Today’s OECD Interim Economic Outlook warns that trade growth is slowing, contributing to another slowing of global GDP growth in 2016 and with few signs of improvement for 2017. Does it really matter? If we believe the current anti-trade, anti-globalisation rhetoric, we might shrug our shoulders and say “no”. Trade has been so maligned and demonised, some might even be pleased.
But that would be the wrong answer. Open trade and cross-border investment are key vectors for diffusion of new technologies and competition, which are central to achieving productivity gains and improving well-being. New research published today by the OECD in conjunction with the Interim Economic Outlook suggests that a substantial part of the post-crisis slowdown in total factor productivity growth could be reversed if trade intensity were to recover. In short, weak trade is one of the factors that will keep the economy in a “low-growth” trap where sluggish trade and investment lead to diminished growth expectations and rising financial risks.
Over decades, trade has been responsible for drawing hundreds of millions of people out of poverty – and we mean one and two-dollar-a-day poverty – in emerging and developing countries. Trade could perform this same miracle for the many millions still living in abject poverty in poor countries in Asia and Africa, if other conditions are also right of course. Salaries and working conditions are almost always better in companies that trade than in those that do not, and this is true in countries at all levels of development. Households gain hugely from trade because it increases choice and reduces prices.
The prospects of millions of workers in the global economy depend on their participation in global value chains, as highlighted by statistics developed by the OECD with the WTO on Trade in Value-Added (TiVA). The main insight from these data is first, in order to export efficiently, a company has to also import efficiently. A second key insight is the importance of high quality services to support trade and trade-intensive activities. It should be of great concern that there are signs that the development of global value chains appears to have gone into reverse in recent years.
The OECD paper published today looks at the reasons for the trade slowdown and back-tracking in the development of global value chains. Several factors are at play, some of them cyclical in nature, others structural like the changing role of China in the global economy. Increasingly murky protectionism is contributing to the slowdown, as is the failure to implement any really ground-breaking global new trade initiatives for more than a decade. Without entering into a rather futile debate about when the slowdown really started or the exact contribution of structural versus cyclical drivers, let us instead ask what governments can do to reverse it.
The OECD Interim Economic Outlook calls for implementation of a package of measures to boost demand, including through collective fiscal action focussed on raising investment and productive spending, and structural reforms. Removing barriers to trade and creating the conditions for people to reap the potential benefits of trade should be at the heart of the structural reform agenda.
First, governments should put their weight behind efforts to further lower trade barriers and unnecessary trade costs by implementing the Trade Facilitation Agreement, vigorously pursuing the reduction of restrictions on services trade, including by concluding the trade in Services Agreement (TISA), co-operating to reduce costly and unnecessary regulatory differences, concluding the Agreement on Environmental Goods, and by coming to the table to deliver a good result at the 11th WTO Ministerial Conference a little over a year from now. They should reduce remaining barriers to foreign direct investment. There are unilateral, bilateral, plurilateral and multilateral channels available if governments want to provide those growth opportunities that are currently lacking.
Second, governments need to step in to ensure that the benefits of trade are fairly shared. Governments should help those affected by the churn and disruption caused by globalisation. Benefits from trade are diffuse and long-term in nature. Losses tend to be sharp and very concentrated on individuals and regions. The people most affected are sometimes those with the least capacity to adjust. An unemployed steel worker does not take much comfort from knowing that programmers in Silicon Valley are thriving, or that T-shirts and smartphones are cheaper. What he or she needs is a decent job, new training and skills, and a robust social safety net to help through the transition.
Making trade work better for more people is not just about persuading them, although clearer and more honest communication is important. It is about ensuring that the full panoply of structural policies is put to work to ensure that people are able to reap the benefits that more open trade, technology, and investment will bring. This means paying attention to infrastructure, well-functioning financial markets, education and skills, clear and transparent institutions and rule of law – all the things that make an economy nimble Trade policy cannot be made in a vacuum but rather must be part of the fabric of domestic policies. If we are not able to do this, growing public scepticism, particularly in the most advanced economies, may mean that further market opening will be difficult, if not impossible. Such a result would impoverish many across the world.
