals expire, some initial progress on the SDGs is being increasingly seen as one of the few wins from a rather forlorn-looking Earth Summit in Rio next week. The essence of the proposal is that global goals help focus leaders’ attention and galvanize aid, but that this time around, they need to bring together development and environment into a single set of targets.

The most likely result in Rio is a paragraph or two in the final summit document, kicking off several months/years of talks to design and approve a new set of goals before the MDGs’ sell-by date arrives. But I’m worried that much of the discussion is taking place in a political vacuum, ignoring the political and economic context that will shape any decision and opting instead for the comforting-but-illusory safety of wonkish debates about indicators and metrics. Here’s the gist of my pitch to the meeting.

Firstly, the context is totally different to when the MDGs were agreed (late 1990s). The rich countries are in recession (compared to a long boom) and the US is in a presidential election campaign; there is no prospect of EU leadership to rival that of the Utstein group and (later) the UK and US governments in the late 90s; there is G-zero drift at the multilateral level (i.e. no-one taking global responsibility, contrasting with post Cold War dynamism in the 90s); and poverty is now mainly a middle income country phenomenon (and so ending it becomes more an issue of domestic redistribution). Finally, any agreement is likely to be more shock-driven, in terms of needing crises (political or economic) to generate the necessary momentum for agreement and implementation.

Secondly, the MDGs were largely about increasing the quantity and quality of aid. That is an implausible mission in the next 10 years. The graph shows World Bank research on the impact of previous banking crises on donor aid flows – aid typically rises for a couple of years and then falls of a cliff, not returning to its former levels for 15 years. The latest global aid numbers suggest a repeat of that pattern could be under way, so goals and targets are unlikely to have the same impact this time around.

So third, we need to think about what instruments have historically been born out of, or worked in, a downturn. Candidates include:

- Long term norm setting
- New sources of revenue, whether international or national, eg the financial transaction tax, closing down tax havens, increased royalties from natural resources, or domestic tax reform
- Re-regulation of financial sectors and introduction of social safety nets (cf the New Deal, born out of the Great Depression.)
- Creating the ‘enabling conditions’ for local people’s movements and others to put pressure on governments, eg access to good quality data, reporting requirements on governments
- Low/zero cost forms of pressure, eg league tables or peer review that use name and shame to create a race to the top between neighbours and rivals.

Add all this together and I think the most sensible approach to the SDGs is to aim for an ‘inspirational envelope’ in Rio, accompanied by low-cost commitments that will become sources of progressive traction (rather than explicit targets), primarily on national governments, forcing them to pay increased attention to issues of poverty eradication and sustainability.

Using Claire Melamed’s handy typology, that means agreeing a big ‘Bulls Eye’ end goal – zero hunger (Ban Ki Moon); zero poverty (WEF); human security (IDS); universal basic services; sustainability (or hey, how about the Universal Declaration of Human Rights?). That could build on Kate Raworth’s doughnut framework (see yesterday’s post), combining development goals and planetary boundaries (see graphic).

Add to that, agreements on data and process to put in place the enabling conditions for future progress. Finally, and hardest to pin down, is it possible to create mechanisms that allow governments, the multilateral system or citizens to respond to shocks by accelerating progress? Not sure quite what this would involve, but the current MDG-type construct is very incremental/steady-state, whereas we know that a lot of social progress comes during and after shocks – can that be reflected in the SDGs in some way?

One other thought: it will soon be 20 years since the World Bank conducted ‘Voices of the Poor’, a ground-breaking study of more than 60,000 poor people in 60 countries that changed our understanding of the nature of poverty. Could Rio agree that it is time for a re-run to see how much has changed/remained the same?

This is all light-years away from the kind of SDG lists that are circulating, which more closely resemble Claire Melamed’s ‘Christmas Tree’ category. My concern is that this is more due to intellectual inertia (let’s take the MDGs and add some more) than a real attempt to understand the possibilities in the current political and economic context.

