Will the new UN Panel on Global Sustainability have an impact?

The diplomatic circus is full of high level commissions and panels on this and that, most of which deliberate, publish and sink without trace. But the UN’s new High-Level Panel on Global Sustainability, launched this week by Ban Ki-moon, may just be an exception. It certainly has a hell of a job description: ‘finding ways to lift people out of poverty while tackling climate change and ensuring that economic development is environmentally friendly’, according to the UN newswire.

The 21-member panel will be co-chaired by Finland’s President Tarja Halonen and South African President Jacob Zuma. It’s membership is heavily weighted towards current and former political leaders, with as far as I can see, only one private sector representative – the CEO of Research in Motion, the company that makes Blackberries. The only vaguely civil society member, Mexican environmentalist Julia Carabias, was also Secretary of the Environment. It’s also pretty light on academics, though presumably they can be drafted in later (full list of members here). That suggests that its job is more about influencing governments than coming up with any radical new insights, and highlights the welcome lack of overlap with the science-based work of the IPCC.

Over the next two years, the panel will work on a game plan for resolving the tensions between tackling climate change and economic growth (a subject dear to this blog’s heart), which they will present to delegates at the 2012 Earth Summit in Rio de Janeiro. Ban says he has ‘asked the Panel to think big’, so then the question becomes one familiar to anyone engaged in advocacy - how big? If it doesn’t go far enough in challenging received wisdom on the sanctity of growth, it won’t achieve anything, if it goes to the other extreme and starts preaching degrowth, it is unlikely to get a hearing. 
 
As if that wasn’t enough, officials also hope it will help resolve stalled international climate change negotiations and perhaps secure a replacement treaty to the Kyoto Protocol. Anything else you’d like them to do – harness fusion energy? Find a cure for cancer?

What’s really welcome here is the recognition that there is a big picture challenge on the nature of growth that has been sidelined as governments grapple with the aftermath of the global economic crisis. Someone has to lead the thinking on it – let’s hope the Global Sustainability Panel can do so.

Janos Pasztor, the head of Ban’s climate change support team, who will also manage the new panel’s administration, expects it to begin work around the U.N. General Assembly in New York this September. Ban expects a report from the panel to be completed by the end of 2011, in time for him to forward it to UNFCCC negotiations in South Africa  in December 2011 and then to the delegates gathering for the Earth Summit. Fingers crossed.

The co-creator of the UN’s new Multidimensional Poverty Index defends her new baby

Sabina Alkire responds to the previous posts by Martin Ravallion and me on her new ‘Multidimensional Poverty Index’. She is director of the Oxford Poverty and Human Development Initiative (OPHI).

“As Martin Ravallion points out, we agree that poverty is multidimensional. The question is whether our efforts to incorporate multiple dimensions into the very definition of who is poor and the measurement of poverty “contributes to better thinking about poverty, and to better policies for fighting poverty.” Let me explain what I think the MPI adds.

The MPI measure has meaning in itself and can also be broken down immediately into its component parts.  Every time you see an MPI figure – for a person, an ethnic group, a state, or a country – you know that it also contains what could be thought of as a drop-down menu in two layers. The first layer shows incidence and intensity. The second breaks the MPI down by indicator and shows what poverty is made of.

If we know someone is income poor, we do not know if they are also illiterate or malnourished. If we know someone is multidimensionally poor, we can unpack the MPI to see how they are poor. That is one added value of our methodology.  That is why we call it a high resolution lens: you can zoom in and see more.

This feature could add value to the MDG indicators too. These show us the percentage of people who are malnourished, and the rate of child mortality and many other things, but not how the deprivations overlap. If 30% of people are malnourished and 30% of children are out of school, it would be useful to know if these deprivations affect the same families or different ones. With the MDG indicators we cannot see that; with the MPI, we can. Of course not for all MDG indicators, but it’s a start.

For example, the Somali have the highest multidimensional poverty of all ethnic groups in Kenya followed by the Masai. Looking at the MPI drop-down menu, we see that 96% of Masai are poor and 88% of the Somali. But poverty among the Somali is more intense: on average they are deprived in 67% of dimensions; the Masai in 62%. Zooming in further we note that the Somali are more deprived in education and child mortality, whereas malnutrition and standard of living indicators are worse among the Masai. So the MPI opens out into a wider field of information. 