Today’s post from Lilianne Ploumen, Netherlands Minister for Foreign Trade and Development Co-operation and Co-Chair, Global Partnership for Effective Development Co-operation, is one in a series of ‘In my view’ pieces written by prominent authors on issues covered in the “Development Co-operation Report 2015: Making Partnerships Effective Coalitions for Action”
As co-chairs of the Global Partnership for Effective Development Co-operation, my Mexican and Malawian colleagues and I have a huge task – and a huge opportunity – ahead. A new, truly universal development agenda is taking shape and it holds out to all people on this planet the promise of a more equal and sustainable world, with less conflict and less poverty.
The international community must come to agreement on the challenges we will meet and set the goals, targets and indicators to guide this joint effort. I hope to contribute to solidifying the Global Partnership as a unique platform that will make a decisive contribution to realising the promise of these Sustainable Development Goals.
It is clear that we have to act collectively and without hesitation. For the first time in history, ending poverty within one generation is within our grasp. We have a historic opportunity to change the lives of billions for the better, and for the sake of the hundreds of millions of people still facing malnutrition, unemployment and inequality, we must grasp it.
How can the Global Partnership help to achieve this objective? In my view, it is only through combined efforts that the change needed can happen and better results can be achieved. The Global Partnership can pave the way for enhanced co-operation among governments, companies, non-governmental organisations (NGOs) and other stakeholders, which is fundamental for improving the effectiveness of development co-operation.
With its long legacy of joint work on development effectiveness, the Global Partnership also is well placed to support transparent and accountable action among the partners working to achieve common goals.
The Global Partnership can also facilitate the sharing of knowledge and expertise, providing models of good practice from its in-country monitoring of progress against key indicators.
During my tenure as co-chair over the coming two years, I aim to provide political guidance and strategic direction to the Global Partnership to ensure that it continues to foster open interaction among equals and explore new, innovative forms of collaboration. This is an unprecedented opportunity and there is no time to lose. Let’s get to work!
At the OECD Forum on 2 June, Xavier Godinot, Delegate for International Affairs of ATD Quart Monde (ATD Fourth World ), and René Locqueneux, a member of this NGO in the north of France, led a lively debate with over 50 Forum participants on living on less than two dollars a day.
(Une version française de l’article est disponible ici.)
Xavier Godinot explained that they both took part in participatory research to evaluate the Millennium Development Goals with people living in poverty in 12 countries. Their report Vers un développement durable qui ne laisse personne de côté : le défi de l’après 2015 (Towards sustainable development that leaves nobody behind: the post-2015 challenge) is available here, in French.
Xavier Godinot. The World Bank defines poverty as living on less than two dollars a day per person. We don’t care much for this simplistic threshold, but we’ll talk about people with very little money to live on.
René Locqueneux. Here’s what I was told by Béatrice, a woman who lives near me and who gets the Revenu de Solidarité Active (RSA), a job-seekers allowance. “My RSA is €709 a month. I need €438 to pay the gas, electricity, rent, insurance, telephone and Internet and pay back a loan. That leaves 271 euros to feed my son Jessy and me. We have to go and beg for a food parcel from the St Vincent de Paul association.”
Xavier Godinot. When Béatrice has paid all her monthly bills, “left to live on” for food, clothing, transport, recreation, etc. is E4.5 per person per day. That’s better than $2, but it’s not much and Béatrice needs the help of the St Vincent de Paul food bank. Mr Locqueneux, what do you think of food aid?
René Locqueneux. In New York, 1 inhabitant in 5 needs food aid. In Europe, everybody is angry about the cuts to funding for the EU programme for the most needy. And every year, it’s the same old story: more demand than ever this year, and next year even more people will need help. Of course if people have nothing to eat, you have to feed them, but avoid making them welfare-dependent.
In developing countries, we helped the population to dig wells to irrigate and cultivate the land. In France, it would be interesting to give poor people a piece of land they could cultivate. But I think it’s easier to hand out a food parcel than to accompany them to get access to their basic rights, enable these men and women to have a decent job to bring up their families with dignity.
Xavier then presented five recommendations from ATD Quart Monde for post-2015 (when the UN’s new Sustainable Development Goals are to be implemented.
