I have argued previously on this site that international commitment to global development was reaching its limits. Countries did agree an ambitious new set of UN Sustainable Development Goals (SDGs) in 2015, but they were not backed by new finances or a new package of global measures to implement and track them.
And as 2016 came to a close, clear new threats to global development emerged. A rise in populism and fears about immigration in the West have brought into question whether rich countries’ existing commitments to the poor will be sustained. For the first time this century, aid from OECD countries declined to the least developed countries in favor of responses to the refugee crisis and crisis in the Middle East. The terms of trade for developing countries are also less certain. In the aftermath of Brexit, developing countries will have to renegotiate new bilateral trade deals with the UK. That could work out well for large economies such as China and India, but smaller economies could be waiting years for deals.President Trump’s commitment to nation-first “fair trade” deals for the US also opens questions about the implications for poorer countries. Certainly, any deterioration in trade relations with China would have negative consequences for the Chinese economy, and with it, could prove deleterious for developing countries who rely on China for exports. African economies already took a 40% hit to trade during China’s recent downturn. On the climate front too, the UN’s major multilateral success of 2016, the Paris Agreement, is also at threat from a US withdrawal. A further retreat by the richest countries from a rules-based international order could prove disastrous for developing countries, who rely on foreign investment for 80% of their development finance.
A consensus has emerged that this populist trend is, at least in part, an outcome of the benefits of globalization reaching their limits. A global middle class that is vulnerable to stagnant wages and to backsliding into unemployment and poverty is contesting inequality between elites and the rest, and the legitimacy of internationalism and open borders. That trend may be most pronounced in the West, but emerging markets have also experienced growing domestic protest over inequality, corruption and the quality of public services.
But people that work in development tend to have one trait in common: an almost pathological tendency towards optimism. From this perspective, perhaps there are ways for development actors to snatch victory from the jaws of defeat, by recognizing the challenges to globalization and advancing solutions. I argue there are five major areas of opportunity to be seized in 2017, along the mutually-reinforcing tracks of: mobilizing development finance; reforming international financial institutions; collaborating on technology and medicine; making the rules of globalization work for the many; and making the UN work to prevent crisis.
First, we can intensify collaboration with private capital. A conservative UN estimate of the costs of implementing the SDGs is $3.5-5 trillion per year. Aid from rich countries is over $130 billion per year and migrants’ remittances total $500 billion, so clearly much of the finance gap for development needs to come from the private sector. Approximately $100 trillion is sitting in long-term savings in the world, with low yields since the 2008 financial crisis. Good ideas from developing countries are on the table to unblock this financial capital for development through investments in infrastructure, climate action and private sector development. The UN and the private insurance industry are also collaborating to insure countries against climate change, and to share the costs of adaptation, for example by jointly financing infrastructure that can withstand natural disasters. Turning these partnership ideas into action will require regulatory reform by governments to remove obstacles to overseas investment, and concrete collaboration between the public and private sectors to jointly create enough “bankable” projects that drive development and reduce investors’ risks.
Second, unlike many of their bilateral counterparts, International Financial Institutions (IFIs) are undergoing an important period of reform and expansion, which will ratchet up global development collaboration and investment. The World Bank raised a record $75 billion for development finance for 2017-2020. It committed to matching every $1 raised in aid with $3 raised through private capital markets, and has committed to growing its partnerships with the private sector to leverage more investment into poverty eradication and job creation. The BRICS too made a major breakthrough in reforms in 2016, when their voting rights were increased on the board of the IMF. A 6% shift in voting rights to the BRICS from Europe almost doubled the BRICS’ capital contributions to the IMF. This policy should be applied to the World Bank board, as well as the UN development agencies’ executive boards. These reforms are an important signal of good will and respect for emerging markets’ place in the world, and increase their responsibilities towards the least developed countries. This rebalancing in global power sharing will be key in an era where contributions from more economies will be needed to achieve development for the world’s poorest people, and will help to build strategic coherence with the BRICS’ own New Development Bank and China-led Asia Infrastructure Investment Bank.
Third, philanthropy is booming at around $70 billion per year. Philanthropists and the private sector already account for approximately 25% of the UN’s spending on health and education. The figures will only increase as the wealthy from emerging markets open philanthropic initiatives. If the US does reduce funding to tackle climate change and poverty, philanthropists are likely to close the funding gap. For example, Bill Gates recently announced a $1 billion investment fund for clean energy research and development. In the health sector too, collaboration has emerged around the purchase and transfer of pharmaceutical patents to developing countries. Accountability is, however, needed between philanthropic organizations and developing countries to ensure common priorities are pursued. The India-instituted UN Technology Facilitation Mechanism was founded in 2016. It includes governments, companies and philanthropies, and although new, may become one such solution for advancing accountability and collaboration in areas such as technology and health.
Fourth, although the G20 has frequently been accused of grand-standing, the G20 Summit in Germany in July, 2017 could be a major opportunity to address the current limits of globalization. Chancellor Angela Merkel has committed to putting the SDGs and Paris Agreement front and center of the Summit, whose headline theme is “making globalisation benefit everybody.” Financing infrastructure in Africa is high on the agenda, and presents a major opportunity to build consensus on measures to unblock private capital investments. The G20 “accepting responsibility” for corruption and money laundering is also a priority. G20 leaders could seize the moment to start a conversation about global tax rules. This is a thorny subject. According to Global Financial Integrity, developing countries lose up to $1 trillion per year in tax evasion and money laundering. These funds usually end up in the West. The G77 group of developing countries are demanding in 2017 a new UN Committee to set fairer and more transparent global tax rules and finance flows. The West has blocked any such moves, but the G20 could be the right avenue to start to build consensus. The G20 would also be a good forum to advance the conversation about job creation and training, and in particular global plans and finances to upgrade workers’ skills. Some projections put the global jobs market at 3.5 billion by 2030. The problem is, at current rates of education and training, there will not be enough qualified workers to meet demand.
Fifth, under the new UN Secretary-General, Antonio Guterres, sustaining peace is now top of the UN agenda.The world is undergoing an uptick in violent conflict, which is driven by violence in the Middle East, and unresolved conflicts in Africa. Although the UN is likely to be in for a rough ride with the new US administration, there does appear to be a global consensus on the need to prevent conflict before it breaks out. Violent actors are probing countries to exploit porous borders, weak institutions and aggrieved youth. The international community is on the back foot to contain conflict in the Sahel, Middle East and North Africa and Horn of Africa; it cannot afford for the sphere to spread.The trend is breaking the UN humanitarian system, which has a $15 billion shortfall to provide a lifeline to everyone in need.In practice, getting better at prevention will involve political commitment in vulnerable countries, and rebalancing UN financing streams from peacekeeping and crisis intervention to supporting long-term development and peacebuilding. Antonio Guterres looks set to use his honeymoon period in office to drive this change at the UN. A clear Western break from foreign military interventionism might just reinforce the need in the eyes of Western political leaders to share in the cost of the UN’s prevention efforts.
None of these opportunities can come to fruition if the most powerful countries are unreliable or remove themselves completely from a rules-based international order. But the populist winds in the West could also create a window of opportunity for developing country leaders to seize the initiative to drive the next era of global development, predicated less on Western aid, and more on diversified collaboration between public and private, national, regional and global actors.