Financing sustainable human development: preliminary, random, and provocative reflections

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Financing sustainable human development
preliminary, random, and provocative reflections

• Gabriele Köhler
• Stockholm School of Economics
• Riga, 21 October 2002

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The scene

• All Governments and agencies are rallying around
  sustainable human development (SHD) and the
  Millennium Development Goals (MDGs)

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The dilemma

• My contention somewhat exaggerated, so as to
  overcome complacency
• We have a post-modern, agnostic,
  non-committal consensus
• In truth, we are skirting the issue - how to
  finance these goals?
• There are competing demands that require painful
  choices
• within the status quo there are limited means.

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The obvious financing needs

• Income poverty and inequality
• Public expenditure needs in each country
• Global public goods

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For examplePersonal income inequality
Source UNDP, Human Development Report 2002
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Public spending needs

• Economic infrastructure prerequisite to economic
  development/growth.
• Transport and communications (in the IT sense)
• High tech and pioneer RD
• Industrial parks incubators
• Social infrastructure
• Education for all levels of skills for lifelong
  learning
• Health as a human right and as a prerequisite to
  productivity

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And now The millennium challenge

• Sustainable human development (SHD)
• a notion championed by UNDP in its
• Human Development Reports
• Operationalised in 2000 as the millennium
  development goals (MDGs)

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The Millennium development movement

• MDGs now accepted
• First by Summit of World Leaders
• UN General Assembly 2002
• Adapted by agencies
• UN
• UNDP. UNDP as lead agency for this.
• Since Monterrey Conference on Financing for
  Development and 2002 Development Committee
• Accepted by IFI as well as by business

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THE 8 UN MILLENNIUM DEVELOPMENT GOALS

• Eradicate extreme poverty and hunger
• Achieve universal primary education
• Promote gender equality and empower women
• Reduce child mortality
• Improve maternal health
• Combat HIV/AIDS, malaria and other diseases
• Ensure environmental sustainability
• Develop a global partnership for development

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The costs of meeting the MDGs

• Minimum Estimates range between US 40-60
  billion a year in additional aid (World Bank,
  UNESCO, World Health Organization)
• Some estimates go up to US 100 billion per
  year- this is less than 1 of the global annual
  income but double current ODA flows
• Cost estimates depend in part on the efficacy of
  countries domestic policies

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  Rough estimates of additional aid finance
requiredUS billion annuallyminimum estimates
by issues

•   Halving poverty and hunger......................
  ....................................20
• Halving population without access to safe
  drinking water.............0
• Achieving universal primary education...........
  ..............................9
• Achieving gender equality in primary
  education...........................3
• Achieving three-fourths decline in maternal
  mortality...................n/a
• Achieving two-thirds decline in under-five
  mortality......................n/a
• Halting and reversing HIV/AIDS..................
  .................................7-10
• Providing special assistance to AIDS
  orphans.............................n/a
• Improving lives of 100 million slum dwellers
  ................................4
• Total cost
  50
• Source Zedillo Report, Financing for Development
  Summit, Monterrey, 2002
• n/a indicates no estimate available and  the
  total includes allowance for these headings  

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An excursion financing development - historys
see-saw

• Bretton Woods Institutions and UN in 1944/5
• halfhearted attention to social expenditure
• 1st UN development decade (1960s) recognition
  of the urgency of promoting capital flows to
  developing countries
• 1974 New international economic order
  acknowledgement of need for global redistribution
• Structural adjustment policies of the World Bank
  in the 1980s no attention to social impact

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The changing discourse on financing development
the see-saw again

• UNICEFs critique of World Bank/IMF structural
  adjustment policies (late 1980s)
• UNDP Human Development Reports (since 1990) need
  to monitor human - social - progress
• 20/20 decisions of the World Social Summit
  1995
• 20 of ODA and 20 of domestic government
  budget for
• social expenditure
• The aim of the Summit was to move beyond a
  conversation solely about aid and development
  cooperation toward a broader discourse rooted in
  the recognition that poverty, unemployment, and
  social integration are shared challenges for rich
  and poor countries alike.
• Juan Somavia, spiritus rector of the Social
  Summit

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And the see-saw againReal world constraints in
the 1990s

• Real economy fear the twin deficit pandemic
• Ideology Austerity fixation - the triumph of
  neoclassical economics in the 1980s
• Real politics I pressure from the international
  lending agencies for poor countries to be prudent
• Real politics II rich countries facing economic
  decline resistance to ODA tax resistance
• Real politics III Maastricht criteria on EC
  members budget deficit ceilings (max 3 of
  GDP)

declared choice for fiscal austerity
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But just now stupid Maastricht criteriathe
see-saw again?

• Romano Prodi, president of the European
  Commission, has remarked that the economic rules
  underpinning Europe's single currency the
  Maastricht criteria -  are "stupid".
• His arguments are
• the pact should be applied intelligently
• it should take account of the economic realities
  of our economies
• rigidities are stupid.
• (based on Financial Times 18 and 19/20 Oct 2002)

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What are the options?

• At the level of individual countries and
• Internationally

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Finding resources in the government budget the
options

• raising revenues
• improving efficiency of the expenditure without
  changing its composition
• shifting spending from military and other
  non-productive areas to social expenditure
• deficit spending
• shifting the financial burden to the future
• AND stimulating demand, hence raising future
  revenue

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Government Commitments to Human Development, some
examples
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Finding resources in the macro-economy and
internationally the options

• Increasing trade revenues
• Foreign direct investment (FDI)
• Official development assistance (ODA)
• Domestic and external loans

21
UNDP, Human Development Report 2002
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??? ??????? Some tactics

• Instrumentalising the MDGs to pressurise
  governments and donors
• Mobilise pressure groups
• Mobilise business
• Find creative sources of finance
• Change public discourse and blinkered thinking

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Creative solutions one idea

• Creating a new international tax base? For
  example Tobin Tax on currency trade or capital
  movements, airfares, gasoline
• Tax of 0.1 capital gains would result in an
  estimated 100 - 300 billion of additional
  yearly revenue

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Outlook

• The UN must help define a consensus in the social
  field
• that investment in people is not a cost to
  society but one of its most remunerative
  investments
• that equity and social justice do not hamper
  growth but stimulate it that equality of
  opportunity is a human right and not a concession
  to be dispensed by the powerful and
• that the state and the market are both essential
  to address social needs.
• Juan Somavia, ILO
•