First, leave no person behind in development programmes. He asked René what activists do to make sure everyone was included.
René Locqueneux. To meet the poorest people, for the last few years in my local group we’ve been going to the Post Office on the day the minimum welfare payment comes through. We tell people that if they have trouble obtaining their rights, we in ATD Quart Monde can help them for free to get what they’re entitled to.
Second, involve people living in poverty in knowledge sharing. Xavier asked René to tell us about ATD’s People’s Universities (in French, Spanish and Portuguese) he’s been involved with for a number of years.
René Locqueneux. Every two years since 1989 there’s been a Quart Monde European People’s University, bringing together people living in poverty from all over Europe and enabling them to talk to officials from European institutions. We thought we had to make realistic proposals that could have an impact on European policies. To do that, you need to know what these policies are, and get to know and understand the people working on these policies in Brussels. We had to share the experiences of people who know poverty with people linked to the European institutions. So we created a group to prepare the People’s University and make proposals during the campaign for the European elections.
I’m an activist and a member of the local ATD Quart Monde Sambre-Avenois group in the north of France. We thought about “active inclusion”. We presented a summary to the working group in Brussels. All the members of our group took part in writing the proposals. We worked on it for several months. It was very tiring, but we overcame our tiredness thanks to the very interesting and constructive exchange of views. We were motivated by the fact that as actors in the fight against poverty, we wanted to make our ideas known, and make proposals to Europe.
Third, promote an economy that respects people and the environment.
René Locqueneux. With the solidarity-based economy, it’s very interesting to buy goods from developing countries at cost price or above to enable these countries to develop.
What means a lot to me is when we put insertion into this economy. After a training course, I worked as a technical organiser for insertion programmes. A law passed in 1998 against exclusion talked about the reinsertion of those people the farthest from employment, and insertion was supposed to be a stepping stone towards a job in the market sector. In reality, we took people on for a year or two then they went back to square one because there were no jobs at the end of it. And we started again with other people. That was the reality.
Xavier Godinot emphasised that ATD Quart Monde calls for social safety nets in every country because half the world’s population has no social protection. He then presented ATD quart Monde’s fourth post-2015 proposal: education and training for all, based on cooperation among all stakeholders.
René Locqueneux. Every child should be able to learn and succeed in school, without discrimination, and have the same opportunities for their future. All too often, children from underprivileged backgrounds are oriented towards a specialised education, sometimes even from pre-school.
If schools are to offer the same opportunities and the same quality to all children, you have to avoid orientation too early and a hierarchy among the different curricula that reinforces inequality. The changes needed should be defined along with the parents, especially those who are the most excluded.
ATD’s fifth recommendation is to promote peace through participatory governance.
René Locqueneux. To conclude, we want those without a voice to be heard, we’re fed up being treated as welfare cases, we have knowledge and ideas. Let’s construct a Europe where all citizens have their place.
Today’s post is from Erik Solheim, Chair of the OECD Development Assistance Committee (DAC)
Poverty has been halved in less than 25 years worldwide. The enormous progress over the past few decades is mainly due to rapid economic growth in the South. China’s economy grew by 10% for decades and 600 million people were consequently brought out of poverty.
Economic growth in poor nations is crucial. But it will not be possible to end extreme poverty by 2030 through economic growth alone, even if African countries grow at 10% for the next 15 years. Poverty eradication will require specific policies targeting the most vulnerable groups. The remaining poor tend to be women, minorities, indigenous peoples and the disabled. Poor people are increasingly living in the countryside and in countries in conflict.
More development finance and good policies will be required to end poverty by 2030. The latest OECD peer review of UK development policies (pdf) concludes that the UK can continue to lead a global push for more and better development assistance. The UK reached the international target of 0.7% of national income for aid last year, the first major economy to do so. If the UK can do it, others can follow. The UK Department for International Development (DFID) is also one of the best in the world at measuring success and evaluating what policies work on the ground. We need to learn from success and implement right policies on a global scale. Here are some success stories.
