This post comes to us from Annalisa Prizzon of the OECD Development Centre
The rapid growth of emerging economies has led to a shift in economic power from West to East and South. According to Perspectives on Global Development, a new annual thematic publication by the OECD Development Centre, developing and emerging countries now account for nearly half of world GDP in purchasing power parity (PPP) terms. This is expected to rise to nearly 60 percent of global GDP by 2030.
The growing dynamism of economic activity between developing and emerging countries is one of the factors underpinning this new economic and power landscape for the global economy.
Not so long ago, few people would have expected China to become the leading trade partner of Brazil, India and South Africa. In 2009 that became a reality. Likewise, the Indian multinational Tata is now the second most active investor in sub-Saharan Africa.
But what is the development potential arising from these South-South flows? South-South trade – which represented 19% of global trade in 2008, compared to around 8% in 1990 – could be one of the main engines of growth over the coming decade, especially if the right policies are pursued.
Trade between southern partners can provide opportunities for learning-by-doing in less competitive market environments. It can also give access to cheaper intermediate inputs and facilitate integration into value chains supplying southern markets, which are often much less standards-intensive than comparable northern markets.
OECD Development Centre simulations suggest that there is a large potential for welfare improvements through the reduction of trade barriers and trade costs on South-South trade. Were developing countries to reduce their tariffs on South-South trade to the levels applied on trade between northern countries, they would secure static welfare gains of $59 billion (gains that do not take into account cumulative benefits over time).
This is worth almost twice as much as a similar reduction in tariffs on their trade with the North. The dynamic gains, in terms of greater competition and technology acquisition are likely to be much larger.
Moreover, these results are not contingent on the outcome of ongoing multilateral negotiations – they are measures which developing countries themselves can implement. Some are already acting to realise these gains. In December 2009, 22 developing countries (including Egypt, Morocco and Nigeria) participating in the São Paulo round agreed to cuts of at least 20% on tariffs that apply to some 70% of the goods exported within this group of nations. A timeline was set for intensive negotiations to conclude the agreement by the end of September 2010.
South-South foreign direct investment (FDI) also has enormous untapped potential for low-income countries. Southern multinationals, for example, may be more likely to invest in countries with a similar or lower level of development since they often have technology and business practices tailored to developing country. Technology acquisition and up-grading is thus potentially easier.
Another dimension is the emergence of new aid donors. Emerging economies – aid recipients themselves – contributed the equivalent of about 15 percent of the aid flows of OECD DAC donors in 2009. Official development assistance from donors who are not members of the OECD Development Assistance Committee (DAC) but who report to the DAC amounted to almost $9.1 billion in 2008. The real figure is likely to be much higher. What is crucial at this stage is to leverage the resources and experience of these new development actors to maximise aid effectiveness.
The impact on development of trade, foreign direct investment and aid flows between developing and emerging economies has only recently started to be monitored and analysed in a systematic way. The picture is still rather incomplete. Yet one thing is clear: emerging and developing countries are currently driving global growth while the high-income countries struggle to shake off the impact of the global financial and economic crisis. In the future, we will need to capitalise on these trends if the global economy is to be successfully rebalanced.
Useful links
Some good news. Since 1990, the number of people worldwide living in absolute poverty – the World Bank defines this as people surviving on less than $1.25 a day – has fallen by about half a billion.
This post comes to us from Mark Hannam, honorary Research Fellow at the Institute of Philosophy at the University of London.
John Hope Bryant says that “financial literacy is the new civil rights of today.” He argues that every young person should be given the right to a basic bank account at birth. Others who campaign against poverty, notably Nobel-laureate Muhammad Yunus, have argued that access to credit is a human right.