The other thing the MPI does is clean data of anomalies and focus on poor people. While indicators drawn from different surveys are tremendously useful for many purposes, they do not identify who is multidimensionally poor, so every MPI poor person experiences multiple deprivations. Consider a self-made millionaire who didn’t go to school. A MDG indicator includes this millionaire in the percentage of people who are uneducated. The MPI does not – if she’s not deprived in anything else, she’s not considered poor. In times of tighter fiscal resources we focus on people who are deprived in several things at the same time.

So, the MPI – and the general methodology it uses that James Foster and I developed – adds value because of how it evaluates poverty. The method first determines the dimensions in which a person is deprived, and then ‘adds up’ that person’s deprivations using weights that reflect the relative importance of each deprivation. A person who is sufficiently ‘multiply deprived’ is considered poor. We measure multidimensional poverty as the incidence (or the percentage of the population that is poor) times the intensity (or the average percentage of deprivations poor people experience). Unlike the HDI, this construction does not add up achievement levels, which requires strong assumptions concerning the variables in question as Martin noted. Instead, we add up deprivations, which does not.

OK, now to the issue of weights. Income poverty aggregates within a country using actual or imputed prices (these are critical for fixing the income poverty standard across countries and time). Setting prices is not unproblematic in practice, particularly in Colombia where I am writing from. Indeed the Presidential address to the 2010 American Economic Association raised concerns such as the prices attributed to housing (Deaton 2010). Chen and Ravallion 2008 carefully review the robustness of their results to different pricing approaches. 

As Martin observed, instead of using prices, the MPI sets weights as value judgements. Amartya Sen among others sees this feature as a strength not an embarrassment: “There is indeed great merit… in having public discussions on the kind of weights that may be used” (1997a).

In extensive writings, Sen presents several pertinent observations in favor of setting weights: first, prices may not exist for some aspects of poverty (morbidity, mortality, illiteracy) but giving zero weight to these does not seem right either. Second, setting precise weights may not be necessary: comparisons may be robust to a range of weights. Third, the weights trigger public debates which may be constructive as policy makers weight tradeoffs in practice anyway.

The key, Sen suggests, is to make the weights explicit: “It is not so much a question of holding a referendum on the values to be used, but the need to make sure that the weights – or ranges of weights – used remain open to criticism and chastisement, and nevertheless enjoy reasonable public acceptance” (1997b; see also Decancq and Lugo 2008).

Given this situation, Maria Emma Santos and I proceeded in a very practical way in the MPI. First, the weights are not buried; they are totally transparent (1/3 per dimension, and each indicator within a dimension equally weighted). If people disagree with these weights, they can propose improvements and also recalculate with different weights to check robustness. Second, the weights give some non-zero value to each dimension, which is a starting point. Third, the MPI fixes weights between countries to enable cross-national comparisons; alongside this we strongly encourage countries to develop national measures having richer dimensions, and indicators and weights that reflect their context as Mexico did and Colombia is doing. Fourth, we weight the three dimensions equally, this was corroborated by expert opinion (Chowdhury and Squire 2006), helps make it easy to understand (Atkinson et al. 2002) and at least for the HDI is quite robust (Foster McGillivray and Seth 2009). We do need to create robustness tests for MPI weights, and new methodologies of analysis to guide policy, and OPHI plan to work with other researchers on these. But the key thing is that the present MPI weights are transparent, and critical scrutiny of them is welcomed.

Finally, both previous blogs mentioned data contraints. Duncan criticised the MPI for including only three dimensions, “partly because it still relies on existing data sets.” Well, actually data constraints are the only reason only these three dimensions appear. We and the HDRO wish to include others without losing focus: indeed OPHI’s other research theme highlights the need to gather internationally comparable data on ‘Missing Dimensions’ of poverty – violence, informal work, disempowerment, and isolation/humiliation — given the importance these have in poor people’s lives. Our methodology is flexible enough to accommodate additional dimensions as they become available and we are eager to do so.

Finally, as Martin observed, our data must come from the same survey or from matched surveys. Yet multi-topic surveys have expanded rapidly, especially since the MDGs. The MPI is not perfect, but it uses these surveys to explore joint distribution – the deprivations that batter poor people’s lives at the same time. Such a multidimensional poverty measure complements existing tools. So though no measure is enough, we hope this work will enable others fight poverty and empower poor people more effectively.”

