What’s going on with global inequality? Let’s ask Andy Sumner……

When I was asking around about last week’s Oxfam paper on the G20 and inequality, ace number cruncher Andy Sumner emailed to say that in his opinion, talking about inequality in terms of the Gini index (a single number for overall inequality) is terribly old hat, and these days, everyone is trying out different indicators to get at the fine detail of different kinds of inequality. So I went back to his July summary of the latest research on within-country inequality on Global Dashboard, and I have to say, it is brilliant. Some highlights:

‘What’s happening to within-country inequality isn’t immediately clear.

The new Solt database of the main measure of inequality (known as the Gini after an Italian Sociologist who developed it) was analysed by Ortiz and Cummins at UNICEF who concluded the evidence showed:

Rising inequality in Asia, 1990-2008 but falling inequality in Sub-Saharan Africa over the same time period.

And inequality in Latin America rose slightly 1990-2008 but fell between 2000-2008 and inequality was static in the Middle East and North Africa.

Ortiz and Cummins list a long set of countries where inequality significantly fell between 2000-2008. For example, inequality fell by more than 3 points in Thailand, Malaysia; Brazil, Peru, Argentina, Chile; Lesotho, Malawi, Ethiopia, Burundi, Mali, Sierra Leone, Burkina Faso, Uganda, Nigeria, Gabon.

However, a new paper by Chilean Economist Gabriel Jose Gabriel Palma does a detailed study of within country inequality between 1985 vs 2005 suggesting the Gini hides as much as it reveals.

Instead we need to look at each 10% of the population and what they get.

He finds that there is now a surprising similar picture in most countries, noting:

1. The great majority of regions and countries have a relatively similar distribution of income inequality because countries with low inequality at the outset (1985) have got more unequal and countries with high-inequality have got slightly more equal.

2. The middle classes generally get half of the economic pie wherever you look and the middle classes are incredibly successful about protecting their half.

3. Politics is increasingly a fight for the remaining half between the richest 10% and poorest 40% meaning the other half of the distribution is increasingly ‘up for grabs’ between the very rich and the very poor and who can win over the middle classes.

This might begin to explain some of the recent declines in inequality in Latin America as suggested in a paper by Birdsall et al., who argue that ‘social democratic’ regimes (eg Brazil, Chile and Uruguay) are more likely to reduce inequality than ‘left populist’ (eg Argentina, Bolivia, Ecuador, Nicaragua and Venezuela) and both are more likely to reduce inequality that non-left regimes (eg Colombia, Costa Rica Mexico, Peru) and that this is largely due to more social spending and more progressive spending especially so in the social democratic regimes (eg spending on cash transfers targeted to the poorest and greater increases in spending on health and education and increases in spending on basic services – in particular in education, greater increases in spending on primary and secondary schooling rather than on public universities.

These social democrats have strong support in the middle classes and this throws up the question posed by Birdsall et al:

Might the growing middle classes in countries like Chile and Brazil help lock in leftist social democratic political regimes (whether because or despite its concentration in the top quintile of households)?  There is no evidence that a large middle class is necessary let alone sufficient to these regimes.  But a growing global middle class does seem likely to reinforce effective government that manages moderate redistribution while retaining investor confidence in the likelihood of continuing growth and price stability. Put another way: When is the middle class large enough to become politically salient in supporting or at least tolerating the kind of social and other distributive policies that are good for them but turn out to be good for the poor—for example universal public education?

Food for thought – the middle classes as the new revolutionaries?’

Great stuff. It set me thinking about one of the findings of our paper – that whereas inequality is falling in many low and lower middle income countries (see chart), it is rising in all but four of the G20 countries. Might that be because the middle class is more likely to ally with the elite in the G20 countries than elsewhere and why could that be? Perhaps because their economies are integrated, or more dominated by financial institutions? Just idle speculation of course  - feel free to add y0ur own.

As for organizations like Oxfam, it seems to provide empirical support for our focus on ‘convening and brokering’ – the latest jargon for getting people from different social and economic backgrounds into a room, and helping them build alliances. Any other thoughts?

How the G20 is failing on inequality

Another day, another Oxfam report. This time it’s a ‘practice what you preach’ survey of the G20 countries’ performance on inequality and the environment. According to this guest post from co-author Caroline Pearce, they don’t come out of it very well…….

G20 governments cannot afford to ignore inequality. An Oxfam report published today, Left Behind by the G20, examines G20 countries’ records on inequality and sustainability, and on the former shows an overall picture of rising income inequality: in almost all G20 countries, inequality is dangerously on the rise, despite the G20’s much vaunted commitment to promoting shared growth and narrowing the development gap. Crucially, what the report does not find is any link between particular stages of development and levels of or changes in inequality, casting doubt on those who argue that inequality is an inevitable stage along the way to development. Rather, inequality is a matter of political choices, and now the onus is on the G20 to make the right ones.

According to new data from the new Standardized World Income Inequality Database, just four G20 countries (Korea, Brazil, Mexico and Argentina) have reduced income inequality in the last 20 years (see chart), and some with only modest levels of growth. Even these are not unambiguous success stories: in three, initial inequality was so high that decades’ more progress would still be necessary to bring them to levels seen in, for example, Pakistan, let alone in a country like Sweden. The exception is Korea, which grew to high-income status while reducing already comparatively low levels of income inequality. The others, along with the rest of the G20 club, face serious challenges in living up to G20 promises about ‘inclusive growth’.