How should we understand these arguments? It might make sense to talk in more general terms of a person’s right to be financially included, or of a human right to access a range of high quality financial services at reasonable costs. Philosophers and lawyers disagree about the nature and importance of human rights, but there are three questions that we should ask about the purported human right of financial inclusion. First, what sort of right is this? Second, who is responsible for meeting the obligations that the exercise of this right will incur? Third, is the language of human rights the most effective way of promoting the goal of financial inclusion?
How would the right to financial inclusion compare with other types of human rights? There are some human rights that provide protection for the person against physical or mental abuse: the right not to be subjected to arbitrary arrest and imprisonment, the right to a free trial, the right not to be tortured, etc. Another set of human rights enable citizens to participate in the political life of their community: the right to free speech, the right to vote, the right to form political associations, etc. A third set of human rights help to ensure a basic standard of well-being for all: the right to education, the right to healthcare, the right to employment, etc.
The right to financial inclusion does not look very similar to rights of personal protection, which tend to be negative; that is, they are rights not to be treated in a certain way. However, it might be a civil right – part of what it means to be a citizen – if we think that access to the financial system is crucial to effective participation in the life of the community. Or it might be a welfare right – part of what it means to achieve an acceptable standard of well-being – if we think of financial inclusion as part of living a good human life.
If we opt for the civil rights model then we would expect governments to take responsibility for ensuring this right is guaranteed for all community members, in the same way that they are responsible for ensuring that the legal system and the electoral system are accessible to all. This would imply a significant socialization of the financial system, with governments running far more of the financial infrastructure than they currently do.
Alternatively, if we opt for the welfare rights model then there seems no reason to think that the private provision of financial services would cease to be the norm, as it is, for example, in the provision of employment. But in this case, private sector providers would be under strong obligation to meet the standards of service provision set by the government, and the government would provide some form of safety net for those whose needs are not met by the mainstream.
However, this implies that communities with stronger and more reliable governments will be much better placed to provide inclusive financial services. In communities where government is weak and inconsistent, the provision of inclusive financial services is likely to be far more patchy. Those most in need of better financial services are therefore those least likely to get them.
In particular, the provision of financial services to the young – the basic education in financial literacy that John Hope Bryant advocates – is unlikely to be of high quality in communities that are already struggling to provide their children with adequate healthcare, education and employment opportunities. Nor is it clear that poorer communities should reallocate resources from health and education budgets in order to provide better financial services. This is not to say that financial literacy is not an important issue; simply to say that it is not the most important issue.
Using the language of human rights adds a certain urgency to the debate about the need for financial inclusion. It also challenges the complacent assumption that access to high quality financial services should remain a privilege of the rich. But, as I have argued elsewhere, “human rights are political claims, which citizens make against governments and against institutions that have been established by governments, such as courts and tribunals.” It follows that where governments are weak or ineffective, so too the promotion of human rights will be weak and ineffective.
Perhaps Muhammad Yunus would do better to consider the success of his own company – the Grameen Bank in Bangladesh – as a model for improving the provision of financial services to the poor. There is plenty of evidence from all over the world that private sector microfinance initiatives – or “bottom of the pyramid businesses” – are the best hope for better quality financial services reaching the poorest and most excluded people. Financial inclusion might therefore be better thought of as a challenge for innovative businesses rather than as an obligation for governments.
Useful links:
This year marks an important milestone for the Millennium Development Goals (MDGs) – there’s now just five years left until the date set for their achievement, 2015. So, will the world meet all the goals it set at the turn of the century for reducing things like extreme poverty, child mortality and deaths from disease such as HIV/AIDS?
Without a major push over the next half-decade, the answer is probably no. Some real progress has been made, but “improvements in the lives of the poor have been unacceptably slow, and some hard-won gains are being eroded by the climate, food and economic crises,” says United Nations General-Secretary Ban Ki-moon in the U.N.’s annual report on the MDG’s, which was released this week.
The report points to particular progress in meeting the target for poverty reduction, and forecasts that the number of people living under the international poverty line in 2015 will be half what it was in 1990. There has been progress in other areas, too, including getting more children into school, reducing child deaths from malaria and measles and slowing deforestation.
