Aid from rich to poor countries fell by 4% in real terms last year, the second decline in two years, according to the OECD’s Development Assistance Committee (DAC), which brings together 24 of the world’s leading aid donors. In 2011, aid spending fell by 2%.
The falls reflect the continuing budget pressure on developed countries, many of which are cutting spending across the board, including on aid. Several of the European countries that have been hardest hit by the euro zone crisis made notable cuts in aid in 2012 – by just over 49% in Spain, just over 34% in Italy and 17% in Greece.
This is the first time since 1996-1997 that aid from the major donors has fallen in two successive years, and it now means that aid is down by 6% in real terms since peaking in 2010. However, there is some hope that the worst may be over: Major donors supply forecasts for their aid spending to the OECD every year, and these suggest that 2013 should see a moderate recovery.
Despite the falls, some of the DAC’s member countries did manage to increase their air spending last year: Korea’s total rose by almost 18%, Australia’s by just over 9% and Iceland’s by almost 6%. Turkey, which is not a member of the DAC, reported a rise in its aid spending of almost 99%, largely in response to the refugee crisis in Syria and the need to support countries in North Africa in the wake of the Arab Spring.
The latest aid figures also show aid is shifting away from the world’s poorest countries, including in Sub-Saharan Africa, and towards middle-income countries, such as India, China and Vietnam. That’s a worrying trend, as OECD Secretary-General Angel Gurría noted: “I hope that the trend in aid away from the poorest countries will be reversed. This is essential if aid is to play its part in helping achieve the [Millennium Development] Goals.”
The fall in aid was criticised by a number of international agencies. “This cut in aid is going to cost lives,” said Oxfam International’s Jeremy Hobbs. “This is not the time for rich countries to drop long-standing commitments.” Several contributors to a live Tweetchat following the release of the data were also critical of the performance of the world’s wealthiest countries. “For 2nd yr official aid data show rich countries fail to do all they can to fight poverty,” wrote Nicole Metz.
Today we’re publishing the last in a series of three articles by Liisa-Maija Harju, Environmental Coordinator in the OECD Operations Service on the OECD’s environmental performance.
Did you know that the Eiffel Tour is going green? The planned €25 million investments will improve the landmark’s energy performance by 30%. The Eiffel Tour will start to generate its own electricity and hot water by the end of 2013. Solar panels and small, vertical wind and hydraulically-powered turbines will be installed 57 metres above the ground. Ninety-five per cent of the new lighting will be of LED-type that has a longer lifespan and consumes less energy than conventional eco light-bulbs.
Small, individual investments like this are needed because the building sector contributes up to 30% to annual global greenhouse gas (GHG) emissions and consumes up to 40% of all world energy, according to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC). Not to mention that the big clock is ticking: the World Meteorological Organization announced that the amount of GHGs in the atmosphere reached a new record high in 2011.
Fortunately the building sector offers the largest potential for climate change mitigation at low-cost in all world regions, and sustainable building practices are becoming popular. In these types of buildings natural resources like energy and water are used efficiently; emissions, pollution and waste production is minimized; and occupants’ health and employees’ productivity are improved.
To tackle the climate challenge, private sector investments in buildings, transport and energy infrastructure will need to be shifted toward low-carbon options. Choices made today about the types and location of critical infrastructure will lock-in costly future emissions and the vulnerability of our economies to a changing climate. The OECD has developed a Green Investment Policy Framework which identifies how governments can improve the conditions to shift and scale-up private investment towards greener infrastructure.
The International Energy Agency’s Sustainable Buildings Centre (IEA-SBC) agrees, and recommends a holistic approach for lowering buildings’ energy consumption. Aiming for net-zero energy consumption, improving the energy efficiency of existing buildings, applying for building energy labels or certificates, as well as improving energy performance of building components and systems are some of the most cost-efficient ways to save energy in buildings. Appliances and equipment used within buildings should also be selected according to these guidelines. The Eiffel Tour is definitely on the right track!
But building occupants’ consumption habits can also have a significant impact. The results of an OECD survey on “Greening Household Behaviour” show that government policies and mixes of instruments can encourage the best changes towards occupants’ sustainable consumption habits. Regulations can incentivise building owners and services providers to offer an infrastructure and services that support positive behavioural changes. The presence and quality of collection services for recyclables, for example, is found to increase recycling participation and intensity. Providing the right economic incentive has also proved to be useful: price-based incentives encourage energy and water savings.