As well as highlighting this troubling trend, the report spells out why G20 governments should care. Inequality – of many different kinds, not simply income inequality – is linked to weaker and less accountable public institutions, social unrest, crime, and lower well-being. The ongoing Occupy protests are just one illustration of popular discontent with growing inequality, and particularly with the way that inequalities of wealth and power reinforce each other. Our report acknowledges these concerns, and focuses on the links between income inequality, poverty reduction, and growth.

Firstly, high and growing levels of inequality severely limit the impact of growth on poverty reduction. This is a simple matter of logic: when the benefits of growth go disproportionately to the wealthy, then the resources left over to reduce poverty are inevitably reduced. World Bank analysis found that 1 percentage point of economic growth in a low inequality country could reduce poverty by 4 percentage points – or not at all, in a high inequality country.

Our report uses models developed by economists from the World Bank and the UN University to illustrate the potential impact of inequality on poverty in three G20 countries: Brazil, Mexico and South Africa. Using current IMF projections of economic and population growth, we show that continuing progress on inequality in Brazil would allow a million more people to exit from dollar-a-day poverty by 2020 than if inequality remains stagnant. Accelerating the fall in inequality in Mexico, taking 5 points off the gini by 2020, could reduce the number of people in absolute poverty by more than three quarters. Most worryingly, allowing inequality in South Africa to grow at the most recently observed rate could push well over a million extra people into extreme poverty, even as the economy grows. This is a powerful rebuttal of the assumption that a rising tide will lift all boats: on the contrary, without attention to inequality and distribution, the tide can rise but allow many millions of women, men and children to sink.

Moreover, a growing body of evidence demonstrates the pernicious impact of inequality on growth itself. Recent IMF research papers, for example, have illustrated the role of inequality in driving the 2008 financial crisis, and the fact that high levels of inequality shorten the average length of periods of economic growth. The overall message: without attention to inequality and distribution, the tide will slow or perhaps even stop rising.

The question of what should be done about this is harder, with different answers for different countries. Oxfam is undertaking a major research project to look at the impact of different policies on inequality and growth. But some obvious lessons stand out: progressive taxes and redistributive transfers make a huge difference; universal public services – particularly education and health – increase social mobility and reduce future inequality; a focus on gender inequality is not only necessary in its own right but crucial in reducing income and wealthy inequality; and redistribution of land can reduce poverty and prevent growing inequality.

Tomorrow, Kate Raworth discusses the G20’s record on sustainability

Robin Hood, the G20 and the Greek debt crisis – what came out of last week’s summit?

It’s any campaigner’s nightmare – you work for months to get movement on a big issue at a summit, and then an international crisis blows up and threatens to wreck both the agenda and your plans. But Max Lawson, Oxfam’s head of Policy and Advocacy, reckons that the Robin Hood Tax made significant progress last week at a G20 summit dominated by the Greek debt crisis. Here’s his last day wrap-up from Friday:

It is all over. The diminutive Frenchman has spoken (at length). So what happened?

We heard in the morning from South Africa that the French attempt to have a separate communique on the Financial Transaction Tax (FTT) had run out of time.  Which basically confirmed what has been the theme of the last few days – the ingredients for further movement on the FTT have been there all along but there was simply not enough time or diplomatic head space.  Frustrating, but not surprising.  We also heard that the Brazilians had won support from France on a global minimum for social protection in return for their backing on the FTT, which was interesting and impressive diplomacy by Dilma.

All morning rumours circulated about possible agreements on various things that never came to fruition, mostly about boosting the resources of the IMF.  The emerging powers don’t want to fund the European bailout directly as it is too politically contentious, but they are interested in channelling money through the IMF, in return for a bigger share in the governance of the institution.  For nerds like me this remains fascinating, as the financial crisis continues to accelerate the shift of global power to the major emerging markets.  This is a febrile moment in history, and whilst shrouded in deadly dull financial speak, we are witnessing some major shifts that will shape the next century. 

Mid-morning and NGOs had a briefing from the Gates Foundation staff on the G20 discussion yesterday of development, which took up about 45 minutes.  It seems there was some pretty good discussion and definitely having Bill and his report there meant the FTT got a lot more profile than it would have otherwise.  They confirmed that Germany was saying that they are open to potentially using some of the revenues from an FTT to finance climate change and development, which was good to hear. 

The press conference finally started around 2pm. Just when I thought sitting in this lurid bunker of a press centre could not get any more surreal, it emerged that all of the many men’s toilets you go to in this huge complex have the Star Wars music on a permanent loop. 

Sarkozy spoke first about the euro of course and the commitments of the G20 to boost growth, but announced nothing new. He spoke at length about the action they have taken in naming 11 tax havens, which is of course good but not nearly enough, as it is only beating up on some small island states and ignoring the major companies creaming off profits through these havens and the fact that the biggest tax havens are in the G8, in London especially. Still, it’s good that this crucial issue is getting profile and some progress. It is similar to the FTT in many ways – a popular cause that taps into anger in rich and poor countries alike that companies and the richest individuals are avoiding their responsibilities and failing to contribute, meaning that ordinary people are faced with cuts in services and bankrupt governments. 