Phew. Thanks to Martin and Sabina for raising the intellectual tone with these top notch contributions. Something altogether more superficial tomorrow, promise.

Update: check out the comments for ongoing discussions between Martin Ravallion and Sabina, and lots of other top contributions

Guest Blog: World Bank research director critiques the new UN poverty index

Martin Ravallion is Director of the World Bank’s research department, the Development Research Group. These are the views of the author, and need not reflect those of the World Bank.

“Everyone agrees that poverty is not just about low consumption of market commodities by a household.  There are also important non-market goods, such as access to public services, and there are issues of distribution within the household. It is agreed that consumption or income poverty measures need to be supplemented by other measures to get a complete picture.

But does that mean we should add up the multiple dimensions of poverty into a single composite index? Or should we instead measure consumption poverty with the best data available, while also looking for the best data on other dimensions of poverty as appropriate to the country context?

The Oxford Poverty and Human Development Initiative (OPHI) has recently launched a Multidimensional Poverty Index (MPI), and calculated it for over 100 countries.   The MPI is a composite of indicators selected for consistency with the UNDP’s famous Human Development Index (HDI). The HDI uses aggregate country-level data, while the MPI uses household-level data, which is then aggregated to country level. The index has ten components; two represent health (malnutrition, and child mortality), two are educational achievements (years of schooling and school enrolment), and six aim to capture “living standards” (including both access to services and proxies for household wealth).  The three broad categories–health, education, and living standards–are weighted equally (one-third each) to form the composite index.   

One can debate the precise indicators chosen for the MPI by the Oxford team (who are clearly aware of the many data concerns). For example, the MPI’s six “living standard” indicators are likely to be correlated with consumption or income, but they are unlikely to be very responsive to economic fluctuations.  The MPI would probably not capture well the impacts on poor people of economic downturns (such as the Global Financial Crisis) or rapid upswings in macro-economic performance.

The precise indicators used in the MPI were not in fact chosen because they are the best available data on each dimension of poverty. Rather they were chosen because the methodology used by the MPI requires that the analyst has all the indicators for exactly the same sampled household. So they must all come from one survey. There is much better data available on virtually all of the components of the MPI, but these better data can’t be used in the MPI since they are only available from different surveys. This aspect of their methodology greatly constrains the exercise. If one chooses not to form the composite at household level but to look instead at the separate dimensions of poverty one is free to choose the best available data on each dimension of poverty.

There is a deeper concern about the MPI, which holds even if the best data all came from just one survey. The index is essentially adding up “apples and oranges” without knowing their relative price. When one measures aggregate consumption from household-survey data for the purpose of measuring poverty, as in the World Bank’s “$1 a day” measures, one relies on economic theory, which says that (under certain conditions) market prices provide the correct weights for aggregation. We have no such theory for an index like the MPI. A decision has to be taken, and no consensus exists on how the multiple dimensions should be weighted to form the composite index. 

On closer scrutiny, the embedded trade-offs (stemming from the weights chosen by the analyst) can be questioned, and may be unacceptable to many people.  In the context of the HDI, I pointed out 15 years ago that by aggregating GDP per capita with life expectancy the HDI implicitly put a value on an extra year of life, and I showed that this value rises from a very low level in poor countries to a remarkably high level in rich ones (4-5 times GDP per capita).   If it was made clearer to users, I expect that they would question this trade-off embedded in the HDI.

The MPI index faces the same problem. How can one contend (as the MPI does implicitly) that the death of a child is equivalent to having a dirt floor, cooking with wood, and not having a radio, TV, telephone, bike or car?  Or that attaining these material conditions is equivalent to an extra year of schooling (such that someone has at least 5 years) or to not having any malnourished family member?  These are highly questionable value judgments. Sometimes such judgments are needed in policy making at country level, but we would not want to have them buried in some aggregate index.  Rather, they should be brought out explicitly in the specific country and policy context, which will determine what trade off is considered appropriate; any given dimension of poverty will have higher priority in some countries and for some policy problems than others. 

Poverty is indeed multidimensional.  But it is not obvious how a composite multidimensional poverty index such as the MPI contributes to better thinking about poverty, or better policies for fighting poverty.  Being multidimensional about poverty is not about adding up fundamentally different things in arbitrary ways. Rather it is about explicitly recognizing that there are important aspects of welfare that cannot be captured in a single index.”