Brazil reduced poverty and inequality while growing the economy. Key to the success was the Bolsa Familia cash transfer program to poor families given in exchange for enrolling children in school and ensuring vaccinations. Similar conditional cash transfer schemes have worked well across Latin America. DFID has found convincing evidence that cash transfers can reduce both inequality and poverty. The challenge for governments in Africa and South Asia will be to mobilize the finances and to put in place systems and safeguards to implement such cash transfer schemes. Can we think of a Bolsa Familia Global?
The microcredit revolution has spread across the world and given millions of poor people, in particular women, the chance to start small businesses and get out of poverty. Bill Gates has made a bet that mobile banking will be the next big microfinance revolution. The UK was instrumental in setting up Kenya’s M-PESA, the most successful mobile banking company in the world. The challenge will be to identify and channel investments to other successful microfinance initiatives.
No country has reached a high state of development without industrialization. Chinese people in the Zhejiang province are now 200 times richer than in the 1970s due to rapid development and manufacturing. Chinese companies are now moving and investing in manufacturing in Ethiopia and Rwanda, helping provide some of the 1 million new jobs required every month across Africa. Development assistance can help mobilize more investments into manufacturing and industrial development. Development aid is also successfully used to provide skills training to minorities and other vulnerable groups. The UK supports Camfed, the Campaign for Female Education that helps girls finish school and get a job and the Employment Fund Programme in Nepal providing skills training to women and people considered low-caste.
Three-quarters of the world’s poorest depend on agriculture. Good policies can transform the sector. Vietnam went from a big rice importer to the second biggest exporter in the world by implementing property rights, building roads to markets and introducing better rice varieties. The UK has among other things funded OECD Innovation Prize winner Katalyst, an organisation providing mini-packs of high quality seeds to poor farmers. The simple innovation has benefitted over 2 million farmers in Bangladesh and increased farm incomes by almost £200 million. Africa needs a green agricultural revolution. Grow Africa is a coalition of companies, civil society, governments and aid donors coming together to improve agriculture. More such coalitions for action are needed!
Soon half of the world’s poor will live in fragile states and countries in conflict. Conflict can reverse national development by as much as 30 years. Minorities are often targeted and the poorest suffer the most in war. The international community must do more to prevent and stop conflicts. The UK has made progress in coordinating peace and conflict prevention issues across government through the National Security Council. The UK is also committed to direct 30% its aid to support fragile and conflict affected states. The Conflict, Stability and Security fund, a £1 billion venture capital fund for peace, poverty reduction, state-building and security objectives is an admirable way to support peace entrepreneurs and peace processes.
Rapid sustainable economic growth combined with targeted policies for vulnerable groups will make it possible to eradicate extreme poverty by 2030. The challenge will be to identify and implement the most effective policies. Then to mobilize the finances and political will to get the job done!
A Complex Thing! Are measures of complexity an end in themselves to address extreme poverty?
Today’s post is from Emmanuel Asomba, a consultant working on poverty reduction, human development and systematic reviews of development polices and programs.
The most prominent goal of development has been to eradicate extreme poverty. Both literally and figuratively this goal has been part of a prescriptive stroll over the past two decades, moving in a linear fashion. However, along the way, it has become clear that poverty is a multidimensional phenomenon changing across context, thus requiring multiple correspondence analysis and interventions. This is far more amenable to adaptive solutions in social change. It underlies a different vision to address, among others, the interactions between inequality and poverty, primarily to share approaches in different domains, and ultimately to enhance the interconnectedness between institutions to balance social outcomes.
With a number of components, such as behaviors and organizational parameters, needed for development to work, it is important to capture the variability of desired outcomes to adapt social and economic interventions. Proclaiming that social protection programs and job promotion have to “accommodate specificities” is not enough. The transition is to consider how aggregation happens, widening the scope of change by reviewing the relationships between cause and effect to discern how emergent practices can blend to improve rights-based/social justice platforms. This view stresses how change can unfold across converging organizational contexts.
To alter the balance more effectively, interconnections among intervention designs can boost the possibility of generating multidimensional development systems. The idea is to bring about empowerment and cooperation across several sectors and stakeholders, all of them identifying and differentiating the causes of change to come up with more than mere technical fixes. For instance, the ultimate objective of the MDGs (Millennium Development Goals) has been to promote sustainable development across the board. The broad effort of the development community consistent with the post-2015 agenda is to avoid fragmentation. This can be most apparent if human development, food security, access to education, health care, etc, can scale up, increasing relationships, operationalization, transparency and compliance across life-cycle development approaches. These elements are states of matter stemming from observations and applications of qualitative differences in social systems.
