'The Donors’ Dilemma' - Beyond Zero Sum

By John Podesta - 28 December 2013
John Podesta - Beyond Zero Sum

This column by John Podesta is part of Global Policy’s e-book, ‘The Donors’ Dilemma: Emergence, Convergence and the Future of Aid’, edited by Andy Sumner. Contributions from academics and practitioners will be serialised on Global Policy until the e-book’s release in the first quarter of 2014. Find out more here or join the debate on Twitter #GPfutureofaid.

Whenever we talk about the post-2015 development agenda, our gaze is to the future - forward-looking, bold, and yet practical. We summon the grand accomplishments which the spirit of international cooperation might make possible, such as ending extreme poverty or preventing needless child deaths around the globe. We imagine a world that is more prosperous, sustainable, and equitable. We call for new partnerships and breakthroughs in science and technology that will revolutionize how we live.

But when discussions turn to financing the post-2015 agenda, we quickly slip into the past, and the conversation among UN diplomats in 2014 sound almost identical to those in 2000. Despite the fact that every aid official now notes that Official Development Assistance, or ODA, only makes up about 13 percent of the finance flowing to developing countries, that small piece of the pie continues to dictate much of the terms of the debate.

The reason for this quandary: we, and I use this term collectively, are still guilty of thinking of development largely as a zero sum game where every goal and target comes with a price tag to be picked up by a bilateral or multilateral donor. Instead of simply talking about the costs of development, we also need to talk about the savings, the efficiencies and the opportunities to build inclusive economies that a post-2015 agenda could achieve and how we can best mobilize greater assets for development.

Let’s look at the savings and efficiencies side of the equation first, using the UN High Level Panel’s list of illustrative goals and targets as a jumping off point. Will eradicating extreme poverty and ending hunger cost money? Of course. But within the goals and targets in the Panel report, we also see the potential for enormous savings through embracing truly sustainable development.

The target to phase out inefficient fossil fuel subsidies, by itself, could free up more than $600 billion dollars annually. Efforts to reduce food and agricultural waste would result in hundreds of billions of dollars of savings annually – vastly benefiting both producers and consumers while helping slow climate change. Recent research from the International Food Policy Research Institute suggests that investments by developing countries in adequate early childhood nutrition result in 18-fold returns, as better nourished children are far more likely to succeed in school, and better educated people are far more likely to be economically productive.

Across the entire gamut of proposed goals and targets for the post-2015 agenda, we see aspirations that will require investment, but like any good investment, they will also provide valuable returns. Ending child marriage? Reduction in teen pregnancies, currently the greatest killer of girls age 15-19 in the developing world. Providing universal legal identity? More efficient social services, greater economic productivity and reduced vulnerability to everything from land grabbing to human trafficking. Tackling climate change? Huge savings from fewer major disasters, reduced population movements and more productive agriculture. Providing universal access to safe drinking water? A gain of 320 million productive days each year, health care savings of $7 billion, and enormous time savings for people with better access to water and sanitation, according to the World Health Organization.

When viewed through the lens of a reasonable cost-benefit analysis, the question quickly changes from ‘How can we afford the post 2015 agenda?’ to ‘How can we afford not to embrace the post-2015 agenda?’

With that in mind, we must next turn to the question of how to mobilize the greatest amount of resources for the post-2015 agenda. First and foremost, we need to move beyond the idea that development finance is some static pool of aid, to be neatly divided by bilateral and development agencies. We now live in a world where enormous amounts of private capital will flow into environments that are viewed as investment friendly. If developing countries embrace the rule of law, stability and transparency in governance and make credible efforts to tackle corruption, investment will flow in. If they don’t, it won’t. One of the most important forces that can encourage equitable economic growth and mobilize finance is that of accountable governance. When people can access a government’s decisions and regulations that affect economic growth, they can help ensure that their economic perspectives, realities and interests are understood and acted upon by governments, and international capital will respond.

This is not intended to suggest that developed countries and emerging middle-income countries should not continue and even expand their development assistance programs, but instead to argue that developed and developing countries can work together to greatly expand the pool of available finance flowing into the developing world. Smart development assistance can fuel a virtuous circle. For example, making remittances cheaper and more convenient would free up enormous resources for development, and remittances are now larger globally than ODA. New technology and greater competition have helped lower the cost of sending remittances from the United States to Mexico by nearly 80 percent since 1999.

Efforts to bolster global tax compliance and ensure far greater transparency in the use and exploitation of natural resource wealth also has the potential to reap tremendous benefits. But again, for this to be successful, it will require actions by developed and developing nations alike. Multinational corporations that have often used operations in developing countries as a convenient tax dodge will need to submit to greater transparency and accountability, and developing countries must make the effort to hold to account leaders who have benefitted from kickbacks and bribes from domestic and international industries.

And ultimately, to maximize finance and help ensure that sustainable economic growth flourishes to the benefit the poorest of the poor, each person must be connected to the engines of growth and the government that regulates them. True connectivity means that a person is able to pursue a broad range of economic opportunities and also has access to the infrastructure, social services and government institutions that are an essential part of any successful social compact.

If the post-2015 agenda is to be a true success, it will not only require changes in how we act, but how we think—and how we pay.

 

John Podesta is the former Chair of the Center for American Progress and currently a Counselor to President Barack Obama.

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