Sabina Alkire of OPHI (and the creator of the MPI) responds tomorrow. For Duncan’s introductory post on the MPI see here.

How can we improve the way we measure poverty? The UN’s new poverty index (and groovy graphics)

Ask poor people what poverty is like, and they typically talk about fear, humiliation and ill health, at least as much as money. But can the non-income dimensions of poverty be measured in a way that allows policy makers to weigh priorities and allocate resources? If not, the danger (as often happens) is that decision makers and documents initially nod towards the many dimensions of poverty, but by paragraph two, you’re back in $ per day territory. And all too often, in policy terms, if it can’t be measured, it gets ignored.

The Oxford Poverty and Human Development Initiative (OPHI) has been working for years to try and develop such metrics, and they recently launched the ‘Multidimensional Poverty Index’ (MPI), which will feature in this year’s UNDP Human Development Report, celebrating its 20th anniversary. I’ll briefly summarize it here, before unleashing an exchange of guest blogs between the World Bank and OPHI.

The MPI brings together 10 indicators of health (child mortality and nutrition), education (years of schooling and child enrolment) and standard of living (access to electricity, drinking water, sanitation, flooring, cooking fuel and basic assets like a radio or bicycle). It’s thus a logical extension of its predecessor, UNDP’s pioneering Human Development Index, launched in the first Human Development Report back in 1990, which combined life expectancy, education (literacy + enrolment rates) and GDP per capita.

What were the results when they crunched the numbers? Here’s the blurb from the launch press release:

“OPHI researchers analysed data from 104 countries with a combined population of 5.2 billion (78 per cent of the world total). About 1.7 billion people in the countries covered – a third of their entire population – live in multidimensional poverty, according to the MPI. This exceeds the 1.3 billion people, in those same countries, estimated to live on $1.25 a day or less, the more commonly accepted measure of ‘extreme’ poverty.

The MPI also captures distinct and broader aspects of poverty. For example, in Ethiopia 90 per cent of people are ‘MPI poor’ compared to the 39 per cent who are classified as living in ‘extreme poverty’ under income terms alone. Conversely, 89 per cent of Tanzanians are extreme income-poor, compared to 65 per cent who are MPI poor. The MPI captures deprivations directly – in health and educational outcomes and key services, such as water, sanitation and electricity. In some countries these resources are provided free or at low cost; in others they are out of reach even for many working people with an income.

Half of the world’s poor as measured by the MPI live in South Asia (51 per cent or 844 million people) and one quarter in Africa (28 per cent or 458 million). Niger has the greatest intensity and incidence of poverty in any country, with 93 per cent of the population classified as poor in MPI terms.

Even in countries with strong economic growth in recent years, the MPI analysis reveals the persistence of acute poverty. India is a major case in point. There are more MPI poor people in eight Indian states alone (421 million in Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh, and West Bengal) than in the 26 poorest African countries combined (410 million). The MPI also reveals great variations within countries: Nairobi has the same level of MPI poverty as the Dominican Republic, whereas Kenya’s rural northeast is poorer in MPI terms than Niger.”

My views on all this (largely stolen from my colleague Claire Hutchings)? It’s a step forward on the previous Human Development Index, but only a limited one. There are still many facets of poverty that it doesn’t touch on, such as conflict, personal security, domestic and social violence, issues of power/ empowerment, or intra-household dynamics. This is partly because it still relies on existing data sets, focusing on how to use differently the data we are already collecting, rather than proposing/ starting from a fresh conceptual framework on critical dimensions of poverty. That makes the proposal more practical, but less radical.

The comparison of extreme income poverty scores vs multidimensional poverty scores is interesting (see chart – the bar is the MPI score, the line is the income poverty score) – it would be great to see further research into possible explanations for the divergences, such as the role of social services and social protection- both formal and informal, and the potential implications for policy development.

Another advantage for policy development and assessment is that this index responds more rapidly than income to different policy interventions. A child feeding programme or scrapping user fees will have an immediate impact, whereas it may take years for government policies to filter through into income stats.

Great that it’s all open source – as with all measures there is scope to choose the mix of indicators to back up your particular argument, but at least making this data open source allows other people to challenge your analysis.

Finally, while it does allow for comparisons of groups within countries it is still a very aggregate picture, designed primarily to enable comparisons between countries.