Anyhow, then he moved onto the FTT.  He underlined that the FTT was now a mainstream issue, and had made it into the communique.  That there were big fights on this issue in the G20 with many against, but that plucky little France continues to push for it.  That in addition to France, Germany, Spain, Brazil and Argentina, they now had support from South Africa, the African Union, Ethiopia (Meles, the Ethiopian president attends the G20 representing NEPAD) and Ban Ki Moon.  

He underlined that the process at the EU is the main one, and that this will be on the agenda at the EU heads of state meeting in January.  He said that whilst not in favour of the FTT, President Obama agreed that the financial sector should contribute more to the cost of the crisis. He confirmed that he believes that the majority of the revenue should be spent on development.  Later, in questions, he name-checked the Robin Hood Tax campaign, and reiterated that the banks must be made to pay back for the impact of the financial crisis they have caused.

What does this mean?  Well it is definitely progress.  During his brief flirtation with the FTT before he lost the election, Gordon Brown compared taxing transactions to debt cancellation for poor countries.  Debt cancellation was initially the preserve of the radicals, ridiculed and dismissed by economists, but which then over a period of ten years and with a fantastic global campaign made the journey into the mainstream and into actual policy.  Sarkozy made a similar case for the FTT, and I think he is right in many ways, although the time-frame is a lot quicker.  

I had a long debate with one of [UK finance minister] George Osborne’s advisers yesterday about all this, and he conceded that he felt the eurozone FTT was almost certain to go ahead now, and that they are scenario-planning to see whether the UK will benefit from it or not.  Germany are really serious about doing this, as are France, and at the moment what Merkel and Sarkozy want to do in the eurozone is very likely to happen.  In fact there are no major opponents of the tax in the eurozone, with the Dutch having changed their position recently.  All that would have been completely unthinkable two years ago. 

The key question is whether all the fuss this week, and the involvement now of South Africa, Brazil and the other developing countries, is enough to ensure that not just the French, but the Germans and the rest of the eurozone countries agree to spend some of the money on fighting poverty and climate change.  I hope so.  Either way the FTT took a big step in that direction today.  We need to keep the pressure up in the coming few months on Germany and France on the issue of how the revenues are used, and not stop campaigning until they stop talking big about this tax and actually go ahead and do it.  In France especially the pressure should be on Sarkozy to implement the FTT nationally too and stop hiding behind other countries. 

Lots to do, but for now I am hanging up the bow and arrow and heading off for some vin, pain and the usual Gallic shrug when I ask whether they have a vegetarian option.

G20 rap curtain-raiser – Tap Dat A$$et from MC Moneypenney

I’m in Cambodia for a few days, (more on that to follow), which means that I will miss the the last minute lobby briefings etc for this week’s G20 summit in Cannes. But in lieu of a curtain raiser, here’s something altogether more fun – MC Moneypenney provides an international finance 101 rap from Occupy Wall Street, and covers (among other things) quantitative easing, Weimar inflation, Tobin/Robin Hood Tax, and Paul Krugman (who has morphed into K-rug… excellent). Finally, Bill Nighy’s got some competition.

[h/t Max Lawson]

How can advocacy NGOs respond to the global meltdown? FP2P Flashback

OK, it’s looking ever more likely that we are heading for a European double plunge recession (double dip sounds too pleasant), so here’s some thoughts from December 2008 about how to respond.

Ever since the global financial and economic meltdown broke, NGO colleagues have been debating how to respond. That debate is now focused on the G20 summit process, which started in Washington DC on 15 November and will reconvene in the UK on 2 April. In conversations with colleagues in the UK and elsewhere in recent days, a potentially useful typology emerged. Here are some options, in ascending order of commitment in terms of cash, staff and policy development:

1. Repackage what you’re doing already: a number of NGOs are reframing their existing policy and advocacy work (on aid, tax, climate change, IMF and World Bank reform) in light of the financial meltdown. This makes sense anyway, since you need to keep your messages relevant.

2. Stick to process: In any political negotiation like the unfolding series of G20 summits, there are always going to be important process issues – who’s in the room, what is published, who’s consulted, how transparent is the negotiation of statements, communiqués and commitments? NGOs have worked on this for decades in the World Bank, IMF, WTO and elsewhere, and many of the arguments are easily transferable to a new forum.

3.  Highlight human impact: journalists and decision makers may not look to NGOs for their ideas on revising bond contracts or capital reserve requirements (and who can blame them…?) but they do want to hear from us about how the crisis is affecting poor people around the world. Simply ‘bearing witness’ may not slake the policy wonks’ thirst for technical detail, but it can be a serious contribution to the debate.

4. Oppose bad things: Stopping anti-development issues getting onto an agenda is often a relatively easy thing around which to rally a coalition. In the WTO Doha round, an effective developing country coalition – backed by NGOs and others – successfully blocked the EU’s efforts to force investment and other ‘new issues’ onto the Doha agenda. The EU’s insistence led to the collapse of the 2003 Cancun trade ministerial – but after that, the EU did withdraw its demands.