We at the OECD’s Operations Service have listened to these recommendations. One of the main goals we have set for ourselves within the Organisation’s internal greening strategy is to obtain the French High Environmental Quality (La Haute Qualité Environnementale® Exploitation, HQE®E)- environmental certification for the five major buildings in which we operate in France.
Our buildings have indeed a significant impact on total GHG emissions of OECD operations: in 2011 the overall GHG emissions of our operations were 8,535 tCO2e, an 8% decrease from 2010. Due to the nature of our work, travel on missions is the main contributor to this GHG footprint (64%), followed by buildings (20%) and commuting (16%).
The HQE® is the most frequently applied building certification scheme in France. It is a voluntary approach aiming to limit the short and long-term environmental impact of a building’s operation and maintenance, while guaranteeing healthy and comfortable living and working conditions for the occupants. The certificate’s 14 indicators are used to measure and manage buildings’ quality in four areas: construction, management, comfort, and as well as health. In addition to energy and emissions the indicators are used to measure topics like green procurement and waste management.
We are approaching our HQE®E-certification goal: two of the five buildings are now HQE®E – certified, and we are working towards certifying the OECD Conference Centre and Château de la Muette as well as one more building in which our employees work. These successes were made possible thanks to the support of the Secretary-General of the OECD, the know-how of all operations service teams involved, and the engagement of our employees.
While our strategy has so far proven to be successful, it should be remembered that HQE®E and other buildings’ environmental certificates available on the market only encourage the buildings’ owners and service providers to improve buildings’ environmental quality and performance. The certificates do not yet allow for the measurement of resilience. How do buildings react to impacts or risks, such as extreme weather events, caused by the environment?
What do you look for in a holiday destination – sunshine and sand, fine food, ancient treasures? If none of these send you scuttling off to Tripadvisor, then how about this: fresh air. That’s what one Chinese province is promising in adverts running on national TV: “Take a deep breath, you’re in Fujian.”
The campaign seems to be working: So far this year, the coastal province has seen a 38% rise in visitors, according to NPR’s Rob Schmitz. “The air is so fresh here!” one tourist told him. “Whenever I go to work in Beijing, I have to wear a mask or else I’ll start coughing uncontrollably. It’s just been terrible lately.”
Indeed. Even by Beijing’s standards, air pollution this past winter has been awful, with the city repeatedly blanketed in throat-choking fog. On one weekend in January, the level of airborne fine particles classed as PM2.5, which are especially harmful to health, briefly rose to almost 40 times above the acceptable limits set by the World Health Organisation (WHO). Beijing is not alone: Less than 1% of China’s 500 biggest cities meet WHO air-quality guidelines, according to the Asian Development Bank, and seven of them rank among the world’s ten most polluted cities. According to the in the world from urban air pollution.
None of this is particularly new – China’s problem with pollution has been apparent for years, but the depth of the murk that descended this past winter does seem to have sparked a real bout of soul-searching. China’s media, for example, has been reporting the problem with unusual frankness –“Beijing’s 225 shades of grey,” says a headline in the China Daily, over a set of photos of the smoggy capital. The leadership, too, has responded, promising increased air monitoring and extra efforts.
The air problems in China’s urban areas bring together two major challenges facing the country, both of which get special attention in the OECD’s latest Economic Survey of China, released ahead of the annual China Development Forum in Beijing at the weekend.
The first is the challenge of making China’s rapidly growing cities more liveable. At one level, this means ensuring that citizens have access to breathable air, rapid transport and so on. But there are other, less visible, issues. Setting environmental problems aside for a moment, one of the most pressing concerns the status of internal migrants, who account for around 70% of the growth of China’s cities over the past few decades. Faced with an ageing population and stagnating workforce, China needs that movement to continue but, if that’s to happen, its cities will need to set out a proper welcome mat for migrants. As we’ve noted before, the hukou registration system means people leaving their home area can lose access to services like health and education. That’s bad not just for migrants but also their children. Many of them – perhaps 36 million – get left behind, and are raised by grandparents; those who do move with their parents to the cities – an estimated 23 million – don’t always have access to great education. Chinese cities and provinces have pursued piecemeal reform of the hukou system, but there are growing calls – including from the OECD – for cities to grant residential permits to migrants; recent reports suggest substantial reform may not be far off.
The second great challenge is, of course, the environment. Smog-filled cities are just one face of the country’s environmental degradation, which also encompasses desertification, flooding, soil contamination and water pollution. China has made some progress in tackling these: For example, sulphur dioxide emissions have declined somewhat, although the country remains the world’s biggest emitter, and there has been a slight improvement in water quality – Shanghai’s floating pigs notwithstanding.
