Wednesday, 26 June 2013

Inequality – A battle lost but a war won? A dissenting view

By Carlos Fortin

Claire Melamed's recent Guardian blog on the High Level Panel Report fairly sums up the reaction of many progressive commentators to the Report's treatment of the issue of inequality.
 
‘Inequality campaigners’- she writes – ‘seem to have lost the battle but won the war’.
The battle lost is about an inequality goal: the Report does not propose one. The war won is about a comprehensive approach to inequality and discrimination and their perverse effects on opportunities and poverty, an approach which, it is argued, the Report embraces.
  
I beg to differ on both points. On the battle lost, as Claire Melamed herself remarks, adopting a quantitative goal at this stage would raise tricky problems of measurement. The Gini index may well be –with apologies to Winston Churchill - the least worst measure of inequality, but it is still a pretty crude instrument, useful as a working tool but not to be elevated to yardstick for a major commitment of the international community. Not having a quantitative goal based on it at this point may perhaps not be that bad.

By contrast, I find the Report's approach to the analysis of inequality wanting. It missed an opportunity to bring in the vast amount of work, reflection and research on inequality that has taken place in the last fifteen years.  Its basic flaws, in my view:
  1. The Report still conflates the issue of inequality with the fight against poverty and the provision of a minimum standard of living for all. To be sure, poverty reduction and minimum living standards should be major objectives of international cooperation, and in most parts of the developing world they should probably take priority over most other goals. But they are different from inequality reduction  and, although they are of course related, they do not always move in the same direction.  To give just one example, close to my heart.  Post-Pinochet social democratic governments in  Chile were spectacularly successful in reducing poverty, from over 45% in 1989 to less than 15 % in 2009; but inequality - measured, of course, by the Gini index! - was barely reduced and today Chile is among the worst cases of income inequality in the world.
  2. The Report does not tackle the issue of the structure of inequality –the distance between the various levels of the socio-economic pyramid and its determinants. Instead it emphasises the need to make it possible for individuals to move up the pyramid: upward socio-economic mobility should be coupled with the elimination of de jure and de facto discrimination against specific groups. Again, highly valuable goals in themselves, but goals which can also coexist with high levels of inequality.
  3. The Report does not link inequality with the productive structure and the generation of the primary income distribution –before taxes and transfers. There is a welcome reference to the need to ‘transform economies for jobs and inclusive growth’ but this is quickly qualified by the suggestion that what is sought is for people to escape poverty and join the middle class; the potentially unequalising effects of the neoliberal development model and of developing countries' unbridled integration into the global economy – well documented in Chapter 3 of the the last UNCTAD Trade and Development Report - are simply ignored. 
  The war, I am afraid, is far from won.                                    
 




Thursday, 20 June 2013

Is there hope for a green transformation?

By Hubert Schmitz

Washout summers. Flash floods. Snow in May. Droughts.’ Such climate chaos leads meteorologists and climate scientists to meet this week and discuss the UK’s strange weather in recent years. Continental Europe has similar problems. Only last week, some 36,000 Europeans have had to flee their flood-ruined homes. How many incidents of climate chaos are needed to trigger meaningful action rather than mere talk? It would be easy to fall into deep pessimism about the prospects for sustainability.

Some Western countries (Denmark, Germany) have adopted green policies but overall progress has been small. Most of Western Europe and North America is politically paralysed and/or financially bankrupt. So Western leadership in the green transformation seems unlikely. Do the rising powers (India, China, Brazil) offer more hope? They certainly have more financial room to manoeuvre and they have used their capacity to invest and strengthen their own green sectors. For several years China has been the world’s No. 1 investor in renewable energy and India has had the highest recent growth rate. But they have also invested heavily in new coal-fired power stations. Thus, in spite of their big green investments, the rising powers are responsible for most of the recent increases in carbon emissions. Of course, the Western powers are responsible for most of the sins of the past. This struggle between the historic and current responsibilities is at the heart of the deadlock in global negotiations to reduce emissions.