5. Propose new things, but get in early: Negotiating processes are more plastic in the initial stages, when new ideas can find their way onto an agenda, provided they are framed in the language and within the boundaries of the process. In the early stages of the Doha Round, developing countries and NGOs worked together within the language of the Agreement on Agriculture to argue for extra flexibility to protect crops judged particularly important to small farmers. These ‘special products’ marked an important conceptual shift in the negotiations, and become a litmus test for disagreements between the more dogmatic free traders and development advocates.

Then there’s a sixth option that could go anywhere in this list – shocks like the current financial and economic crisis challenge received wisdom and the rules of the game, and provide an opportunity to drastically change the ‘discourse’ (how I hate that word). Think how the oil shocks of the 70s triggered the rise of monetarism/collapse of Keynesianism. The current crisis has already thrown up hitherto unimaginable shifts on issues such as progressive taxation, redistribution, nationalisation, reregulation and the role of the state (for a recent example, here’s Peter Mandelson rediscovering industrial policy). Joining in the counter-hegemonic arm-wrestling can involve anything from a couple of op-eds, to generating some huge tome like From Poverty to Power, but I don’t think I’m up for another one of those (at least, not yet).

Verdict on G20 food summit? Dismal, please try harder

Agriculture is a hot potato (sorry…) in most countries’ domestic politics. Think rioting French farmers, US agribiz lobbies or the long death-by-agriculture of the WTO Doha round. So perhaps the most notable thing about the G20 agriculture ministers’ meeting that ended yesterday was that it took place at all – it was the first ever meeting of its kind. It shows just how globally important the topic of food prices and production have become.

Cling to that, because the actual result was dismal – the classic vacuous summit fudge of empty rhetoric, calls for more transparency

tadaaa......!

(who could oppose that?) and kicking the can down the road through buck-passing (asking the finance ministers to look at speculation) and ‘needs more research’, with a few baby steps in coordination. No regulation, no obligation, no new money.

Below is a more detailed verdict from Oxfam’s G20 geeks, and you can read similar damning commentaries from the UN’s Special Rapporteur on Food or the Guardian’s Felicity Lawrence. We launched the Grow campaign in part because we feared that the discussion of how to feed the world over the next 40 years would ignore issues of power, inequality and sustainability – this meeting fully confirms those fears.

Biofuels: Verdict – Poor
There were high hopes that Ministers would tackle flawed biofuels policies after calls for action by the Food and Agriculture Organisation, World Bank, International Monetary Fund and others. However, while Ministers agreed to look at the links between biofuels production and food price volatility they failed to take any concrete measures aimed at reforming biofuels policies or adjusting biofuels targets when food supplies are endangered. Countries suspected of blocking progress include the US, Brazil, Canada and France. The US Government’s biofuels laws meant nearly 40 per cent of US corn crop went into ethanol production rather than food production in 2010 – as the second food price crisis in the space of 3 years began to hit.

Food reserves: Verdict – Poor
Agriculture Ministers agreed to look into bolstering emergency reserves which provide food to people in crisis situations. This is a small step forward however this approach only deals with some of the impacts of high and volatile prices and fails to address the causes.  G20 Ministers failed to recognise that strategic food reserves or buffer stocks also have a critical role to play in helping poor countries cope with extremes food price volatility. A global grain reserve of just 105m tonnes would have been enough to help avoid the food price crisis in 2007-8. The cost of maintaining this would have been $1.5 billion or just $10 for each of the extra 150 million people who joined the ranks of the hungry as a direct result of the last food price surge. 

Speculation: Verdict – Inconclusive
This is the top priority for the French Presidency. The G20 Agriculture Ministers agreed to explore the links between speculation and food price volatility and to look at mechanisms for regulating excessive speculation on the commodity markets.  This is an issue which Finance Ministers will take up when they meet in July.

Transparency: Verdict – Pass
Agriculture Ministers agreed to set up system to provide information on agricultural production and food stocks held by countries around the world. This will help ensure countries and the international community has some of the information they need to analyse the global food situation and take action to avert a crisis. Unfortunately Ministers stopped short of requiring agribusinesses – which dominate the trade in many staple foods– to disclose information on the stocks they hold.  According to one estimate Cargill, Bunge, and ADM control nearly 90 per cent of global grain trading between them.

Insurance Mechanisms:  Verdict – Poor
France pushed forward market based proposals for hedging instruments that would enable vulnerable countries to insure themselves against future food price shocks.  Because the proposals fail to address the causes of price volatility they are unlikely to succeed.   Without action to regulate and increase the transparency of global commodity and futures markets the measures are more likely to benefit the financial institutions which provide the insurance rather than poor food insecure countries which are purchasing it.  In addition, poor smallholders who will not be able to access these mechanisms. Oxfam believes resources would be better directed at other instruments to manage risk such as buffer stocks.

Investment in agriculture: Verdict – Fail
Agriculture Ministers agreed that more investment is needed in agriculture. However, they focused on the need to support private investment in agriculture, rather than agreeing any concrete measures to support poor producers in developing countries who offer the greatest potential to sustainably increase global agricultural yields and tackle hunger. Investing in women farmers could raise total agricultural output in developing countries by 2.5 to 4 per cent. 

Climate change: Verdict – Fail
Rich counties failed to even acknowledge that climate change is major cause of food price volatility. Climate change is estimated to have increased the amount we spend on food worldwide by $50bn a year.