Nevertheless, grave problems remain and, as the OECD report notes, a wider range of weapons needs to be used to tackle them, including market-driven pricing of fuels like natural gas and coal and greater use of pollution taxes and levies. The potential impact of China on the global environmental is so great that, unless the country rises to the challenge, it won’t just be the citizens of its own cities who are gasping for air.
网站 (中文) (The OECD’s Chinese-language site)
This week, around 30,000 children under the age of five will die from water-related diseases, one every 20 seconds. In fact unsafe water now kills more people than all forms of violence, including war, with diarrheal diseases claiming 1.8 million victims a year and causing more deaths in children under 15 than the combined impact of HIV/AIDS, malaria, and tuberculosis. Uleftae Mundeo from Manzo in Ethiopia told NGO WaterAid what that means. “Children often die here from the water. Often all of the money we earn from farming is spent on medicine.”
Uleftae uses a local pond, but often collecting water means walking a dozen or more kilometres a day carrying a heavy load, leading to chronic back pain and sometimes spinal deformities. China’s Global Times interviewed 12 year-old Mi Guie who spent her weekends helping her parents fetch water after a drought hit Yunnan Province in 2009-10. They walked for hours getting to and from the nearest river, climbing a 600 metre high cliff on the way there and back, for a few litres of muddy water each time.
In areas where supply is worst, women and girls (always them) get up in the middle of the night and queue for hours for their turn then a couple of hours more as water trickles into buckets. In urban areas, the problems are different but no less serious. Infrastructure hasn’t expanded as much as population, leaving millions of citizens with no access to piped water and modern sanitation, or forced to live near open sewers carrying household and industrial waste. One of these sewers caught fire in a shantytown in Nairobi in September 2011 after petrol spilled into it, burning to death over 100 people.
Fortunately for us, stories like these don’t take place in OECD countries, but the number of water-related disasters has increased worldwide over the last three decades, particularly floods, droughts and storms, with almost 40% in OECD countries, 30% in the BRIICS and 30% elsewhere. Only about 5% of the victims were in OECD countries, although OECD countries suffered almost two-thirds of the economic losses.
Floods accounted for well over 40% of the disasters over 1980-2009, storms nearly 45% and droughts 15%. The number of victims ranges between about 100 million and 200 million per year with peaks of 300 million or more. Almost two-thirds of the victims are due to floods, with droughts and other temperature extremes accounting for 25% and storms the remaining 10%.
Economic losses were $50-100 billion a year between 1980 and 2009, although that jumped to $220 billion following Hurricane Katrina in the US in 2005. Storms account for half of all losses, floods one third and droughts almost 15%.
With so many different factors influencing and being influenced by each other, it’s hard to define an overarching framework to think about water-related issues. Even the basic geographical categories I used above aren’t that useful in many cases. Within a single “OECD country” like France, the main concern can vary from place to place – pesticides and fertilizers polluting rivers, financing the replacement of ageing infrastructure, limiting the impact of drought on economic activity…
However, “water security” provides a useful lens through which to examine the issues, as we celebrate World Water Day, especially as this year, World Water Day is part of the UN’s International Year of Water Cooperation. Water security is emerging as one the major global challenges of the 21st century. World water use is projected to be 55% higher in 2050 than it was in 2000, and the OECD Environmental Outlook says that by mid-century, nearly half the world population will live in river basins under severe water stress. That means an additional 1 billion people compared with today. These figures are only talking about the quantity of water available. Degradation of water quality adds to the uncertainty about future water availability.
In forthcoming work, the OECD will argue that when you talk about security, you’re implicitly or explicitly talking about risk, so a risk approach may be the best way to tackle water security. Water security would be defined as maintaining an acceptable level of risks in terms of water shortage or excess, pollution, and freshwater system resilience for society and the environment, today and in the future. The main thrust of a risk approach to water security would be to secure benefits for society and the environment in a way that maximises expected social welfare.
Issues ranging from infrastructure financing to climate change influence water resources, as well as economic activities have to be considered. Some of these activities are obvious, while others may come as a surprise, energy for example. Thermoelectric power generation accounted for 39% of all freshwater withdrawals in the US in 2000, roughly equivalent to water withdrawals for irrigated agriculture. You may also be surprised to learn how much water goes into making the products you use every day, over 15,000 litres for a kilo of beef for instance, or 1500 litres for a litre of apple juice. (You can calculate your own “water footprint” here)
From a risk perspective, water governance poses three main challenges: know the risk by obtaining the information needed to make effective and informed decisions; cap the risk by setting and enforcing acceptable limits on use and standards for water quality and flood protection; and managing the risk through policies and regulations that allow equitable and efficient allocation of water resources, equitable and efficient land-use planning for flood prevention, and implementing the polluter-pays-principle.