Less encouraging, the numbers of people who are undernourished continues to grow while progress on gender equality has been “sluggish on all fronts – from education to access to political decision-making”.
Useful links
African Economic Outlook http://www.africaneconomicoutlook.org/en/
This post comes to us from Harvey Rubin MD, PhD. Professor of Medicine and Computer Science, University of Pennsylvania and Alice Conant, Harvey Mudd College. The program they are working on, “Energy for Health” connects access to vaccines and clean water in developing countries with access to the fastest spreading technology in the world: cell phones.
According to the World Health Organization, 3 million people die each year from diseases spread by unclean water. These deaths are a direct result of the current water crisis in developing countries where more than 1 billion people have inadequate access to clean water and 2.6 billion people lack access to adequate sanitation. Together, unclean water and poor sanitation are the world’s second biggest killer of children.
Additionally, at least 2 million people die each year from vaccine preventable diseases. These deaths are not because there is a lack of vaccines and medications in the world, but because there is an inadequate cold chain — reliable refrigeration and storage units from the point of delivery of the vaccine or medicine in the country to the point of delivery to the patient in rural areas in developing countries. Maintaining the cold chain is an almost overwhelming challenge in countries where resources are scarce. The cold chain becomes increasingly unreliable as the distance between primary health centers and sub-health centers increases because of the lack of reliable power sources in the rural areas of developing countries. This is where the cell phones come in.
A recent New York Times article, “Toilets and Cell phones,” informed the public that there are now more cell phones in India than toilets. Cell phones are the fastest spreading technology in the world, and customers in developing countries account for two thirds of the universal mobile phones in use. Cell phones rely on cell towers, and each tower has its own supply of power. Our goal is to harness an adequate portion of this electrical energy to power refrigeration units and water filtration systems. This synergy clearly benefits the cell phone service provider as well as the local population—more healthy people, more cell phone users, more cell phone users, more healthy people. Couldn’t be a better arrangement.
This idea has received huge and enthusiastic support for its potentially transformative impact on world health and human security. By piggybacking access to viable vaccines, medications and clean water onto the fastest spreading industry in the world, we could solve a perplexing global health problem. According to the 2010 World Telecommunications/ICT Development Report, approximately 75% of the world’s rural inhabitants are covered by a mobile cellular signal, and it is estimated that close to 100% of the world will have mobile coverage by 2015. In order to have mobile coverage you must be within the range of a cell tower (a matter of miles, depending on the territory), which means that if we can utilize the power from the towers to sustain cold chains and water filtration units, by 2015 close to 100% of the world could have access to viable vaccines, medication and clean water.
So far, our first-round calculations behind this technology suggest that it is completely doable. Cell phone towers run on alternating current (AC) power, have a backup energy generator in case the primary electrical supply goes down, and most units already have AC power outlets built into them! Basic cold chain refrigeration units also run on AC power and consume approximately 200 Watts of power.
As we continue to expand on the research behind “Energy For Health”, we are exploring solutions to the following questions:
1) How does the cell tower distribution correspond with population distribution?
2) How will we monitor the security of the refrigeration and water filtration units?
3) What is a fair and equitable financial model for the installation and maintenance of the systems?
Excitement is growing in our team the University of Pennsylvania and with our partners as we continue to plan the pilot project of this technology and anticipate the enormous impact it will have on healthcare in developing countries. We welcome any ideas and suggestions.
You’ll feel rage but not despair, and be astonished but not surprised on reading State of the World’s Mothers 2010, the latest annual report from NGO Save the Children, with its country rankings of the health, education and economic situation of mothers, women and children, and the stories behind the statistics.
Rage at figures like these: every year 8.8 million children die before reaching age 5 and 343,000 women lose their lives due to pregnancy or childbirth complications. Practically all of these deaths occur in the developing world, where 50 million women give birth at home each year with no professional help.