Hard to exaggerate just how disappointing a response this is to the kinds of impacts of the food price spike that we are seeing on the ground. Official communiqué here [h/t Glen Tarman].

Living on a spike – how are high food prices actually experienced by people living in poverty?

The G20’s Agriculture Ministers are meeting for the first time today and tomorrow, in Paris, a sign of the rising importance of food security and related issues, following the recent chaos in global food prices (see graph). Oxfam is focussing its lobby efforts on biofuels (in many cases, a bad thing, diverting food to fuel and not even helping reduce carbon emissions) and food reserves (a neglected way to smooth the spikes in prices). The FT curtain raiser says the ministers are divided and set to duck the big challenges on biofuels and export bans, but also covers their efforts to improve data on food stocks - a potentially useful way to reduce price volatility.

Oxfam (or at least some of our research partners) has also done something rather radical. When a shock hits, all the development wonks rush for their models and start calculating the impact on ‘the poor’, based on how many millions slip into poverty when prices rise by X or GDP falls by Y. What’s extraordinary is how seldom researchers think to go and talk to poor people themselves. When you do so, you get answers full of depth and surprise, as we found out in ‘Living on a Spike’, a new report on the impact of the 2011 food price crisis, published today by Oxfam and the Institute of Development Studies. Naomi Hossain and I had a piece in the Guardian yesterday summarizing the findings.

The researchers returned in March 2011 to eight community ‘listening posts’ in Bangladesh, Indonesia, Kenya, and Zambia, that were previously visited in 2009 and 2010, building up an increasingly valuable time series of how food prices and their impact have varied over time. Using focus groups and other participatory techniques, they asked: What has happened to prices and wages since last year? How are people adjusting to these changes? What do people think causes food price volatility, and what do they think should be done about it?

The overall impact of the 2011 food price spike has been to ratchet up inequality, producing a pattern of ‘weak losers and strong winners’. The losers – those already struggling in low-paid, informal sector occupations such as petty trading, street vending, casual construction work, sex work, laundry, portering, and transport – are doing worse. Many have seen stagnant or only slightly raised rates of pay, which have been swallowed up by higher food prices, combined with more erratic access to work or customers. Small-scale farmers and small market and food traders have not generally done well, despite the high price of food. High input costs and the squeeze on people’s purchasing power has meant that profits from growing and selling food remain low for those with least scope to diversify and spread their risk.

These people are clearly worse off than last year. They strongly believe that the government is not on their side in their efforts to eke out a living. Regulations on where people can run their businesses or provide their services, police harassment, and unfavourable new laws mean that making a living has got harder, not easier, for many in this group over the past year.

But some groups – usually those who were already relatively better off – have done better than last year. Commodity producers and export sector workers have largely benefited from the global recovery, as have some people in other occupations linked to these groups.

People are adjusting to high food prices in complex ways. While some people are eating less and going hungry, the more usual pattern is for people to shift to lower quality, more boring food and less diverse diets.

The effects differ greatly by gender: women come under more pressure to provide good meals with less food, and feel the stresses of coping with their children’s hunger most directly. Often women go without. As one labourer from Bangladesh explained, ‘The women make the ultimate sacrifice. They take their food after everyone is done. We have completely forgotten the taste of beef.’

These stresses push women into poorly paid informal sector work, competing among themselves for increasingly inadequate earnings. Men also feel the effects: the food price rises severely undercut their ability to provide for their families, leading to arguments in the household and fuelling alcohol abuse and domestic violence. As one Kenyan woman complained, ‘They come home drunk and even feed on the leftovers for our children.’ In the worst instances, couples split up or look for better-off partners to cope with the tough times.

Talking to people living in poverty reveals just how multi-faceted the impacts of the food price spike are, touching on almost every aspect of life. People are spending less on personal items like clothes and cosmetics, and scaling down their social lives. A rickshaw driver from Bangladesh graphically explained:  ‘With my income, I don’t have any money after buying food, so how can I have the luxury of buying more underwear?’… People can see my ass. And the thing is, as I wear the same underwear for the whole week, people get a bad smell from me. What can I do?’

Government has provided some support, but this has generally failed to protect people from the effects of rising prices. The result of these adjustments is not generally starvation, but an overall increased level of discontent and stress. Poor people are having an even more difficult time getting by.
 
The extent of people’s discontent with the situation becomes clearer when asked about their opinions on the causes of food price rises, and what should be done about them. Few people think international food prices are an important cause; some even dismiss such factors as merely convenient excuses made by their ineffective governments. Governments are held responsible for protecting their people from price spikes, but are generally seen as having failed to do so. There is a belief that governments can act to keep prices low if they want to. In Zambia, for instance, some people credited the imminent elections with putting political pressure on the government to keep staple prices low.

Poor people’s explanations of why governments have generally failed to act on food price rises revolve around two key perceptions: that governments do not care about poor people’s concerns; and that corruption at different levels of the system ensures that prices cannot be controlled – either because market inspectors can be bought off, national politicians owe big businessmen favours for help with election expenses, or cartels are permitted to operate.

Young urban men appear particularly angry about governments’ failure to act. According to one group in Kenya, ‘It is high time Kenya went the way of Egypt way. We need a leadership change!’