See here  for a nice interactive map, and check out the coverage in the FT and Guardian

UN Women: the United Nations gets its act together on gender

One of the things undermining the effectiveness of the UN’s work on gender issues has been the lack of a single agency with responsibility for the subject. Now, after years of difficult negotiations, the U.N. General Assembly has voted to set up a body that will seek to improve the situation of women and girls around the world. The new body will be known officially as the U.N. Entity for Gender Equality and the Empowerment of Women,  although thankfully officials say it will be referred to as U.N. Women (website here). It will consolidate four separate U.N. divisions now dealing with women’s and gender issues.

According to the website: “UN Women will have two key roles: It will support inter-governmental bodies such as the Commission on the Status of Women in their formulation of policies, global standards and norms, and it will help Member States to implement these standards, standing ready to provide suitable technical and financial support to those countries that request it, as well as forging effective partnerships with civil society. It will also help the UN system to be accountable for its own commitments on gender equality, including regular monitoring of system-wide progress.”

U.N. diplomats said four years of negotiations between Western developed nations and developing countries, many of them states where women are often discriminated against, had been tough because of varying views on women’s rights and gender equality. A new post of under-secretary-general will be created to head U.N. Women, with diplomats saying privately that former Chilean President Michelle Bachelet (right) is one of the top candidates. U.N. Women will become operational on January 1, 2011.

Update: oops, missed this comment from elsewhere in the Oxfam machine. Luckily, it looks like I’m on message:

‘Oxfam reaction to the establishment of a single UN gender equality entity: Daniela Rosche, lead of Oxfam’s campaign in support of the new entity said:

“Oxfam welcomes the establishment of the new UN gender quality entity. A single UN gender equality entity is critical for women everywhere, and especially for women in the poorest countries.”

“However, the proposed mandate of the new entity was compromised during the negotiations. For example, the GA has missed out on the opportunity to strengthen the accountability of the UN system for its gender mainstreaming responsibilities. It remains to be seen if the entity’s mandate and structure, which have been agreed yesterday, will be powerful enough to ensure it has a positive impact on women’s lives”.

“UN member states’ decision to involve civil society organizations and women’s organizations in particular, in the work of the new entity is promising. Issues of women’s rights, gender equality and development are far too complex for any organization to solve alone. Unless women’s rights advocates can bring the perspectives of women to the table, it is doubtful that the new entity will be successful.”

“Much will depend on the leadership of the new Under-Secretary-General who will soon be appointed to lead the new entity. Despite earlier promises by UN Secretary General Ban Ki-moon, the recruitment process for this post is happening behind closed doors and has left civil society completely in the dark. We call upon the Secretary General to make this process transparent as a matter of urgency.”

What happens when negotiations fail to prevent 2 million deaths? Not much, apparently

Suppose weapons of mass destruction had taken 2.1 million lives over the last three years. International diplomacy would surely be at fever pitch, the UN would be in constant session, leaders would be shuttling to and fro trying to bring a halt to the slaughter.

Wrong. Conventional arms have, directly or indirectly, killed that number of people, and yet international talks on an Arms Trade Treaty, which kicked off in December 2006, are stuck in the slow lane. As Jan Egeland, Former UN Under Secretary General for Humanitarian Affairs writes in the foreword to a new Oxfam report by my colleague Ed Cairns, published today:

‘They will tell us, again and again, that it cannot be done. That the proliferation of conventional weapons cannot be controlled through a global negotiated effort. That we have to live with automatic guns and other weapons of mass misery traveling from conflict to conflict, without effective controls, with a trail of death and destruction among defenceless civilians.

I remember the same was said when the efforts to curb the scourge of landmines and cluster bombs started. But like-minded governments and civil society made inter-governmental agreements possible that may signal the beginning of the end for those horrific types of arms.’

The decision to begin work towards the ATT marked the recognition by a majority of nations that the current patchwork of laws, regional agreements, and embargoes is ineffective, and insufficient to limit the catastrophic effects of easily available weaponry. It was a moment of hope, promising that an ATT would follow in the footsteps of the 1997 landmines ban treaty or the Convention on Cluster Munitions, (signed in 2008 after just two years of negotiations). Three years on, and governments face a stark choice. move to formal negotiations and actually agree a treaty that will save lives, or stay in the slow lane while thousands more people die from conventional arms fire.