Raising levels of investment and advancing collective action for the green transformation remains difficult at all levels: global, national and local. Progress is held back partly because the units of analysis are mis-specified. The debate continues to pitch rising powers against old powers, developed against developing countries, public against private sector, and civil society against the financial sector. This is not helpful. Actors supporting (and opposing) the green transformation can be found in each of these categories. The analytical and practical challenge lies in identifying and forging alliances across these divides. Such focus on alliances offers the best hope we have to accelerate the green transformation within West and East and across the divide.

This may sound like wishful thinking but what is being suggested here is the opposite: to bring realpolitik into the green transformation debate. To understand this we need to ask who can be considered a member of a transformational alliance. It is tempting to let motivation count and opt for alliances of the like-minded. But this would be a limiting step to take. There is a range of actors that can support the green transformation but their motives for doing so can differ greatly: mitigating climate change, securing energy, building competitive industries, fostering green jobs. In other words, alliances can include actors whose priority is not environmental sustainability. This can be a game changer in the dynamics of the transformation.

You can get a glimpse of this game changer in both European and Asian examples. In Denmark, the experimentation with wind energy received substantial support from politicians and business leaders concerned with energy security – in the wake of various oil crises. Civic actors with environmental motivations played a role at the start and increased over time but they were never sufficient. Government and business actors motivated by the chance to build a globally competitive wind energy hub have played a big role. In China, such alliances were equally if not more relevant. China’s massive investment in renewable energy was not driven primarily by concerns with global climate change but by concerns to secure energy and ambitions to build new competitive green industries.

The relevance of alliances is confirmed by the research of Harrison and Kostka (2012: 5) on the local politics of climate change in China and India. ‘In both countries the ability to build and sustain coalitions is central to the effectiveness and sustainability of climate change policy. For various reasons, state strategies in China and India have focused on the need to bring different parties with otherwise divergent interests on board to build a coalition in favour of climate mitigation measures’. Such bundling of interests seems critical.

Not convinced? Watch this new space – which focuses on the Green Transformation. Researchers at IDS and Sussex University and their partners in Germany, China and India are conducting research on the role of transformative alliances. There is a lot to be done. What drives us forward is the promise of a new approach which brings both more analytical power and new insights for moving forward.

Monday, 17 June 2013

Moving on from 'Northern chauvinism'? Traditional aid donors and rising powers

By Musab Younis

In recent years, a series of studies have looked candidly at foreign aid in the context of power, geopolitics and the domestic interests of donor governments.

Derek Fee’s How to Manage an Aid Exit Strategy brought a critique of growing aid dependence – which was seen as linked to the strategic interests of rich states, shoring up structures of dependency that had their origins in the late colonial era – to bear on a strategic vision for bringing about an 'aid exit'. Fee’s work built a number of critical analyses of aid which have emerged in the last five years, including Yash Tandon’s Ending Aid Dependence and Roger Ridell’s Does Foreign Aid Really Work?. These two studies, though they identify a common problem, represent quite different perspectives on the politics and power of aid.

Emma Mawdsley’s From Recipients to Donors recently drew our attention to the ways in which ‘emerging’ donors like India and Brazil, as well as ‘re-emerging’ donors like Russia, are weakening the authority of the OECD’s Development Assistance Committee. And influential studies like Deborah Brautigam’s The Dragon’s Gift have added much-needed nuance and evidence to the way that China’s aid to African states is talked about.

In this context – a new frankness about the purposes of aid and an increased willingness to apply rigorous analytical tools to the discussion of such aid – Rosalind Eyben’s new policy brief on the relationships between old and new donors makes for instructive reading. There now remains little doubt that the OECD’s hegemony on aid provision, otherwise termed development cooperation, is over.

As part of our programme on Rising Powers at IDS we’ve been running a series of seminars on this very topic: looking at how (and why) new donors like the BRICS are choosing to engage in the 'development' field.