With revolutions in the Middle East and other protests against governments in Europe, the stress and discontent fuelled by high food prices merits close attention by the G20 agriculture ministers. Hope they’re listening. 

With three years of visits under the researchers’ belts, we’re keen to keep going back to the communities in the next few years, maybe adding on a few other countries and introducing some quantitative methods to complement the qualitative. I’d be interested in links and references to similar research efforts at this kind of  qualitative longitudinal work on particular issues.

How is the G20 shaping up as the new global steering committee?

The G20 summit takes place in Seoul today and tomorrow, the first such gathering in a non-G8 country. I’ve been following the G20 process from a distance and it’s fascinating – here’s a few reflections.

The moment: the financial crisis of 2008/9 saw the G8 publicly hand over the reins of international coordination to the G20. What happens next? Will it become a kind of global steering committee (which may not be good news if you’re one of the G172 countries not in the room), or just another piece of an increasingly fragmented international jigsaw of power? My money is on the latter – it will become an essential player, but will try and limit its remit to its original area of comparative advantage, the international financial system. There will be a battle to insert new issues onto the agenda (as there was with the G8), but also fears that that could weaken its impact and undermine other parts of the multilateral system (like the UN).

How the G20 works: According to a recent ODI talk by Shriti Vadera, a former UK Minister, and now an advisor to the Korean G20 Presidency, the G20 is more disciplined, internally democratic and more accountable than the G8. The whole membership, rather than just the Chair of the next meeting,  decides the agenda, and any action agreed must have a name and deadline for implementation. If the action is not carried out, it must go back to the next G20 Foreign Ministers meeting for scrutiny. The result is a multi-year action plan attached to the communiqué with names, deadlines and report-backs. (Wonder how they will ensure that all the un-implemented promises don’t accumulate as time goes on into a litany of failure attached to each summit outcome.)

Development Agenda: While the most contentious debate in Seoul is likely to be over China’s currency and American quantitative, one of the big achievements of the Korean presidency has been to make development a core part of the G20 agenda (see, it’s already expanding beyond finance!). There will be a permanent Expert Group on development issues, which has identified nine ‘pillars’ for discussion: infrastructure; private investment and job creation; human resources development; trade; financial inclusion; growth with resilience; food security; governance and knowledge sharing. This is a really interesting list, with little resemblance to the Washington Consensus (eg no mention of liberalization), and rejecting a one size fits all recipe for what the Koreans trendily call a ‘dynamic iPhone model’ – a range of different development apps for every situation. But the list also has some big absences – it claims to be based on the successful experience of Korea, but a neoliberal government has airbushed out the industrial policy (including regulation of foreign investment) and land reform that were crucial to Korea’s take off. See Ha-Joon Chang in the Guardian for more on this.

In terms of process, the G20 isn’t as exclusive as it looks. Vadera pointed out that NEPAD and the African Union have been represented at every G20 summit to date, and thinks that will be institutionalised (‘There will always be two Africans in addition to South Africa’). Like most ‘G’ groups, the numbers at the table are flexible, and hardly ever amount to 20…..

Wider Impacts on Global Governance: When a new international forum appears on the scene, there is inevitably an adjustment process as responsibilities and agenda items migrate to and fro and then settle down. The G20 has to find its place alongside the G8, UN, WTO and a plethora of other lower profile international institutions. Overall, as the international community tries to provide some global governance without global government, the G20 seems another step on the journey from a system of hard institutions and binding treaties to a messier ‘soft power’ world of networks, consensus and peer pressure.

That process of readjustment is bound to create winners and losers, both in terms of actors and issues. In this latest exercise, issues like growth and investment seem to be getting a boost, but on climate change, the G20 is likely to bat the ball back to the UN, while aid will float between OECD, UN and the G8. Nothing wrong with that, except that if the political energy and capital is with the G20, that means even less momentum for progress on climate change and aid.

What’s Next? The G20 presidency passes to France after the Seoul summit, and the French seem very committed to making it work. French officials at another ODI event (I seem to spend my life there) cited reform of the international monetary system, reduction of price volatility and reform of global governance as the three priorities for French presidency. They include innovative forms of finance, such as the Financial Transactions Tax, in that list. Should be interesting.

For more on the summit and the issues, check out the series of posts on the Triple Crisis blog or Oxfam’s Seoul curtain raiser. FT coverage is here, including a dose of well informed pessimism, see Alan Beattie’s weary comparison of the G20 with the paralysed Doha round of trade negotiations. That bad, eh?

Do loose networks like the G20 strengthen or weaken developing country voice?

Networks are (yet) another development buzzword, contrasting with markets and hierarchies. They are proliferating in the international arena, as well as in academic literature – how many ‘Gs’ can you name apart from the G20 and the G8? What’s the difference? According to ‘Networks of Influence? Developing countries in a Networked Global Order‘, edited by Leonardo Martinez-Diaz and Ngaire Woods, ‘Like networks, markets are non-hierarchical, but in a market with many buyers and sellers, a particular set of participants may transact once but never again. In a network the same group of actors interacts repeatedly in an iterative process. As in networks, actors that are part of hierarchical institutions may interact regularly, but in a hierarchy, there is by definition someone with the authority to arbitrate and resolve disputes when conflicts arise. In networks, there is no such delegation of authority.’