“Be Outraged!” Some big names in development take on the Austerians

This week Oxfam supported the publication of ‘Be Outraged’, an angry and eloquent broadside from some big names in the development scene, including Richard Jolly, Carlos Fortin, Giovanni Andrea Cornia, Diane Elson, Ruth Pearson, Frances Stewart and Stephany Griffith Jones. Many of them led the fightback in the late 1980s against the excesses of the Washington Consensus, working out of UNICEF and producing the hugely influential critique, Adjustment with a Human Face. A generation later, they’re back, vaguely reminiscent of a more gender-balanced version of the Magnificent Seven – battle-weary gunslingers returning for one last shoot-out (over to you, photoshoppers – Richard Jolly as Yul Brynner has to be worth a go).

The targets of their wrath are the TINA Austerians – ‘there is no alternative to austerity’. They critique each aspect of the austerity agenda, then contrast it with inspirational examples of more constructive approaches. Here are some highlights:

“Pushed to extremes, austerity is bad economics, bad arithmetic, and ignores the lessons of history. We, an international group of economists and social scientists, are outraged at the narrow range of austerity policies which are bringing so many people around the world to their knees, especially in Europe. Austerity and cutbacks are reducing growth and worsening poverty. In our professional opinions, there are alternatives – for Britain, Europe and all countries that currently imagine that government cutbacks are the only way out of debt.

Unemployment: A waste for economies and a tragedy for people. Stimulus can increase employment and economic growth. The first phase of stimulus in 2009 and recovery did have positive effects, which should not be ignored. But the stimulus was not maintained – the first failure. It was not backed up with measures to overhaul bank regulation and control – a second failure. And only limited actions were taken to tackle the dangerous trends of financial globalisation, growing inequality and ‘precarisation’ in the labour market – a third failure. The fact that women and care were hardly considered, if at all, constituted a fourth failure.

Examples for Inspiration: In response to the 1997-2000 East Asian crisis, countries such as Korea, Indonesia, Thailand and China vowed “never again!” They strengthened regional institutions and built up reserves. Their response to the current crisis has been to maintain growth and invest heavily in education and in programs for unemployed youth, in contrast to Europe which is often cutting back on opportunities for youth.

The Financial Sector must change from Bad Master to Good Servant. The sector, both national and international, has two main functions. Firstly it should serve the needs of the real economy. Secondly, it should help manage and mitigate risk. In the last two decades it has done neither. Countries need a far smaller, simpler, more transparent and accountable financial sector, focussed on lending to the real economy, not on making exorbitant profits and salaries for outrageously overpaid bankers and banksters.

Examples for Inspiration: In post-World War II USA and Europe, and many developing countries like Brazil and India today, the financial sector has been well regulated and controlled. Well-run public banks have played an important role. It is clear that finance can support and not undermine the real economy, but strong and clear regulation is required.

Extremes of Inequality can be reduced. Levels of poverty and inequality today are staggering. In 2011, salaries, benefits and bonuses of top directors in the FTSE 100 companies increased by an average of 49%, “despite minimal growth in their companies”. The richest 1% (61 million individuals) earn the same amount as the poorest 3.5 billion (56% of the world’s population).

Examples for Inspiration: In the last decade Brazil, Thailand, Malawi, Argentina, Chile, Malaysia, Venezuela and Bolivia have all reduced inequality, through:

• Fiscal policy that aims to balance the budget along with expansionary expenditure
• Minimum wage legislation
• Increasing access by all social groups to secondary and higher education
• Increased taxation and rising tax/GDP ratios, especially from oil and mineral exports
• Social protection measures involving cash transfers to poor people

The care economy and equality for women. The care economy and social infrastructure needs support and investment. Cuts usually leave women to pick up the pieces and children to bear the brunt. Women’s work and support for care can strengthen both society and the economy, if combined with more equality for women. It is counterproductive to sacrifice women’s and children’s rights and support in the name of credibility in financial markets.

Examples for Inspiration: The Nordic countries lead the world in government support for child care and pre-primary education services, including good wages for public pre-school teachers.

[And the final peroration]

Leaders of the world need to regain the vision and determination to strengthen the international system and prevent future crises. State action is also needed to help sustain more dynamic national economies and a more stable and balanced global economy, especially when backed by decisive global and regional action. The key priorities for economic recovery are support for employment, for the poorest people, and for women and children, while avoiding environmental destruction. The crisis will only become more serious as positive action is delayed.

There are alternatives

People are suffering unnecessarily

We can make a difference

Action is needed now!”