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CDI 2015: How Do Rich Countries’ Policies Affect Development? – Podcast with Owen Barder
00:12:39
How do rich countries' policies affect the world's poorest people? The results are in on CGD's 2015 Commitment to Development Index, which highlights strengths and opportunities in national policies on aid, environment, technology, and more. Owen...
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Foreign.
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Hello, I'm Rajesh Merchandani and thanks for joining me for this edition of the CGD podcast. Now, how much do rich countries policies help or hinder the world's poorest people? That's what we're thinking about today and that's what CGD's commitment to development index measures. The CDI ranks 27 of the world's richest countries according to their performance across the seven policy, aid, trade, migration, finance, environment, technology and security. It recognizes that development is about much more than aid now. And as we enter the era of the Sustainable Development Goals, that the world's problems are shared problems and that therefore the solutions depend on global cooperation as well. Joining me to talk about this is Owen Barda, who's CGD Vice President and Director of our Europe Programme. Owen, great to have you here in the studio with us.
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Thanks, Rajesh.
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Now, you and your team combined this year's cdi, you did all the number crunching, compiled this year's rankings. But let's just sort of step back from the rankings for one second and think about the bigger picture. What it's telling us is that if rich countries want to make steps towards achieving the SDGs, then right here in the CDI is a way of understanding how they can do that.
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That's exactly right. The development agenda has shifted. The Sustainable Development Goals are a much broader agenda than the Millennium Development Goals that they rep. And they're broader because they're about how we build long term sustainable prosperity. And we're not going to do that just with aid. This is also about how countries trade with each other. It's about how we deal with global problems like climate change. It's about creating security across the world. And there are lots of things that we do in rich countries that affect the prospects for meeting those goals in poor countries.
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And I think on top of that is the idea that the benefits of development friendly policies don't just accrue to developing countries as well.
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That's exactly right. When, for example, rich countries open their markets to goods and services from poor countries that benefits consumers and taxpayers in their own country. So this is not a long list of sacrifices that we want rich countries to make for the world's poor. This is a set of reforms and better policies that would make the world a better place. And of course, one of the things about the Sustainable Development Goals is that they are targets for us all to make the world a better place to have environmental sustainability and increase prosperity everywhere.
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So policymakers who signed up to The Sustainable Development Goals in New York in September are now listening to this and going, aha. Owen is about to tell me how I can achieve these goals and where I might actually rank in this index. So let's do that first, then let's tell us, because if you have an index, what do you want to know? Where's my country come? How well is my team doing, for example? So who does come out best? Best is a sort of strange word to use, but who has the most development friendly policies and why?
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So the team that does best is Team Scandinavia. At the top of the index, we see Denmark, Sweden, Norway and Finland. So literally right there, what you see is the countries who not only have good and effective aid budgets, but they also pursue development friendly policies in a large variety of other ways. They are good at accepting migrants from the developing world. They tend to be good at having relatively open trade for developing countries. They contribute to peacekeeping and security operations. So in many areas they're marked up and that's why they come top of the index. That said, there are many areas even those countries that come top of our index could improve upon and where they could learn from countries much further down the index.
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Okay, let's come on to that in a second. But let's just find out a bit more about who is where. There are a few countries that tend to languish down the bottom of the table.
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Yes, that's right. So both South Korea and Japan tend to be bottom placed. I should say that they are also improving faster than other countries in the index. So although they started low when we first started collecting the data for this, they have gradually improved. They get penalized for a variety of reasons, partly because their trade policies tend to be bad for developing countries. They have high barriers on imports of especially rice, which is, which of course is a particularly important market for them, but also things like wheat and beef, and that makes it difficult for developing countries to sell to them. Japan also has a very low level of commitment to international peacekeeping, for example. That's partly because they've been largely unmilitarized since the Second World War, so they don't have large military forces to contribute. So some of these, there are some particular reasons why they come low, but there are things that they could do to improve their scores on the index.
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Let's find out a bit more about where the UK and the US place in the index. So the UK, I think, according to this year's rankings, is sixth, which is still the kind of highest of the G7.
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It's almost an honorary Scandinavian. There's a group called the Nordic plus in international development circles that the UK is part of. And so this is the plus part of the Nordic Group. The UK does well, especially on having a good aid program. It's both generous and has very effective aid. We measure both, not just the amount of aid, but also how well it's delivered.
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So it's not just based. That command is not just based on the 0.7, the proximity to 0.7.
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That's right. And importantly, we look in all of these cases on the contribution compared to national income or compared to the size of the country. So we don't reward bigger countries for being big. We're looking at the effort that countries make relative to their size.
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The US therefore is the biggest donor.