Networks of Influence builds on 8 case studies, all loosely involving financial networks such as the G20, several written by network insiders, to try and sort out whether networks are a blessing or a curse for developing countries. Are they exciting new avenues for poor country governments and civil society to influence the big decisions, or sneaky ways to get round accountability and exclude the great unwashed through a 21st century version of invitation-only gentleman’s clubs? Will they replace or strengthen formal international institutions like the UN or IMF? Are North-South networks different from South-South ones? (both are proliferating).

It’s time for some wonky lists. The book sets out five functions of networks: agenda setting; consensus building; policy coordination; knowledge exchange and production and norm-setting and diffusion. It identifies two categories of network. Advocacy networks aim to mobilize support for a cause and concentrate on the agenda-setting, norm-setting and consensus-building functions, while ‘self-help’ or ‘problem-sharing’ networks focus on improving members’ capacities through knowledge production and exchange and policy coordination.

It then uses the case studies to test four hypotheses (last list, promise):

Hypothesis: Networks emerge as a reaction to real and perceived failings of formal institutions, particularly international organizations
Conclusion: Yes

Hypothesis: The largest contributors of resources to a network use their influence to ‘capture’ the network and steer it in their own interests
Conclusion: Not completely. Big contributors are kept in check because weaker players simply vote with their feet and leave the network if they see the big guys abusing their positions.

Hypothesis: Even with unequal resource contributions, networks provide developing countries with greater voice and influence than international organizations
Conclusion: Mixed results, but overall, yes, where there are adequate resources for the network and the stronger players don’t try and take over.

Hypothesis: Networks will replace international organizations because they are much less resource-intensive, more flexible and more egalitarian
Conclusion: No. Networks are rarely effective on their own – they need to form a symbiotic relationship with international organizations. The emerging world order will be of these organizations interacting with clusters of networks, each playing to its strengths.

It’s that last conclusion on symbiosis that is the most interesting. International organizations burdened with procedures and bureaucracies can take tricky issues off-line for discussions and consensus-building in networks, but binding decisions require rules and formal institutions, so in turn, networks have to bat them back to the organizations to be turned into something concrete. The interaction between the G8/G20 and the IMF and World Bank is a classic example. Networks have to be properly ‘nested’ within a larger institutional landscape if they are to be more than mere talking shops. One lesson for international advocacy is that if we are proposing new networks on tax, arms control or whatever else, we need to think long and hard about the best institutional ‘nest’ for them.

Worth comparing this with Owen Barder’s recent attempt to rethink the aid system in terms of a hybrid of markets, networks and hierarchies.

What happened at the Pittsburgh G20?

I didn’t attend the G20 summit in Pittsburgh last week, but I’ve been poring over the communiqué. Here are some initial thoughts on what it all means (numbers in square brackets refer to paragraphs in the original), incorporating analysis and intel from the Oxfam team at the event.

Headline: Pittsburgh formally enshrined the rise of the BRICs and relative decline of the G8: ‘We designated the G-20 to be the premier forum for our international economic cooperation’ [preamble, 19]. The passing of the baton takes place in Canada next June, where the G8 and G20 summits will coincide.

Winners and Losers: Institutions
The World Bank and IMF were once again anointed as the lead agencies on almost everything. ‘The World Bank and other multilateral development banks are critical to our ability to act together to address challenges, such as climate change and food security, which are global in nature and require globally coordinated action…. The World Bank should strengthen.. its focus on food security, … Its focus on human development and security in the poorest and most challenging environments, … support for private-sector led growth and infrastructure… contributions to financing the transition to a green economy through investment in sustainable clean energy generation and use, energy efficiency and climate resilience.’ [24]

The IMF ‘must play a critical role in promoting global financial stability and rebalancing growth’, including an enhanced role in providing oversight of the global financial system and its imbalances [20].

In return, the G20 put numbers on IMF and World Bank quota reform: ‘at least’ 5% of voting power for both institutions [the World Bank figure was 3%, on top of 1.5% already redistributed] will shift from over-represented to under-represented countries’. The US had offered 5%, and the BRICS had been asking for 7% – the ‘at least’ means this isn’t totally shut down. Europe, which will lose influence under the reforms, had been asking for no target at all.

The shift means that middle income countries whose GDP or trade has grown in recent years (eg China, South Korea, Singapore, Turkey) will get bigger shares, at the expense of countries whose quota share is now bigger than the calculations justify (eg Belgium, Saudi Arabia, Venezuela, France). It is still the richest countries in charge, but updating the quotas at least takes account of which countries are now the richest. To protect the voting share of the poorest countries, the G20 gave guarantees that whatever happens, they won’t lose vote share as the emerging countries like China and India increase their muscle

How much difference will this make? Some pretty rich countries are counted as ‘developing’ by the IMF. Our calculations (which rely on some assumptions about how this would be done) suggest that the shift for high income countries would be from around 68.3% to around 65% of the votes and the maximum benefit for the poorest (PRGF-eligible) countries is from 7.7 to 7.8% of the vote. Hardly seismic.