From a water cooperation perspective, that means for example ending the institutional fragmentation and promoting a multi-level approach so that all the different needs, options, and consequences can be looked at as a whole.
The problems are undeniable, but there is room for optimism. Next week sees the first meeting of the OECD Water Governance Initiative that argues that “Managed correctly, there is sufficient water on Earth for the world’s population”. I’ll drink to that.
Water Chapter of the OECD Environmental Outlook to 2050: The Consequences of Inaction
Today’s post is from Adrian Blundell-Wignall, Special Advisor to the OECD Secretary General on Financial Markets. The view expressed here is his own and does not necessarily reflect that of any OECD government.
The Cyprus crisis is the result of policy mistakes and a failure of collective responsibility, as well as an illustration of what bad policy can do and could do if it’s not corrected. It’s now too late to take the easier steps that could have avoided the problems we’re facing today, but there are alternatives to the myopic, badly conceived plan proposed by the Troika (the committee led by the European Commission with the European Central Bank and the International Monetary Fund that negotiates loans to the states worst affected by the sovereign debt crisis).
While all deposits are supposed to be guaranteed to €100,000, those with above that amount were to be taxed 9.9%, and those with less 6.75%; enough to raise about €7bn, to make up the €17bn estimated to be needed to rescue Cyprus’ banks (since a limit of €10bn for Troika bailout loans was imposed). The deposit plan was (naturally) rejected by Cyprus’ parliament.
The “above-€100,000” depositors are in the main Russian depositors; the bulwark of Cyprus’ role as an offshore centre.
Large withdrawals of electronic funds have been suspended. Electronic transfer of funds from Cyprus has been stopped. Banks are closed, now until next week.
Bank collapses would result in some €68bn deposit insurance liabilities to be paid (at least 1/3 outside the euro area), an amount much larger than Cyprus’s GDP (just under €18bn) —an unthinkable option.
While reports suggested there was a Troika threat to cut off ECB liquidity support (hence collapsing the banks), this was not made by the ECB, which has responsibility for such decisions and continues to support the banks for now.
A key policy mistake in Cyprus was that action was not taken sooner. Hybrid and unsecured bonds should be the first in line (after equity) in burden-sharing during bank failure resolution. Bondholders were involved in burden-sharing in other European countries and implicit bank debt guarantees declined. This caused the amount of outstanding unsecured bonds of Cypriot banks to fall noticeably during 2012 (there is now only €1.2bn of junior bond holders left!) but the Troika failed to take action to deal with the banks. Consequently, the bulk of liabilities now consists of deposits. Early action would have reduced the cost.
There is a collective responsibility here. Starting from the failure to act early, one can add more to the list: the losses of Cyprus’ banks derived mainly from holdings of Greek government bonds, which successive European politicians promised would never be allowed to default; the one size fits all monetary policy; the failure to implement and monitor the Maastricht fiscal pact; and the permission given to enter the euro in the first place.
The Troika’s plan amounts to a confiscation of deposits. The most recent example of this kind of policy was Zimbabwe in 2008—confiscating foreign currency bank accounts (puzzlingly the IMF was critical of this then). And there have been examples in extreme crisis situations in Europe and Latin America before that, which also made things worse and left a deep distrust of banking for generations.
The plan has surprised even the worst critics of the euro project.Not contributing to bank runs is the single most important lesson of hundreds of years of financial policy making in crises, lessons that appear to have been lost on the Troika.
The full implication of this latest policy announcement from Europe is hard to assess. But policy makers need to rethink this policy quickly.
The risk of runs on Cyprus bank deposits is now high, as soon as the banks re-open, in the absence of capital controls and limits on cash withdrawals. Governments went through a lot of trouble to establish new deposit insurance ceilings in Europe. The new harmonised EU (and EFTA)-wide deposit insurance ceilings have to be seen against the background of re-instilling depositor confidence, while also trying to limit moral hazard risks. Major efforts have been undertaken by deposit insurers to raise awareness of these new ceilings. Any policy measure that undermines the credibility of this ceiling runs the risk of triggering a depositor runs in other countries that have banking sectors under stress and weak sovereigns.