Rage at families denying women and children care, even when it is available. Often, it’s because men don’t want another man to examine a female patient. Often it’s due to ignorance. An Egyptian woman tells how her mother-in-law refused to let her go to hospital because severe bleeding after childbirth was “normal”.
Egypt is one of several countries where the birth of a child isn’t celebrated immediately. Ceremonies like Egypt’s el sebou’, practiced by Muslims and Christians alike, recognise a grim truth: many babies do not live very long. The first four weeks of life are the most dangerous, accounting for 41% of infant deaths.
Despite the depressing situation (57 countries have “critical shortages” of health workers, 36 of them in Africa) there’s optimism too. What astonished me is the way terms and ideas I’ve encountered so often that they’ve become meaningless suddenly become real again. Here for instance: “Increased investments in girls’ education are essential… to empower future mothers to be stronger and wiser advocates for their own health and the health of their children.”
Concretely, this is because educated girls tend to marry later and have fewer, healthier and better-nourished children. Mothers with little or no education are much less likely to receive skilled support during pregnancy and childbirth, and both they and their babies are at higher risk of death. They are also more likely to respect harmful traditional practices such as delaying breastfeeding for up to 24 hours after giving birth.
Relatively minor investments pay huge dividends – “leverage” as we’d say here at the OECD. In Bangladesh for instance, female community health workers with limited formal education and only 6 weeks of hands-on training contributed to a 34% reduction in newborn mortality. Women with a few years of formal schooling can master the skills needed to diagnose and treat common early childhood illnesses, mobilise demand for vaccinations, and promote improved nutrition, safe motherhood and essential newborn care.
Some of the techniques are incredibly simple, low tech and low cost, or even no-cost, as when mothers of underweight, preterm babies are taught “kangaroo care”. The mothers serve as human incubators, keeping their babies next to their skin for warmth, and encouraging them to breastfeed frequently. A review of 15 studies in developing countries found kangaroo care was more effective than incubator care, cutting newborn deaths by 51% for preterm babies who were stable. Up to half a million newborns could be saved each year if kangaroo care were used everywhere.
Finally, as you’d expect, the Scandinavian countries top the rankings, along with Australia and New Zealand. At the other end of the scale, every mother in Afghanistan is likely to lose at least one child.
Useful links
The OECD Education Directorate conference on the economic crisis and early childhood education and care is here.
The Lancet monitors progress between 1990 and 2010 on maternal, newborn and child survival in light of the Millennium Development Goals.
The OECD Family Database provides data on “family outcomes and family policies” with over 50 indicators for all OECD countries on everything from breastfeeding to participation in elections.
Doing Better for Children looks at the state of child wellbeing in OECD countries.
Gender Aid at a Glance provides statistics on Official Development Assistance focused on gender equality and women’s empowerment
Work on gender at the OECD Development Centre
educationtoday OECD’s “education lighthouse for the way out of the crisis”.
Wikigender is designed to help participants “share and exchange information and best practices on gender equality”
The article on kangaroo care is published in the April 2010 issue of the International Journal of Epidemiology. This issue is on “Development and use of the Lives Saved Tool (LiST): a model to estimate the impact of scaling up proven interventions on maternal, neonatal and child mortality”.
The arrival of the World Cup to South Africa is a tribute to that country’s transformation since Apartheid ended in the early 1990s. It’s now a thriving emerging market–the “S” in the BRICS–and participates in the G20 and OECD work too.
But behind this success story lies a troubling and persistent problem – poverty. Based on the national definition of poverty – $4 a day – more than half of South Africans (54%) are poor. And, as the chart below shows, poverty and inequality still reflect race. While the African community’s access to services such as housing, water and electricity has improved substantially, its income continues to lag far behind other social groups. By international standards, this link between race and poverty is remarkably strong. Nor have there been too many signs of this link weakening.