Eyben’s brief, 'Building Relationships in Development Cooperation: Traditional Donors and the Rising Powers', is based on anthropological research conducted by scholars who attended key forums in which ‘old’ and ‘new’ donors have come into contact, particularly the various High Level Forums on Aid Effectiveness. As such, it gives us a valuable ethnographic addition to a body of writing on aid that tends to be dominated by either theoretical or hyper-empirical extremes.

Her key finding is that emotionally-charged identities matter in international discussions on aid, affecting how participants see themselves and how they are seen by others.

'Identity is fundamental to the notion of South–South Cooperation with its roots in the Third World and the Non-Aligned Movement from the Cold War,' she states. 'In contrast, traditional donors do not always recognise that they may be reaffirming their old imperialist identity when they block Southern-led initiatives.'

Eyben highlights the failed 2012 attempt by Northern states to limit the mandate of UNCTAD, a UN organisation that has traditionally been seen to represent a Southern voice. She suggests that such behaviour – what I think we can call ‘Northern chauvinism’ – is not only damaging to present North-South relations, but arcs back in the memories of some participants to a period of international relations in which vast populations were deemed flatly unworthy of participation in decisions.

That international discussions are imbued with historically-formed identities and perceptions is not a new concept in the academic study of international relations. However, there has been remarkably little discussion of it in the context of aid and development (Patty Gray’s work on Russia is a notable exception).

Rosalind Eyben’s key points relate not simply to finessing existing approaches in international forums. She makes a case instead for Northern governments seriously re-evaluating their approach to interactions at an international level. As such, this concise brief adds to a growing literature on North-South interaction – marked this year by Vijay Prashad’s superb study The Poorer Nations – in which a largely submerged history is beginning to be uncovered, with crucial implications for political practice.

Friday, 14 June 2013

What might the BRICS Bank mean for development?

By Stephen Spratt

On Wednesday this week I participated in an event hosted by the All Party Parliamentary Group for Debt, Aid and Trade, as part of the IDS Rising Powers in International Development Programme. We were asked to address the following question:
Will the BRICS Bank change development and shift the global balance of power?   
There are actually two questions here. In response to the second, it is clear that irrespective of what happens with the proposed bank, the emergence of the BRICS has already shifted the global balance of power in three important areas:
 
  • Economically, the BRICS have generated much of the global growth that we have seen since the crisis of 2007-8.
  • Financially, they are responsible for a rising proportion of global investment. China is the world’s largest investor in renewable energy, for example, and India is the fastest growing. South-South investment flows are an increasingly important aspect of globalisation.
  • Politically, the G8 has been replaced by the G20 as the pre-eminent political grouping at the global level.
Importantly, these power shifts have not been reflected in institutions like the World Bank and IMF. I will not dwell on the obvious unfairness of this, but simply note that Belgium has more IMF votes than Brazil. This is probably the main motivation behind the BRICS Bank: to create a development finance institution not dominated by developed countries.

This leads us to the first question: will the BRICS Bank change ‘development’? The honest answer is that we don’t know. We know little about how the bank will be structured, or what it will do.

So let’s change our question so that it can be answered:

What would the BRICS bank have to do to change development (and how likely is it that it will do these things)?

There are two ways that the BRICs bank could ‘change development’:
  • Directly - through the way it operates as a public, multilateral development bank.
  • Indirectly - through its impacts on the wider development industry.
For direct impacts, we need to clarify what development banks actually do before we can assess if the BRICS Bank will be different.  The three main functions are to:

(i) Lend to key sectors.
Commercial banks focus on the most profitable activities, but these are not always the things that matter most for the wider economy. Some key sectors, such as SME’s, are not particularly profitable. Lending small amounts to lots of small firms is far less appealing than lending large amounts to a few large firms. Infrastructure and agriculture are other key sectors that commercial banks tend to neglect.
 
(ii) Provide the right type of finance.
Infrastructure projects need long-term ‘patient’ finance. Commercial banks are very bad at providing this. They are also pro-cyclical, lending lots in good times but little in downturns. Development banks can offset this, providing lending when private finance dries up. They may also lend at below market rates when high social returns are achievable, but financial returns are low.
 