Clearly, the ATT won’t end all those deaths, but it would definitely help restrain the kinds of arms sales that fuel war, for example transfers of arms and ammunition to Chad by France, Israel, and Serbia since 2006, including the reported transfer from Serbia in 2006 of 48,610kg of cartridges worth around $900,000, despite the substantial risk of diversion to armed groups. The risk of diversion was apparent at the time of the transfer: in January 2006 the UN Panel of Experts on Sudan reported that Darfuri armed opposition groups ‘have continued to receive arms, ammunition and/or equipment from Chad’, and in 2007 the UN Panel proposed that the UN Security Council impose an arms embargo on eastern Chad. Some of these Israeli and Serbian weapons were indeed diverted.

Every conflict is unique. Every lawless city or region needs its own solution. But one universal route to reducing armed violence is to control the flows of weapons and ammunition in circulation around the world. For more info on the arms trade treaty, visit the Control Arms Campaign website.

The UN lays into finance, speculation and the IMF: UNCTAD’s Trade and Development Report 2009

Another day, another UN report, this time the Trade and Development Report 2009, from the UN Conference on Trade and Development (UNCTAD), released last week. It’s surprisingly forthright. Set up in 1964, in the table-thumping days of the New International Economic Order, in recent years UNCTAD had become markedly more cautious, not least under its current secretary general, the distinctly un-fiery Supachai Panitchpakdi, (a former WTO boss). The global crisis seems to have changed all that. Some excerpts from the overview (italicised subheads are my attempt at a summary):

The origins of the crisis lie in financial deregulation:

‘Policymakers also failed to draw lessons from the experiences of earlier financial crises. Like previous ones, the current crisis follows the classical sequence of expansion, euphoria, financial distress and panic….. What makes this crisis exceptionally widespread and deep is the fact that financial deregulation, “innovation” of many opaque products and a total ineptitude of credit rating agencies raised credit leverage to unprecedented levels. Blind faith in the “efficiency” of deregulated financial markets led authorities to allow the emergence of a shadow financial system and several global “casinos” with little or no supervision and inadequate capital requirements.’

Speculation is driving commodity price volatility and needs to be curbed:

‘It is true that deteriorating global economic prospects after September 2008 dampened demand for commodities; but the downturn in international commodity prices was first triggered by financial investors who started to unwind their relatively liquid positions in commodities when the value of other assets began to fall or became uncertain. And the herd behaviour of many market participants reinforced such impulses. Financial investors in commodity futures exchanges have been treating commodities increasingly as an alternative asset class…. In order to improve the functioning of commodity futures exchanges in the interests of producers and consumers, and to keep pace with the participation of new trader categories such as index funds, closer and stronger supervision and regulation of these markets is indispensable. In the first half of 2009, commodity prices rose again, reflecting the return of financial speculators to commodity markets, which appears to have amplified the effects of small changes in market fundamentals.’

Developing country governments have responded well to crisis, but the IMF is holding them back:

‘A number of developing and transition economies also launched sizeable fiscal stimulus packages. On average, their size was even larger than those of developed countries: 4.7 per cent of GDP in developing countries and 5.8 per cent in transition economies, extending over a period of one to three years. The authorities in China were quick to announce a particularly large fiscal stimulus plan, amounting to more than 13 per cent of GDP…. By contrast, some developing and transition economies have had to turn to the International Monetary Fund (IMF) for financial support to stabilize their exchange rates and prevent a collapse of their banking systems. IMF lending has surged since the outbreak of the current crisis, extending to nearly 50 countries by the end of May 2009. However, the scope for expansionary policies to counter the impact of the crisis on domestic demand and employment has been severely constrained by the conditionality attached to IMF lending….. Several announcements were made to the effect that the IMF would recognize countercyclical policies and large fiscal stimulus packages as the most effective means to compensate for the fall in aggregate demand induced by debt deflation. However, in reality, the conditions attached to recent lending operations have remained quite similar to those of the past. Indeed, in almost all its recent lending arrangements, the Fund has continued to impose procyclical macroeconomic tightening, including the requirement for a reduction in public spending and an increase in interest rates.’  

A debt moratorium is needed to avert a new debt crisis:

‘The fallout of the global economic crisis is impairing [low income countries’] ability to service their external debt without compromising their imports…. A temporary moratorium on official debt repayments would allow low-income countries to counter, to some extent, the impact of lower export earnings on their import capacity and government budgets. Such a moratorium would be in the spirit of the countercyclical policies undertaken in most developed and emerging-market economies…. the total amount of such a temporary debt moratorium would be modest, amounting to about $26 billion for 49 low-income countries for 2009 and 2010 combined.’