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But it's the world's biggest donor in dollar terms. But in terms compared to gni, compared to its national income, it's actually not a very generous donor. It's rather a stingy donor.
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And so where does it come in the rounds?
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And so the US is 21st overall out of 27 countries, not only because of the aid component, it does well in some areas, but in aid it doesn't do particularly well.
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And so there are these seven Aid, trade, finance, migration, environment, security, technology. And then within each category there are dozens of indicators. How many indicators is actually available?
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There's a couple of hundred indicators.
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And so you get measurements through publicly available data on all of this, whatever is available.
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That's exactly right. In fact, the indicators sum up. We estimate it to be over 10 million different data points from for each country. That's mainly because we look carefully at the trade data, at the tariffs and quotas, and there are lots and lots of different data points there. But so we're amassing a lot of data. We look for publicly available data. We're not a panel of judges holding up scores for countries. We're trying to use objective quantified numbers where we can, and we're sometimes limited by what data is available. So we're using these to indicate the overall state of a country's policy.
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Then you measure the indicators and then you take a weighted average to get up with the index ranking.
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So we weight the sub components to develop these seven components that you measured. Aid, trade, migration, environment, security, technology, transfer and finance. And then those we add together unweighted. So we treat all of those seven dimensions the same.
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One thing you mentioned earlier is this idea that countries higher up the rankings can learn from countries lower down. And that's, I think, a really important element of this because that shows countries how they can improve their policies overall, how they can get closer to achieving, starting to achieve the sdg. So who can learn what from whom?
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So, for example, one country that doesn't do very well overall, as we discussed, is South Korea. But they do have very good policies on technology transfer. Technology transfer is hugely important for development. If developing countries can take ideas and innovations and build businesses and succeed from that, that adds to global prosperity. South Korea invests in R and D more than other countries, and it has relatively low intellectual property rights protection that enables those ideas to be taken up and used elsewhere. So although they come bottom of the index overall on technology transfer, they do extremely well. And so that's something that the rest we look at South Korea, we don't see an economy that doesn't innovate. We see an economy that's highly successful, technologically led, innovative economy. We could learn from what they're doing because it's obviously good for South Korea and it's good for the rest of the world, what they're doing. So there's a good example of something that we can learn. Sweden, a country that does very well on things like foreign assistance, has very high levels of arms sales. They have an arms industry that sells to poor and undemocratic countries. We weight arms sales according to how poor the places are that are buying them and how undemocratic they are. And Sweden does very, very badly on that index. Now, they could look and see the way that other countries restrict the sales of arms, and they could, as a matter of public policy, change that. And in fact, there have been signs in the last year that they're doing that, and we will expect to see that in the data going forward. It doesn't yet feature in this year's index, but we're seeing the policy changes that we would expect to see them lift off the bottom. As I think they're learning kind of international norms and standards that it's not okay to be selling arms in these places and they need to sort that out.
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And for policymakers who are interested in this, they want their country to come out well. You want to be seen as being development friendly. And so there are ways here that they can. There are practical tools and lessons for them.
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That's exactly right. I personally don't think that scoring well on the index is enough of an incentive for a country to change its policies one day.
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One day.
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But it does help identify what the issues are and it forces a conversation about whether a country could do this better, whether there are things we could learn from other countries. And it reminds people that these are important not only for our own prosperity, but for the rest, for the developing world.
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And it's an accountability tool.
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It absolutely is. And it helps also bring evidence. I think being able to say to policymakers, look, you're lagging behind the rest of the world in this respect does actually help stimulate the conversation. I know when you Canada, which has always performed badly on our environmental index, when we publish the Commitment Development Index, a lot of Canadians who think of themselves as being quite environmentalist are interested in why that is. And it helps draw attention to issues about the levels of carbon emission or tropical timber imports in Canada. And that has helped create part of the conversation there.
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And didn't. Is it the Dutch who instigated some kind of review of an area of policy on the basis of this?
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Yes, the Dutch looked at why European countries generally are doing badly on technology transfer. In particular, intellectual property rights have gradually got tighter and tighter. So one of the things the index enables you to do is to see what's changing over time. And what we've seen is that the European countries are tightening up the rules that make it hard to transfer new technologies to the developing world. And the Dutch parliament had a debate about what was going on. Their conclusion was that these were largely rules and practices that were emanating from Brussels. And so their attention focused to how they could begin to change that in Brussels. So that, I think, comes from drawing attention to these issues.
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This year's CDI rankings and all the information that goes into calculating the index is available on our website, cgdev.org Owen and team. Let's thank the team for putting the index together. But Owen, thank you for coming in and talking to us about it.
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Thanks, Rajesh.
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And don't forget to join me, Rajesh Merchandani, for the next podcast from the center for Global Development.