(iii) Consider the broader public good when taking decisions.
Lending for renewable energy production, for example, will rarely be the most profitable option, but is important for other reasons. Similarly, ensuring good wages are paid and human rights respected may not increase a project’s financial returns, but are important for the broader public good.  

While at this stage it’s not possible to be sure that the BRICS Bank would do these things differently from the World Bank, there are some indications that it might:

  1. For sectors the focus will be infrastructure, where there is a huge funding gap. The BRICS countries need $4.5 trillion of investment over the next 5 years; the infrastructure financing gap in Africa is $50 billion per year. Given its importance to development, an infrastructure focus is to be welcomed, particularly as existing MDBs have moved away from this in the past 10-20 years.
  2. For financing mechanisms, I would expect considerably more flexibility than we currently see.  Public banks in some BRICS countries have shown a greater willingness to provide concessional loans than the World Bank and RDBs. Some – such as in Brazil – also played an important counter-cyclical financing role in the 2007-8 crisis, and are the main sources of long-term finance. Importantly, the BRICS bank is likely to be less ideologically fixated on providing finance at market rates than current institutions.
  3. For the non-financial aspects of lending, we can be certain about one thing: World Bank style conditionality is not going to happen. On other important questions we can be less sure. For example: What say will local communities have in projects? What weight will be given to human rights and other social factors? Will potential projects’ real environmental impact be taken into account when taking decisions? How transparent will the Bank be in its operations?
On many of these questions – particularly the non-financial aspects of lending – the BRICS themselves hold different views. Just think of Brazil and Russia, for example. This means that the direct impact on development may be decided by which of the BRICS countries have the most say in how the bank functions. This is all about governance and mandate of course, which is where we know the least. We know the least because it matters the most. Given its economic weight, many expect China to have a big say in these questions, but compromise from all parties will be essential if the bank is to get off the ground. Negotiations are ongoing: there is much to play for.

When we have answers to the following questions, we will know more about the distribution of power within the BRICS bank, and its likely direct development impacts.

  • Will the BRICS provide capital in line with their economic weight, or equal amounts?
  • Will voting rights reflect these different contributions, or other considerations?
  • What say, if any, will non-BRIC countries have in the Bank’s activities?
  • How will be the Bank be financed beyond its initial capitalisation?
  • How broad or narrow will the bank’s mandate be in terms of countries, sectors, and potential financing instruments, including concessional finance?
  • What role will non-financial factors play in its lending decisions?
  • How will its performance be assessed?
Finally, the indirect effects of a BRICS bank are bound to be significant: the World Bank will have a serious competitor for the first time. If nothing else, this will force it to pay attention to what its customers want, and restrict the ability to impose its will. For an institution that has long pushed the merits of competition, there is a certain irony here.  
Stephen Spratt coauthored IDS Rapid Response Briefing "What next for BRICS Bank" with Musab Younis and Noshua Watson.
 

Wednesday, 12 June 2013

How much is the New Alliance doing for food security and nutrition?

By Ewan Robinson and John Humphrey

We are in the midst of some of the biggest weeks on the global food and nutrition calendar. Last weekend the Nutrition for Growth Summit announced new funding pledges and this week food and agriculture will be major priorities in discussions leading up to the G8 Summit. Much of the attention is being focused on how to work with the private sector, and the G8 ‘New Alliance’ is seen as the flagship programme for increasing private investment in agriculture and food.

Launched last year, the New Alliance has covered six African countries (a further three were announced over the weekend), and spells out roles for the G8 donors, African governments and 70 participating companies:
  • Donors promise to fund country agricultural investment plans.
  • African governments agree to implement policy reforms to encourage private investment.
  • Private companies, multinational and domestic, commit to investing in specific projects.
The initiative promises to lift 50 million people out of poverty by 2022, and leverage serious money: $3.75 billion in private sector investment, according to USAID.