Other aspects of IMF reform were explicitly put on the table, including size and composition of the Board, role of governors, effectiveness of the Board, staff diversity. [21]

The ILO also had a good summit, with a major focus on job creation in the crisis response [43-47] and a strong endorsement of its work: ‘The international institutions should consider ILO standards and the goals of the Jobs Pact in their crisis and post-crisis analysis and policy-making activities.’ [46]. The G20 agreed an early 2010 meeting of G20 Employment Ministers ‘to assess the evolving employment situation, review reports from the ILO and other organizations on the impact of policies we have adopted, report on whether further measures are desirable.’[46]
 
As for losers, once again the UN was largely missing in action – the circus at the General Assembly in New York prior to the G20 can’t have helped. All it got was a token acknowledgement that the ‘UN’s new Global Impact Vulnerability Alert System will help our efforts to monitor the impact of the crisis on the most vulnerable’ [34] and a couple of vague short paragraphs on the UN-led climate change negotiations that merely ‘note’ the principles agreed at the July G8 in l’Aquila [32-33].

Winners and Losers: Issues
Reflecting US priorities, food security received serious attention: ‘Sustained funding and targeted investments are urgently needed to improve long-term food security. We welcome and support the food security initiative announced in L’Aquila and efforts to further implement the Global Partnership for Agriculture and Food Security and to address excessive price volatility. We call on the World Bank to work with interested donors and organizations to develop a multilateral trust fund to scale-up agricultural assistance to low-income countries.’ [39] The communique called on the Bank to set up yet another multilateral trust fund – the proliferation of such funds on health, agriculture etc is threatening to undo much of the recent progress in trying to reduce the bureaucracy of aid reporting requirements, which eats up scarce staff time in poor country governments.

At the last minute, German insistence led to a new, if oblique, paragraph on the Tobin Tax: ‘We task the IMF to prepare a report for our next meeting with regard to the range of options countries have adopted or are considering as to how the financial sector could make a fair and substantial contribution toward paying for any burdens associated with government interventions to repair the banking system.’ [16] President Sarkozy and Chancellor Merkel both specified that this para refers to the Tobin Tax, and TT campaigners are celebrating – this is a new high water mark in getting the idea onto the international agenda. Still this language seems vague enough to allow considerable room for backing down – taxing the financial sector could be a lot more restricted than a currency transactions tax, and in any case, is only being discussed in terms of paying back bailouts, not wider issues such as using a Tobin Tax to fund climate mitigation and adaptation. Lots to play for, here.

Clean energy [31] and getting rid of fossil fuel subsidies [29] both prospered and that is important (ending subsidies could reduce greenhosue gas emissions by 10%, according to the communique). But that was the extent of environmental concern, apart from a liberal and apparently random sprinkling of the word ‘sustainable’ all over the text. A wider shift to a low carbon development model was missing, and without that the overall statement that ‘our objective is to return the world to high, sustainable, and balanced growth’ [3] increasingly looks incompatible with the objective of stopping the planet from frying. The ‘G-20 Framework for Strong, Sustainable, and Balanced Growth’ [annex] is almost entirely oblivious to environmental constraints and issues (‘sustainable’ appears to refer more to economic than environmental sustainability – the word should perhaps be changed to ‘sustained’ to avoid confusion).

On climate finance, the can was kicked firmly down the road by asking the G20 finance ministers’ meeting in November to report back on climate financing. [33] An effort to outline principles for climate finance in an earlier draft of the communiqué was dropped.

Reportedly, there was lengthy discussion on climate change at the leaders’ lunch at the summit. Swedish Prime Minister Fredrik Reinfeldt and French President Nicholas Sarkozy both suggested that the leaders could talk again on climate change in as little as two weeks time – possibly by videocon. Other reports suggest, however, that President Obama indicated that reaching a final global deal at Copenhagen was not vital, suggesting that if anything the summit may have undermined momentum.

On aid, there was no new money for the poorest countries, but at least an endorsement (reportedly after a struggle) of the promises made at the Gleneagles summit in 2005.   There was a recognition that a number of G20 members will recycle their SDRs (the IMF’s version of quantitative easing) through the IMF.  It is not yet clear how much more they will recycle but it is likely it will only be used to deliver the amounts already promised in London.

On Tax Havens, the vaguely promising language around exploring a multilateral mechanism that was in the communiqué for the G20 finance ministers meeting in London in early September was dropped from the Pittsburgh communiqué, which instead patted itself on the back for ‘impressive results.’[15]. Really? Care to offer some examples of increased flows of tax payments to poor countries? There is, however, a threat to go further: ‘We stand ready to use countermeasures against tax havens from March 2010.’ [15]

Finally, at the opposite extreme from the bank mega-bailouts that have characterized the crisis, the G20 set up a ‘G-20 Financial Inclusion Experts Group’ to look at how to promote financial services for the poor and specifically for small and medium enterprises (SMEs).[41] Oxfam has a rather good paper coming out on this next month, so we may have some useful suggestions for them.

Overall verdict? Even though the impact of the crisis on the poorest countries has become more pressing since the London Summit in April, it felt like development had slid down the agenda this time around. No more money on the table, missing the moment on climate change, and a general sense that the regulatory tide is receding as we move to ‘a critical transition from crisis to recovery’, in the words of the communique’s triumphalist first para. As I discussed in a recent lecture at Notre Dame, maybe the crisis simply isn’t proving big and painful enough to trigger the structural changes we need.