The Basel process is trying to discourage reliance on short-term wholesale funding while favouring retail deposits, with a view to improving the outlook for financial stability. Deposits are currently very much sought after. For example, the relative stability of the Italian banking sector in part reflects the ability of Italian banks to increase their domestic retail deposit base. Haircutting small depositors will undermine these efforts.
Restrictions on capital flows, should they prove necessary, perpetuate external imbalances, undermine trust, and may prompt and encourage similar measures by other countries.
There are serious problems on bank balance sheets in certain larger EU economies, which may in the end require bank resolutions. It is only natural that the Cyprus approach be taken as a pointer for what could be done elsewhere (confiscation of deposits). This is very important, because one of the stumbling blocks for the European Banking Union project is the very nature of deposit insurance and who will pay for it. The precedent being set here will make it more difficult to finalise the banking union project.
Trust in the financial system is built around the most basic ideas of caveat emptor for sophisticated participants and protections for unsophisticated investors. European politicians have strongly supported the OECD push for better financial literacy and consumer protection—yet the Cyprus plan says that Europe is prepared to hurt the small unsophisticated depositor in banks that they believed were safe.
Global systemically important banks have not been restructured to separate material derivatives and securities businesses, where caveat emptor should apply, from traditional businesses of deposit taking and lending where protections are important. More volatility can put big banks under pressure via margin and collateral calls, contaminating traditional banking, if the crisis were to escalate from here.
What could be done?
There were so many choices that could have avoided the problems. A list of alternatives from the easiest to the hardest includes:
- Earlier action in the first place—alas now not available.
- Given no meaningful action was taken, ‘tax’ uninsured deposits for all depositors above €100,000 to the amount required. Promises are not broken, and many unsophisticated depositors had more than one bank account to avoid the risk of loss. This ‘big deposits approach’ would undermine Cyprus’ status as an offshore financial centre—but that may not be such a bad thing for the future.
- Capital injections into banks from the European Stability Mechanism (ESM) to the amounts required, TARP-style, in exchange for warrants.
- Fully nationalise the banks, keep them running, and wipe out all equity and bond holders. Restructure the banks, and then sell them back to the private sector—a time honoured and profitable approach, used in Scandanavia, in the US S&L crisis and even on a piecemeal basis in this crisis.
Sticking with the Cyprus plan amounts to telling European depositors and that their money is not safe in any country where banks have problems (bond holders know this already). The ‘coiled spring’ has just been compressed further. For now the private sector believes in ECB magic. This is perhaps the most strongly held market view. But when the strongest-held views are contradicted—even by the slightest hint of a problem elsewhere in the future—the coiled spring could uncoil explosively in a collective unwinding of all those beliefs. This would create new problems and would certainly further delay Europe’s recovery.
Change course now! And, in doing so, clarify Europe’s view on deposit insurance and resolution in the Banking Union plan as soon as possible, making it clear that confiscation of insured deposits will never happen anywhere.
Be honest, if you had to pick one of Snow White’s Dwarfs to run your country, would Happy be your first choice? I mean, what’s so great about happiness that it gets enshrined in constitutions and even gets its own International Day today (even if it does have to share with Alien Abduction Day according to OECD sources)? When your economy is going to hell in a hand basket, Doc and the technocrats are called in. And it’s Grumpy and the rest of the dissatisfied who stimulate progress. As Shimon Peres said during his visit here last week, the reason Israelis are so innovative is that they’re always complaining.
But even the glum old OECD is trying to cheer you up, or at least find out if you’re miserable. The title alone of our latest report, OECD Guidelines on Measuring Subjective Well-being, will probably bring a smile to your face, but just wait till you see what’s in it. You may think that subjective well-being is easier to recognise than to define, but that’s because you’re not a statistician. The OECD definition “encompasses three elements: life evaluation (a reflective assessment on a person’s life or some specific aspect of it); affect (a person’s feelings or emotional states, typically measured with reference to a particular point in time); and eudaimonia (a sense of meaning and purpose in life, or good psychological functioning).
We’ll come back to eudaimonia below, but you may be wondering how you can actually measure these things. Since the report consists of guidelines, its main purpose is to help to design surveys – sample size, target population, survey frequency, that kind of thing. But it does provide examples of measures. My favourite is the Andrews and Withey scale that asks how you feel about your life as a whole and you have seven possible options ranging from (no, not “Sleepy” to “Dopey”) “Delighted” to “Terrible”.
Back to Eudaimonia. It’s defined here as “meaningfulness” or “purpose” to life, but Eudaimonia is often translated from the ancient Greek as “happiness”, our subject today. However, for philosophers from Socrates on who used the term, the meaning wasn’t really that implied by the OECD guidelines (if only they’d known!). It referred less to a pleasant feeling than to how you lived your life and whether your actions were moral – well-living and well-doing and not just well-being if you like. Less to do with how you feel than how you act.
So what’s that got to do with an organisation like the OECD? Everything, if you take our slogan “Better policies for better lives” seriously.
Eudaimonia meant taking the morally appropriate course of action in a given situation. A typical example would be how to react to fear, as discussed by Aristotle in his Nicomachean Ethics. Too much fear can lead to cowardice and inaction. Too little fear may mean doing something stupid through over-confidence. Courage is the virtuous reaction in this case. Substitute “crisis” for “fear” and you’re not far from the kinds of choices a government has to make and the kind of advice the OECD gives.
Maybe you think that’s according too much credit to the continuing relevance to modern governance of ancient ideas of virtue. After all, these ideas refer to individual conduct rather than what a government (or company) is judged on – its actions, and whether they increase overall well-being and conform to certain standards.
At the same time, one of the main themes of this year’s OECD Forum is rebuilding trust. The latest Edelman Trust Barometer shows that the public puts a high price on individual ethics. Less than one in five respondents believes a business or governmental leader will actually tell the truth when confronted with a difficult issue, while unethical behaviour is one of the main reasons that banks and financial services remain the least trusted sectors .
Surveys like the Barometer also underline the fact that the people who are most trusted are those the respondents feel are most like them. There is a general impression that what is important to political and business leaders isn’t what counts to most citizens. Measuring Subjective Well-being is part of a broader OECD project, the Better Life Initiative, which tries to change that, at least as regards governments. The Initiative includes Your Better Life Index, an interactive tool that allows you to compare well-being across countries, based on 11 topics covering material living conditions and quality of life, according to how important you think each topic is. Try it, you’ll make a lot of statisticians happy.
I know a photographer who worked in the Egyptian oases at the time when the people living there became poor. Their wealth and number of possessions didn’t change, but with the arrival of television and other modern media, they suddenly learned that they were living in a backward, disadvantaged area. Until then, they’d believed that they had everything you needed for a good life – food, water, animals, plants, friends, feuds… But they didn’t have fridges, schools, and most of the other goods and services to be found in the city. At the same period, people who lived in a metropolitan slum would not have considered themselves rich just because they had a TV, electricity and most of the other things the Bedouin lacked.
Poverty then isn’t just a question of income. The newly-published 2013 UN Human Development Report looks at two measures: poverty defined in strictly monetary terms as living on less than $1.25 a day, and the Oxford Poverty and Human Development Initiative’s Multidimensional Poverty Index (MPI). The MPI has three dimensions and ten indicators, all equally weighted, which reflect some Millennium Development Goals and international standards of poverty. The three dimensions are health, education and living standards; while the indicators are nutrition, child mortality, years of schooling, school attendance, cooking fuel, sanitation, water, electricity, type of floor of the dwelling, and assets.
The data support the optimism of the UN report’s title “The Rise of the South: Human Progress in a Diverse World”. More than 40 countries in the developing world have done better than expected in human development terms in recent decades, with their progress accelerating markedly over the past ten years. Of 22 countries having data on MPI poverty over time, 18 reduced MPI significantly, and most of them reduced multidimensional poverty faster than income poverty.
On current trends, half the 22 countries would eradicate MPI within 20 years and 18 within 41 years, but it would take 95 years for all 22 to eradicate multidimensional poverty.
What about the “bottom billion”, the poorest of the poor? In this article in 2010, Brian Keeley discussed Andy Sumner’s argument that if we focus on the poorest countries, we’ll actually miss most of the world’s poor. The new figures suggest that where the bottom billion live depends on whether you look at national averages, the subnational level or the intensity of poverty experienced by each poor person.
At national level, the bottom billion are concentrated in the 30 poorest countries. But the situation can vary significantly from one region to another within a given country. For instance in Tanzania, 32.4% of the people in the Kilimanjaro region were poor in 2010, but the figure rises to 87.4% in the Dodoma region just 250 miles (400 km) away. Looking at 265 subnational regions, the bottom billion are spread across 44 countries.
The bottom billion by individual poverty profiles more than doubles the number of countries to 100. This is calculated by starting with people who are deprived in all 10 indicators. This gives 17 million in all, with India and Ethiopia having 4 million each. You then add people who are deprived in 95% of the indicators and so on until you reach 1 billion.