Extreme poverty and inequality are complex issues; we have good reasons to think that integrating a mix of alternatives in programming is a constructive route to support the expansion of “ecosystems” or networks of change. This outlook is a way to set the focus on context and variation (see Tony Pike). As a step forward we can test the viability of diverse approaches through the tweaking and sequencing of activities to achieve robust feedback systems.
In the world of complexity as outlined by the DAC Network on Gender Equality, the pragmatic case of Women’s Economic Empowerment (WEE) shows how we can reconcile opinions to combat the isolation caused by extreme poverty, and consequently the deprivation feeding women’s unequal control of assets and income. By emphasizing the improvement of standards of living, especially for low-income women, this concept can approach social-economic programs from a systems-perspective, i.e., adapting and iterating solutions to build local expertise and knowledge to reduce their vulnerability. In tandem with consistent policies, principles of equal rights and equity can help map new conceptions of relationships and interactions between various actors, thus shifting measures of initiatives and ownership in gender relations.
The transition moves away from simplifications, adapting organizational levels and flexibility in interventions. This approach contrasts with conventional approaches to programming by capitalizing among other things on the existence of different feedback loops to recalibrate for instance, women’s bargaining power, or their mobility. So, the idea of cause and effect is brought under new light with pathway models telling the stories of key outcomes and relationships that can generate change or be measured.
An illustration of this complexity paradigm is the way CARE shifted its corporate processes and strategy to grapple with gender equality for its agricultural portfolio targeting high-poverty households in Latin America and Africa. A critical juncture was the need to streamline operational links through gender-sensitive policies as part of the Women Empowerment in Agriculture (WEA) framework. Primarily set to encourage the role of women and girls in leadership by using adaptive paths, the emphasis was on an organization-wide change process to build a collective approach on individual rights. CARE called for the understanding of ecosystems of equal rights to adjust their poverty profiles and policy interventions.
A case in point is the implementation in 2008 of their Income Smoothing through Agricultural Marketing Interventions (ISAMI) in Uganda, involving male decision-makers in supporting women across agricultural networks. Seen through a multidimensional lens, this initiative threw a strong light on the pertinence of joint distribution of disadvantages to address women’s participation in household and community-level decision-making. By engaging local groups to address the nature of the gender division of labor, time poverty, or the gender control of labor and products of labor, this project triggered the emergence of implicit causal pathways that led to robust strategic programmatic shifts.
It evolved around three dimensions and sub-dimensions of women’s empowerment in collective marketing, namely, agency, relations and structure. Out of them came forth, a responsive logic model. It broadened feedback loops on connections and practices (cause-effect chains), thus completing CARE’s multidimensional approach with poverty income measures. The true explanation is that these parameters mapped-out a resilience ecology (Circle of Learning) changing old patterns out of emerging practices (gendered allocation of resources) regulating women’s decision influence in household, market accessibility, or the pursuit and acceptance of accountability.
Global development has to move away from linear restrictions treating complex problems in separation. Fulfilling this objective is likely to create significant advances to meet the challenges of extreme poverty. The extension of multiple perspectives can target inherent complexities, making experimentation and learning mainstream adaptive policy tools.
The Social Institutions and Gender Index (SIGI) from the OECD Development Centre is an innovative measure of underlying discrimination against women for over 100 countries. While other indices measure gender inequalities in outcomes such as education and employment, SIGI helps policymakers and researchers understand what drives these outcomes. SIGI captures and quantifies discriminatory social institutions, including early marriage, discriminatory inheritance practices, violence against women, son bias, restrictions on access to public space and restricted access to productive resources.
Applications of complexity science for public policy OECD Global Science Forum
“Ending Poverty” is the title of the OECD Development Co-operation Report 2013. For the first time in history, we have the knowledge, technologies, policies and resources required to bring an end to extreme poverty. President Obama, World Bank Group President Jim Yong Kim and others have explicitly called on the world to set poverty eradication as the overarching aim of the post-2015 framework.