How does the New Alliance link agriculture to nutrition?
There’s been lots of debate about the New Alliance. Donors have championed it, but African farmer and civil society groups and some international NGOs argue it is a form of aid conditionality. Whether the New Alliance investments will benefit small farmers is under scrutiny (see a recent report by CIDSE). But alongside this debate, very little has been said about how the New Alliance might stack up against two of its headline goals: food security and nutrition.

The Alliance sets goals to increase agricultural investment and promises to coordinate with ongoing nutrition activities. But increased agricultural production or incomes does not necessarily improve nutrition. So, do the investments look like they will make nutritious foods more accessible for the people who need them?

New Alliance investments are neglecting nutritious crops and foods
Looking at the 6 country frameworks that have been published, we find the following.
  • More than half of the 111 promised private investment projects focus on non-food crops (such as cocoa or cotton) or on activities that aren’t crop specific (such as providing credit or selling fertilizer).
  • The second-largest group of investments target staple crops, such as rice or maize. These crops are good for filling bellies, but don’t provide the all important micronutrients unless they are fortified.
  • 12 of the 28 investments targeting foods with high levels of protein or micronutrients (including fruits, vegetables, cashews, pulses, milk and poultry) aim to sell to export markets. This can generate revenues but does not deliver nutritious foods to undernourished people in the exporting countries.
  • When nutritious foods are being produced for the domestic market, the investment plans don’t spell out how producing more crops actually leads to getting healthy foods to the people that need them. It is well-known that producing more food, even if this food is nutritious, does not guarantee that it gets to the people who need it, or that businesses have incentives to sell healthy foods. Of the 111 investment projects, only 4 mention specific nutrient-dense food products to be sold locally. 


We need agriculture investments that link to the people affected by undernutrition
Nutrition appears not to be top of the agenda for the New Alliance. The initiative’s objectives to facilitate private investment take pride of place, if you go by what the Alliance promises to measure and report on. Côte d’Ivoire is the only country whose framework includes reducing malnutrition as an indicator for judging the success of the initiative. ONE has similarly recommended that the Alliance should post measurable nutrition goals.

But if we want to make combating undernutrition an important goal, then the New Alliance needs to invest in the right crops and activities, and make sure these are targeted to the populations who suffer most from undernutrition (mothers and infants in the 1000 days and especially the rural and urban poor).

Linking investments around farms to the foods that vulnerable people can eat means coordinating action all along value chains. In our work on agriculture and nutrition, IDS is looking at case studies of how to connect upstream, agricultural production to efforts to get nutritious foods to consumers downstream (earlier, I wrote about a well-known initiative in Bangladesh). More later on the lessons we are learning.

Let’s see if this week’s G8 discussions focus on how to get the right foods to the right people, in addition to how to increase agricultural growth.

A note on the data: This analysis is based on publicly available information on the New Alliance. The figures come from the country cooperation framework documents, which provide brief statements summarizing the private sector investments promised at the time the frameworks were published. We don’t know if further promises have been made since then or which projects are being implemented. And there’s no evidence about the impacts of these investments. Still, one year into this programme, it’s a good time to look at what has been promised.

Monday, 10 June 2013

A matter of life or death? Logistics, distribution and driver safety in Africa and Asia

By Emilie Wilson

According to the World Health Organisation, road traffic deaths are the number 1 cause of death amongst 15-29 year olds in the world. Most of these occur in low and middle-income countries. In a bid to raise the profile of this problem, 2011-2020 has been a declared a decade for action on road safety

On 4 June, the Globalisation Team at IDS was pleased to welcome Gary Forster and Chris Cuninghame from Transaid, a UK-based NGO which shares learning and expertise around logistics and distribution systems. Transaid works with private companies, transport unions and governments in Africa and Asia. Supported by the Chartered Institute of Logistics and Transport and big corporates such as DHL, Michelin Tyres and Jaguar Land Rover, Transaid works on a range of areas including national essential medicine distribution systems, improving logistics in agricultural supply chains (getting produce to market), driver training programmes and emergency transport systems (for pregnant women needing access to health services).

Listen to the full seminar: