Paying for Zero: A new global vision for sustainable development

forumblog.org, Mar 7th 2014

When the Millennium Development Goals (MDGs) were first established nearly 15 years ago, the half-joke reminder among global health experts was that they needed to replace the “M” with a “B” when talking about financing – meaning the solutions required budgets in the order of billions rather than millions of dollars. Today, as the MDGs approach their 2015 deadline and the world negotiates a new global vision for sustainable development, the time has come to shift mindsets from “B” to “T”, since the next frontier is talking about trillions of dollars in required investment throughout the global economy.

To that end, members of the Global Agenda Council on Poverty and Sustainable Development have this week released a report distilling key financing challenges to be addressed in establishing a new generation of global development goals. The report, Paying for Zero: Global Development Finance and the Post-2015 Agenda, stresses the crucial complementary roles and opportunities for public, private and “blended” finance at the domestic and international levels. The word “zero” is used to signal a broad theme of transformation for sustainable development: eliminating extreme poverty, eliminating the most pernicious forms of inequality, and eliminating environmentally unsustainable economic activities.

Stressing ongoing generational shifts in the global development landscape, the report argues that ambitious post-2015 goals will require accompanying ambition and innovation in development finance.Watch Full Movie Online Streaming Online and Download

The conclusions tackle a wide range of issues, including:

  • Development finance will increasingly be integrated across types. Flows from public finance will need to leverage additional private finance, and all forms of finance will need to adhere to common standards of transparency, measurement and reporting.
  • As many developing countries continue to make long-term economic gains, the process of graduation from official development assistance (ODA) needs very careful consideration. For example, emerging lower-middle-income countries, especially those with large numbers of extreme poor, should not face a stark drop-off in access to external finance.
  • It is crucial that the international community place special emphasis on protecting and enhancing properly-targeted ODA budgets. These will need to prioritize the poorest countries and programmes that most effectively reduce poverty. But even with complete success in eliminating extreme poverty by 2030, ODA will continue to play a crucial role tackling many deep global priorities through to 2030 and beyond.
  • Improving the capacity of developing countries to mobilize their own resources should be an important element of ODA, without imposing unwanted conditionalities.
  • Greatly enhanced instruments are needed to incentivize the amount and nature of required private finance post-2015. Big ticket investments in infrastructure, energy and agriculture will all require some degree of blending between public and private sources.
  • Many of the infrastructure investments for sustainable development will be the same ones that determine the future of the world’s climate change mitigation and adaptation efforts.

The report’s release coincides with this week’s meetings of both the Intergovernmental Committee of Experts on Sustainable Development Financing and the Open Working Group on Sustainable Development Goals at the UN Headquarters in New York. The Global Agenda Council on Poverty and Sustainable Development brings together a variety of eminent leaders and practitioners from public, private and non-profit sectors around the world.  An earlier draft of the paper was circulated for public comment in January.

Author: John McArthur is a Senior Fellow at the United Nations Foundation and a visiting fellow at the Brookings Institution. He is a World Economic Forum Young Global Leader and chair of the Global Agenda Council on Poverty and Sustainable Development.

Image: People walk past closed shops in a slum in Rio de Janeiro, Brazil, May 23, 2013. REUTERS/Pilar Olivares.

 

How Much Aid for Basic Needs to 2030? Some Very Coarse Numbers

Brookings – Opinion | February 6, 2014

Amidst the growing global consensus around a target of “zero” extreme poverty for 2030, there is renewed debate around the role of official development assistance (ODA) and how much will be required to achieve the goal. The ideal way to assess this question would be through country-specific, bottom-up costing assessments that account for general equilibrium price dynamics and allow for the possibility of shocks, whether positive (e.g., technology) or negative (e.g., conflict or fuel price spikes). In the absence of such rigorous scenario-based analysis, some back-of-the-envelope calculations help inform the approximate orders of magnitude of aid required.

Two conceptually distinct approaches can help inform deliberations on the issue:

  • The first is to estimate the cost of essential services for extremely poor people and the amount of public expenditure required to finance them.
  • The second is to estimate the dollar value of the extreme poverty gap, i.e., the amount of transfers theoretically required to bring each person in the world up to a living standard of $1.25 a day.

1. Essential Services Budget GapWatch movie online The Transporter Refueled (2015)

A budget gap for basic services can be estimated through some simple arithmetic. Assume the following:

(1) A full package of basic public services for health, education, infrastructure, agriculture and public administration costs $200 per capita per year, including roughly $100-140 for Millennium Development Goal-type public investments (in line with the bottom-up estimates of the U.N. Millennium Project, 2005). [Read more…]

Can we slash poverty and starvation by 2015? Yes, if we get to work [op-ed]

Go to the Globe and Mail homepage

JOHN MCARTHUR

Wednesday, September 25, 2013


If global development targets followed a National Football League format, we would be approaching the two-minute warning. December 31, 2015, marks the final deadline for the Millennium Development Goals, the global anti-poverty targets that have mobilized an unprecedented generational success in tackling extreme poverty around the world, most notably the burdens of disease in the poorest countries. We are now facing the final moment to bend the relevant curves of progress. For decision makers, 2013 is the real 2015. [Read more…]

Asia’s local leaders could play key role in global accountability [op-ed]

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John McArthur says input on social, economic and environmental issues will be vital. 

Monday, 12 August, 2013

The 2008 global financial crisis instigated a cascade of events that still frame many of the world’s foremost political tensions. Simmering beneath the daily headlines lie protracted disputes over which private and public actors caused the problems, and thus who should now pick up the tab.

The scope of debate is enormous, but it likely pales next to the consequences of other global problems like climate change, ocean acidification, air pollution, and even income inequality. Like the financial crisis, these issues call attention to the need for new notions of global accountability across public and private sectors. Much of the resolution will hinge on finding a workable path in Asia.

The Need for a New Canadian Conversation on Foreign Aid

I have a new post at OpenCanada.org, the first of a 3-part series that aims to help kick start a new Canadian conversation around how the country approaches foreign aid over the coming generation.  Please feel encouraged to share comments directly!

New-Conversation

Canada’s foreign aid conversation is lost.  The recently announced merger of CIDA into the Department of Foreign Affairs and International Trade prompted a spate of agitated commentary across the country.  But the public debates underscored the extent to which an institutional tail is wagging the policy dog.  The issues to be resolved are much more fundamental than problems of bureaucratic org charts.  They require systematic and robust thinking, rather than the loose commentary commonly trotted out during moments of sporadic media debate.

Most significantly, there is one central question that needs to be flipped on its head.  Instead of becoming stuck in the supply-driven query, “How should Canada’s foreign aid structures be improved?” the country needs to start with a demand-driven approach, mapping out the nature and scale of the global development challenge, and then asking how Canada can best organize itself to help to tackle the problems at hand.

To that end, this post marks the start of a three-part series.  To help set the stage, below we start by unpacking some of the most common misconceptions around foreign aid.  The second installment provides some historical context for the current debates, and some recent assessments of global need.  The third proposes a way forward, not just for the Canadian government, but for the range of key constituencies that will be essential for moving Canada’s national development strategy forward.

 

[Read more…]

Globe and Mail: Importance of African Agriculture for Ending Extreme Poverty

Yesterday The Globe and Mail published a short piece I recently wrote on the importance of boosting African smallholder agriculture as a key element of any global effort to end extreme poverty.  The Globe ran the piece under the title, “To end poverty worldwide, fix African agriculture first.”  This reproduced a post I wrote originally for the ForumBlog a couple of weeks ago, under the title “Ending extreme poverty in Africa by 2030.”  Full text pasted below.

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To end poverty worldwide, fix African agriculture first

The public chorus to eliminate extreme poverty by 2030 now includes US President Barack Obama, World Bank President Jim Yong Kim and Bono. The backdrop is extremely promising since the developing world has already cut the share of people living below US$1.25 a day by half since 1990. At a consistent rate of progress, the other half could well cross the line in another 20 years too.

But, as my colleague Laurence Chandy and Brookings co-authors have recently pointed out, the distance to crossing the US$ 1.25 line varies tremendously by region. Most of China has already crossed the US$ 1.25 threshold and India has a huge share of its population poised to make the leap next. Sub-Saharan Africa has the farthest to go, despite recent progress, since a large proportion of its population still lives so far below US$ 1.25 per day, often at half that level of income.

Most of Africa’s poorest people live on small farms in rural areas, so those places will likely form the final frontier of the global quest to end extreme poverty. Although fast-growing cities have gained attention for their role in fighting poverty, including in the World Bank’s latest Global Monitoring Report, it is increases in rural productivity, especially agriculture, that are typically a fundamental driver of the urbanization process.Watch Full Movie Streaming Online and Download

There are grounds for optimism. Growing academic evidence highlights agriculture’s unique role in helping to reduce extreme poverty. For example, an important 2011 paper by economists Luc Christiaensen, Lionel Demery and Jesper Kuhl shows that agriculture is roughly three times more effective at reducing extreme poverty than non-agricultural sectors.

There has also been a global renaissance of attention on the need for an African Green Revolution, driven by both public and private investments in a manner that respects local community structures. The World Economic Forum’s Grow Africa initiative, which convened last week in Cape Town, offers a potential high-impact platform, bringing together investors and governments to launch practical joint strategies at scale.

Complementary investments in transport infrastructure, irrigation, farmer credit and input support systems (e.g. for fertilizer and seeds) were essential to Asia’s 20th century green revolutions that laid the foundation for that region’s subsequent economic breakthroughs. The same basic approach, updated for today’s social and environmental realities, can help to ensure Africa’s long-term economic success is equally, if not more, robust. The sooner the process starts, the faster the world gets to the finish line on extreme poverty.

An International Credit Facility for African Smallholder Staple Farmers

Early last year I wrote a 3-page concept note proposing “An International Credit Facility to Support Commercialization of African Smallholder Staple Crop Farmers”  This would be a mechanism to tackle the “missing rural middle” of African farmer finance.

It would target staple crop farmers, rather than cash crop farmers, who typically have much greater access to capital, for many reasons.  (It is also the same mechanism cited in a recent blog post for Rio+20.)

The basic idea is as follows:

A systematic financing mechanism is needed to address the “missing middle” of rural Africa, whereby smallholder farmers can coordinate to access “patient capital” loans of perhaps $25,000-$100,000 at a time. This mechanism should be focused on making capital available in the context of a broader ecosystem of business support and agricultural extension services that help farmers identify market opportunities based on agronomic comparative advantage, then develop business plans, introduce new farming techniques, and implement successful marketing programs. Importantly, the complementary services are not a substitute for the patient capital itself. The financing facility would focus on neither pure public subsidy nor pure private capital. Instead it would focus on covering the risk-adjustment component of private loans.

The cost would be roughly $5 billion per year of public finance to leverage roughly $25 billion per year of private capital.

I wrote this as an input to a working group that was chaired by Mthuli Ncube, chief economist of the African Development Bank, and which included people like Nancy Birdsall of CGD.  Everyone in the group seemed to support the idea, but in the busy-ness of life we didn’t have a chance to spend more time on it.  As a minimum step I thought it worth posting the note online here.