Financial integration needs to be reconsidered, and the IMF should actively encourage the use of capital controls:

‘The realization that in a globalized world “shocks” emanating in one segment of the financial sector of one country can be transmitted rapidly to other parts of the interconnected system raises some fundamental questions about the wisdom of global financial integration of developing countries in general. The experience with the current financial crisis calls into question the conventional wisdom that dismantling all obstacles to cross-border private capital flows is the best recipe for countries to advance…. Assertions that capital controls are ineffective or harmful have been disproved by the actual experiences of emerging-market economies…. the IMF should more actively encourage countries to use, whenever necessary, the introduction of capital controls as provided for in its Articles of Agreement.’

The TDR also calls for a new international exchange rate system and reserve currency to replace the dollar, a role that could perhaps be played by the IMF’s ‘special drawing rights’ (SDRs). In a short additional section on climate change (every report needs one), it comes up with the new (to me) idea of extending the use of compulsory licensing for climate-friendly technologies, allowing governments to override patents (as they currently can in public health emergencies).

Did you notice last week’s UN Conference on the crisis? Thought not…..

In the end the UN Conference that considered Joe Stiglitz’s Commission’s report on the crisis was even more underwhelming than I predicted (given the chaotic preparations, which included a last minute postponement). Only 14 heads of state attended, 10 of them from Latin America; most of Stiglitz’ recommendations bit the dust (e.g. his proposal for a new Global Economic Council); press coverage was minimal and the resulting communiqué was littered with ‘best endeavours language’ that commits countries to precisely nothing – lots of ‘we encourage’s and ‘shoulds’, but precious few ‘shalls’ or ‘wills’ (for tips on reading communiques see here). But at least they agreed on a text, which at one point seemed far from certain.

The UN may be chaotic, slow and often frustrating but it has one thing the G20, G8 etc will never have – the legitimacy that derives from being the G192 of all the world’s countries, including the poorest ones that are usually absent from the more exclusive gatherings. So let’s indulge in a little straw-clutchism and accentuate the positive in what the conference agreed [numbers in brackets refer to paras in the communiqué]:

The plight of the poorest countries was squarely at the top of the agenda, with a call for them to get a ‘larger share of any additional resources’ [14], both from bailouts and long term financing.

In very general terms it recognized the systemic nature and depth of the crisis: ‘many of the main causes of the crisis are linked to systemic fragilities and imbalances…. Regulatory failures, compounded by over-reliance on market self-regulation, overall lack of transparency, financial integrity and irresponsible behaviour, have led to excessive risk-taking, unsustainably high asset prices, irresponsible leveraging, and high levels of consumption fuelled by easy credit and inflated asset prices.’ [9]

It kicked a few cans down the road, rather than abandoned them altogether, agreeing to set up a working group to report back to the next General Assembly [54], and called on that meeting to make the impact of the crisis on development its main theme. Many more leaders will be present then.

On corruption, the UN said ‘we urge all States that have not done so to consider ratifying or acceding to the UN Convention Against Corruption and call upon all States parties to vigorously implement the Convention.’ [19]

Some positive new language (compared to the G20, for example) on conditionality [17], avoiding protectionism [12], resisting discrimination against migrant workers [27], policy space [18], additional resources for social protection [22], greening development [32], debt standstills [15] and new issues of Special Drawing Rights [35] (SDRs are IMF funny money – what Paul Collier calls ‘global quantitative easing’).

Generally, the communiqué was about mood music rather than specifics – there were no new numbers on aid in sharp contrast to the G20 communique. But sometimes mood music matters in setting future agendas.

After a reported stand-off between the US and China, a very watered down version of Stiglitz’ proposal for a new global reserve currency struggled into the final text – check this out for a classic example of best endeavours language: ‘We acknowledge the calls by many states for further study of the feasibility and advisability of a more efficient reserve system, including the possible function of SDRs in any such system and the complimentary roles that could be played by various regional arrangements.’ [35] Weak language perhaps, but it’s a big deal and it’s still in play.