Overall the last decade has been the most successful period of poverty reduction in human history. And progress was not limited to the alleviation of income poverty: The fact that polio is close to global eradication and that child mortality has declined rapidly are striking examples of recent successes. All these developments show that there are indeed reasons for optimism.
Yet Helmut Reisen deems the end-of-poverty declarations euphoric and argues that the idea it might be possible to end extreme poverty by 2030 may be based on wrong premises. He has raised some important points and I thank him for having done so. It is true that the last decade’s progress in poverty reduction has to be considered with caution. For instance, economic growth in China alone has been responsible for a large share of global poverty reduction. Progress certainly has been unevenly distributed across the globe. Some fragile states are falling behind and development assistance to some of the poorest countries is decreasing. Future successes in poverty reduction will by no means be easy to achieve. For example, targeting the ultra-poor and poor minorities will be more difficult than what has been accomplished so far. But eventually this is a matter of political will and good pro-poor policies.
This is why the Development Co-operation Report 2013 comprises contributions from China and other successful countries sharing experiences and lessons others could learn. Yet outstanding developments such as China’s economic rise should not hide the fact that there has also been a lot of progress in Latin America, in Turkey and Indonesia as well as in the entire South East Asia region. If absolute progress of countries in achieving Millennium Development Goals is measured, even low-income countries in Africa reach the top ten places. Rwanda, Burundi, Ethiopia, Liberia, Sierra Leone, Mozambique have made quite significant progress, as outlined in the OECD’s Keeping the multiple dimensions of poverty at the heart of development, OECD and Post-2015 Reflections. OECD analyses of the past and projections for the future support such positive thinking.
Poverty eradication is possible if economic growth continue and there is no further deterioration in economic inequalities. The OECD’s Ending-Poverty message is not, as Helmut Reisen holds, based on the projections by Moss and Leo (2011) or Kharas and Rogerson (2012). Instead we refer to the projections by Peter Edward and Andy Sumner (2013) as well as by Martin Ravallion (2013) who conclude that it is “feasible to come close to ending extreme poverty by around 2030 or so – but only under certain conditions. (see: Sumner, A. (2013). What Will it Take to End Poverty? Development Co-operation Report 2013, OECD, Paris)
To be sure, our report (especially Sabina Alkire’s and Andrew Shepherd’s contributions) explicitly presents the serious challenges linked to achieving global development objectives. Based on such assessments the different chapters of the report also present possible policy strategies for poverty reduction. OECD has core competences on a range of issues relevant for poverty reduction – a multidimensional and complex challenge. OECD work on policy areas such as development cooperation, tax, financing, investment, statistics, environment, and education are extremely relevant and directly linked to future poverty reduction policies. For instance, our research – and experience with countries such as South Korea, China, and Vietnam – suggests that there is an enormous potential for greater tax revenue generation in developing countries – e.g. from better collection systems, from big companies paying a fair share, from addressing illicit financial flows. Especially in middle-income countries, where more than 70% of the global poor live, domestic resource mobilization is both crucial and promising.
The fact that OECD countries, too, face challenges regarding increasing poverty and inequalities does not deprive the Organisation of its competence regarding these issues. On the contrary, these developments worry the OECD and have shifted our focus on these challenges. Our work in this area provides important knowledge that helps both OECD and developing countries to tackle poverty and inequalities more effectively. After all, poverty and inequalities must be considered universal challenges. New ways of working together and learning from each other on a global scale, e.g. through global partnerships, can thus help to achieve this global goal.
For all this political will is needed. This conviction is the main reason why the OECD is calling for “Ending Poverty”. It is a political message intended to mobilise all intellectual, political and financial resources to make progress and – hopefully – end poverty. The development community has far too often tried to mobilise by calling the world a horrible place. Yet positive messages and clear goals are much more likely to mobilise people and politics. Poverty will only be ended if politicians make poverty reduction the top priority among their many different and competing priorities.
Can we really end poverty? Brian Keeley’s report from a debate in London in December 2013 to launch the Development Cooperation Report