Surprisingly, 9.5% of the bottom billion live in upper Middle Income Countries, and 41,000 of the poorest bottom billion live in five High Income Countries. Unsurprisingly, 51.6% reside in South Asia, 32.7% reside in Sub-Saharan Africa, and 12.3% reside in East Asia and Pacific. Nearly 40% of the bottom billion poor reside in India.
But to get back to the optimism. Bangladesh was the original international “basket case” (a term used by the Henry Kissinger-led State Department in 1971). The image persists, but in reality Bangladesh is one of the three top performers in reducing MPI, along with Nepal and Rwanda. The Economist argues that it got out of the basket thanks to four factors: it improved the status of women; the Green Revolution and remittances boosted incomes; the government maintained social spending; and non-government organisations managed to scale up their programmes to work nationwide.
You may have noticed that The Economist doesn’t cite economic growth. The Human Development Report says something similar: “Economic growth alone does not automatically translate into human development progress. Pro-poor policies and significant investments in people’s capabilities – through a focus on education, nutrition and health, and employment skills – can expand access to decent work and provide for sustained progress. The 2013 Report identifies four specific focuses for sustaining development momentum: enhancing equity; enabling participation of citizens, including youth; confronting environmental pressures; and managing demographic change.
These themes will also be discussed at the OECD Global Forum on Development on 4-5 April. The Forum will be looking at how the global economic landscape has changed, and with it, the understanding of what development and poverty are all about. For example the session on the multidimensional nature of poverty will highlight the links between poverty reduction, natural resource management and growth as issues that are central to social protection and pro-poor growth.
The OECD Global Forum would like to hear your opinions on the major themes.
Click here to discuss: Post 2015: Effective partnerships for development in a changing world
Click here to discuss: Beyond Poverty reduction: The challenge of social cohesion in developing countries
Click here to discuss: Measuring poverty, well-being and progress: Innovative approaches and their implications for statistical capacity development
Click here to discuss: The global-national nexus and country-level policy actions
The 2010 edition of the OECD Development Centre’s Perspectives on Global Development: Shifting Wealth pioneered the topic of shifting wealth and the impact of emerging economies on the development of Low Income Countries, taken up in this year’s Human Development Report. The 2012 edition of Perspectives looking at the impact of shifting wealth on social cohesion has an extensive analysis of poverty trends and measures.
Stroll through most cities and you’ll see memorials to all sorts of human achievement – from victory in war to brilliance in the lab. But how about success in an exam? Yes, even that has been commemorated. Tucked away in obscure corners of China, you can still sometimes find archways and stone tablets celebrating the fact that a local man once, a long time ago, passed the fiercely competitive Imperial Examination.
The reward for success was an appointment to the civil service, bringing with it prestige and, for many, great power. In theory, the exam – which endured, on and off, for 1,300 years – was open to almost any man in China. In practice, most of those who sat it came from well-off families. Generally, they were the only ones who could afford to subsidise a son until he was ready to sit the exam, by which time he was usually in his 30s.
Flash forward in time to 2009, more than a century after the last Imperial Examination: students in Shanghai face another test – the OECD’s PISA international student assessment. Just as with their predecessors’, their results are closely watched and – when they show the city’s students ranked first in the world – widely celebrated (although we haven’t heard of any statues being erected).
Is there a link between these stories of ancient and modern achievement? A report from the Economist Intelligence Unit offers grounds for thinking that there might be. The Learning Curve draws on research from PISA, and other international student assessments, to try to take the lid off “the black box” of education. To explain, we know what goes into education – funding, class size, teacher salaries, and so on – and we also have a pretty good idea of what comes out, in terms of student performance. But we still struggle to explain what happens between these “inputs” and “outputs”.
This is not a minor issue. Take spending: You might assume that countries that spend proportionally more get better results, but that’s not the case. Finland devotes 6.4% of its GDP to education, and its students regularly come first among OECD countries in PISA; France spends pretty much the same (6.3%), yet its students only hover around the OECD average. And this is not a rare example: As the EIU report states, in education “inputs are turned into outputs in ways that are difficult to predict or quantify exactly.”
So, clearly, other factors are at work, but what? Research in recent years has given us a much better sense of the importance of factors like how well schools deal with students’ from different social backgrounds. But, as the EIU report points out, there are other factors that we understand less well, including teacher quality, the role of school choice and autonomy and the ability of educational systems to identify the skills of the future. And, it says, there’s something else we need to think about – culture.
Which brings us back to China. The Imperial Examination can be criticised on many grounds, not least that it ignored science and experimentation. But it can surely be said to have underpinned a key idea in the culture of China and much of East Asia – one that can be traced back even further to Confucius: namely, if you want to succeed, you need to study.