The challenge now is to build on the good bits, between now and the next UN General Assembly, which takes place in New York from 22 September – 2 October, coinciding with the rather shorter G20 Pittsburgh Summit (24-25 September).

latest on global crisis from UN: poverty to rise by 73-103 million by end 2009

The UN issued an update of its ‘World Economic Situation and Prospects 2009′ last week, with some pretty gloomy downward revisions. Headlines:

At least 60 developing countries (out of 107 for which they have data) will suffer a fall in per capita incomes this year, while only 7 will grow fast enough to reduce poverty (compared to 69 countries in 2007 and 51 in 2008)

Absolute growth (i.e. not per capita) will be negative in sub-Saharan Africa (-0.1%) and Latin America (-1.9%) – see table. The Africa figure in particular is a lot worse than the IMF’s projection a month earlier of +1.7%. When the initial UN report came out at the start of the year, it was still predicting +4.8% growth for SubSaharan Africa for 2009.

What does all this mean for poverty? By the end of this year, between 73 and 103 million more people will remain poor or fall into poverty compared to what pre-crisis growth would have produced. Most of these will actually be in South Asia (see table). The UN says this figure is likely to be an underestimate, as it does not take into account the impact of the crisis in increasing inequality within countries.

So forget all that stuff about green shoots, when it comes to poor countries, every revision is still downwards – when will they turn the corner?

The report calls for action in four major aras:

- sort out the banks in developed countries

- coordinating the size and timing of the various national fiscal stimuli better will produce significant benefits for global recovery, especially for the poorer countries

- the report’s authors back much of the Stiglitz Commission’s recommendations on reforming the international financial architecture, (no surprise as some of them served on the Commission!) including action on tax havens,  an international mechanism for sovereign debt restructuring, and a new global reserve system to replace the dollar.

- ‘fundamental reform’ of the Bretton Woods institutions (IMF, World Bank etc) and a greater role for the UN

Big UN conference on the global crisis is postponed – why?

At the last minute, the UN has postponed its ‘Conference on the World Financial and Economic Crisis and its Impact on Development’ from 1-3 June to 24-26th June, still in New York. This will allow it time to sort out the draft conclusions and try and convince a respectable number of world leaders to attend.

The process for arriving at an ‘outcome document’ for the meeting has been, to put it kindly, chaotic. First Joseph Stiglitz’ Commission of Experts released their recommendations in March (see my post here). The second, 111 page draft is now up on the UN website (haven’t had a chance to read that yet). Then Father Miguel d’Escoto, the President of the General Assembly (and former Sandinista Foreign Minister), produced a draft outcome document that went so much further than Stiglitz (e.g. it proposed establishing 8 new global institutions – enough to make any international negotiator blanch) that it caused uproar.

Now there’s a second, much watered-down draft, half the length of the first draft, vague on detail and sidelining many of Stiglitz’ proposals. Officially, it has been jointly drafted by Fr d’Escoto and the conference ‘co-facilitators’, the Netherlands and St Vincent and the Grenadines, but it bears little resemblance to d’Escoto’s earlier draft.

The overall tone shifts away from Stiglitz’ repudiation of the IMF and his call for it to be replaced by the UN (always likely to be an uphill task given the central role already handed to the IMF by the G20, backed up with an extra $500bn). Instead, the new draft seeks to secure a louder and more coordinated UN voice in the response to the crisis, along with improved coordination between the UN and the IFIs. Given where we are right now, and the need for rapid action to ease the development impact of the crisis, that probably makes sense.

The only big idea from the Stiglitz Commission to survive more or less unscathed into the new draft text is the proposal for a new ‘Global Economic Council’, which would ‘provide coordination and oversight of concerted responses in addressing the broader range of global challenges’. i.e. an economic version of the UN Security Council which, if fully implemented, would give the UN a much greater role in global economic governance.

Otherwise, Stiglitz’s proposals for a new Global Reserve Fund, Global Financial Regulatory Authority and a Competition Authority are kicked into the long grass of seven proposed ‘ministerial and technical level working groups’. Father d’Escoto’s Global Public Goods Authorities and Global Tax Authority disappear without trace.

Fr d’Escoto has called on UN members to finalise the text by 15 June – let’s see if it’s watered down further or toughened up by then (don’t hold your breath - negotiations don’t usually produce a stronger text!)

All the drafts for the meeting can be found here.

Update 9 June: A Reuters piece on the blame game surrounding the summit