The EIU report argues that the influence of the surrounding culture can’t be underestimated in determining how well education systems perform, and suggests it may be even more important than national wealth. In particular, it identifies culture as being key to the success of two PISA frontrunners – Finland and Korea. These two take very different approaches to education, but their cultures have at least one thing in common: a profound respect for teachers.
Indeed, the role of teachers has come to be increasingly recognised in recent years and, as The Learning Curve notes, several governments have sought to shift or buttress cultural attitudes to the profession by raising its prestige. This has included concrete action, such as setting starting salaries at the same level as other professions, and symbolic steps, such as Singapore’s creation of a National Teachers Day.
The issue is also receiving growing recognition on the international stage. For example, this week sees Amsterdam hosting the third annual Teacher Summit, with the involvement of the OECD. The conference will look at ways of raising the quality of teaching and evaluating how well teachers are doing. You can find out more at the conference website and follow the discussion on Twitter at #ISTP2013
Today’s post is from Kate Lancaster, editor in charge of publications on regional development at the OECD.
Earthquakes. Droughts. Tsunamis. Landslides. Floods. Fires. Tornadoes. Epidemics. Hurricanes. Volcanic eruptions. Stories of disasters punctuate recorded history and resonate even now. Consider Pliny the Younger’s detailed account of the eruption of Mount Vesuvius in 79 CE, which destroyed Pompeii and Herculanum, or Daniel Defoe’s journal recounting the 1665 plague in London, or even the less carefully documented tale of the cow that set Chicago ablaze in 1871.
Today, however, disasters unfold live and pass quickly. They fill our televisions, computers, even phones, as events are happening and in their immediate aftermath. Striking photos, heart-wrenching stories. But then, it’s all over. Once the initial shock has passed, the material and economic damage assessed, a death toll announced, the media often goes home and we turn our gaze away, back to our regular lives, until the next “big one”.
It’s easy to forget that the effects of a disaster linger long afterwards, shaping the places and regions in which they took place.
The Italian region of Abruzzo, already in economic decline, was hit by a devastating earthquake in 2009. Concentrated in the capital city, L’Aquila, the quake also affected more than 50 other small towns nearby. Nearly half the region’s population was displaced by the quake and 309 people died. Thirty-seven thousand buildings were damaged, with devastation concentrated in the renowned historic centre of L’Aquila. Emergency relief in the immediate aftermath of the quake totalled around EUR 3 billion, and another EUR 8 billion was earmarked for reconstruction.
The biggest challenge of reconstruction is not just financial, however, as a recent OECD report, Policy Making after Disasters: Helping Regions Become Resilient – The Case of Post-earthquake Abruzzo, explains. Rather, it is simply how to “get it right” going forward. Reconstruction should help make the afflicted area more resilient, which means not only better able to weather future exceptional shocks or disasters, but stronger than before, with a sustainable local economy and a long-term development strategy. Citizens’ voices should be an important part of this process, the report argues. Authorities should create spaces for community deliberation, both physical and online, and should ensure that the opinions expressed can influence the decision process.
Yet in the three years since the quake, community engagement in strategy setting for the future of L’Aquila has, in fact, been very weak, though first steps towards improvement started in 2012. This has worsened social fragmentation and distrust of local governments. Nevertheless, international experiences show that community engagement does have an important role in post-disaster regions. It can help decision makers to determine redevelopment plans and can help ensure that these fit local circumstances, thus creating a sense of community ownership.
In Christ Church, New Zealand, for example, University of Canterbury has publicly shared its own experiences during and in the wake of the city’s 2010 earthquake, while Lincoln University has made public its research into the economic impact of the quake. In New Orleans, a local non-profit research group, the Greater New Orleans Community Data Center has been monitoring the quality and pace of rebuilding after Hurricane Katrina in 2005, through its New Orleans Index. The index tracks key social and economic recovery indicators, chosen based on input from local residents and when published, the limitations of each indicator’s data set are clearly spelled out in plain language to ensure transparency.
The experience of these cities, of Abruzzo, and of other regions examined in this report, provide valuable lessons to areas where natural disasters have forced a rethinking of the development model, or where long-term decline has done so. The report concludes with a list of eight practical recommendations for building resilient regions of interest to governments, decision makers, opinion leaders and community residents alike.
L’Aquila earthquake: relaunching the economy Workshop organised by the OECD in partnership with the Italian Ministry of Economy and Finance.