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Getting Beyond Aid in Addis – Charles Kenny
00:14:21
With the third international Financing for Development conference taking place only a week from now in Addis Ababa, I sit down with Charles Kenny to take stock of this marquee event. We discuss its importance and what one might reasonably hope is...
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Foreign.
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Hello, I'm Rajesh Merchandani and thanks for joining me, as ever, for the CGD podcast. Today, with the Addis Ababa Financing for Development Conference just around the corner, we thought it was an important moment just to sit down and think more about it. Why is it important? What does it aim to achieve and can it realistically meet those objectives? With me to do that is Charles Kenny, a senior fellow here at CGD and also the guy who's been leading our work on addis and the SDGs. Great to see you here, Charles.
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Great to be here.
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How important do you think ADDIS is and why?
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I think it's hugely important. It's an opportunity that comes up once every 10, 15 years to really have the world's finance minister's sit down and talk about what are we going to do collectively to come together to deliver on the promise of global development.
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The point about Addis, I suppose, is that it is there to decide how to pay for the SDGs. And that needs a reality check, doesn't it? It means thinking beyond the issue of aid. We don't live in that world where aid is the largest source of income for developing countries.
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Absolutely. I mean, if you look at the Sustainable Development Goals, they are incredibly ambitious, for good or ill. They include things like wiping out global poverty, wiping out avoidable child mortality, wiping out malnutrition, providing everybody with electricity and water and sanitation, and the Internet. I mean, it's a long list of expensive things. Right. If you just look at some of the guesses on how much it would cost to meet just the infrastructure part of this, we're talking a trillion, you know, trillion plus dollars a year for the next 15 years. So it's a huge amount of money. And when you look at global aid flows, which bounce around around $150 billion, it's clearly not aid that's going to deliver on this package, even if aid still has a very important role to play.
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So there's two elements there. There's really the fact that rich countries don't have the money it's going to take to pay for the SDGs. There's not the political will to stump up any more money, or much more money really, but also that there are other sources of revenue already available. Remittances, for example, far outstrip the amount of foreign aid sent by rich countries by double or maybe even triple. And that's the reality check, that development finance exists in many different forms in many countries other than aid.
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Yeah. So aid remains really important and Personally, I think the rich world ought to keep to its commitment of 0.7%, which we're far away from 0.7% of their GDP going to ODA. But even if all the rich countries did meet their 0.7% commitment, you get the total up, but not nearly enough. The real money these days is in developing country government budgets, it's in foreign direct investment, it's in remittances, it's in private sector investment in developing countries. That's where the trillions are rather than the billions and hundreds of billions. And so we need to put this all together at Addis, put the whole package together where aid is still a really important component. But the big numbers come from elsewhere.
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So let's think about those big numbers then. The private sector in developing countries and also developing country government revenues. Those are the big numbers. Those are the kind of multi trillions of dollars per year that is going into and being invested in economies in developing countries. And that seems to tell us that the key way to pay for development is by helping those countries create stable, prosperous economies of their own.
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Absolutely. So let's take China, the success story of the last 20 years in terms of reducing global poverty numbers. Just China alone has played a huge role in more than halving the number of people who live on less than $1.25 a day. China is an export led growth story. About 30% of its GDP goes to exports. Of those exports are about half are produced by companies that have got foreign investment in them. So both global trade and global investment were vitally important to China's growth story, which was vitally important to reducing global poverty. So if you want to wipe out global poverty as the USDG suggests, this is a story. Yes, it's about aid, but it's also definitely about trade and investment. It's also about migration. It's also about making sure that we preserve the global commons like the environment. It's got to be about all of these things.
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So looking at the Addis accords, the draft accords, I know you have been poring over the different iterations of these. What are the things that jump out at you in the latest version of the accord that you are nicely surprised about or that make you groan and think, okay, this is the lowest common denominator, it's rich countries living up to low expectations of them.
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So on the plus side, there's language in the accord about a global social flaw, about the idea that just everybody worldwide deserves access to certain basic services. I would like to see those services laid out in the document what they are. And that hasn't happened. And I'd like to see more of a commitment from rich countries to help deliver on those services in the poorest countries, which will undoubtedly need help. But it's a nice step forward at least to have this global social flow.
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And what basic services would you like to see in there? What should it be?
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So if we're really going to wipe out global poverty by 2030, for example, the global income poverty, some countries are going to need help with transfers. We're going to actually need to just hand over cash to some of the very poorest people in the world to make sure they get over the $1.25 or $2 line, whatever it is, that it'll end up being. When it comes to health and education, there's a certain package of basic health services that you really need in order to avoid preventable child mortality. You need everybody to get the VAC vaccinations. You need quality access to care in hospitals for mothers and newborns, for example. In education, not only do you need access to schools, you need to access to schools that are actually teaching. We've got a whole bunch of kids in school at the moment who are sitting there every day, their bums are on their seats, but they are coming out after five, seven years not even be able to read a simple sentence or do two digit math sums. I mean really simple stuff they should have learnt in the first, first or second year. So that would be a great start to the kind of social floor package. Then you'd add in some of the infrastructure services. We want everybody to have clean water, we want people to have decent sanitation and so on. So put that package together. The price tag will be large. Also the policy reforms required to deliver it will be huge. But I'd like to see that package.
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Laid out because the price tag is so large, because the policy reforms that require to meet those goals are so huge. As you say, is it a realistic document? Is it realistic to want those things?
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It's realistic to want them. Whether we'll get them, I guess, is another thing that should have been the question.
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Is it realistic that those things could be achieved?
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So I would be frankly amazed, delighted, but a bit amazed if we do actually reach all of the SDG 0 goals, as they're called, the universal coverage for all these infrastructure services, the universal literacy, the universal access to secondary education and so on. I think the last 15 years under the Millennium Development Goals show we can make huge progress. We have more than HALVED child mortality. We have more than halved global poverty. So I think it's definitely plausible to imagine immense progress over the next 15 years. But it's only possible to imagine that immense progress if we have a global commitment to, to deliver on that progress. This is definitely primarily about individuals in developing countries and about developing country governments delivering services. But there is a huge role for the rest of the world to play, a self interested role, I might add, for the rest of the world to play in delivering these services, which will lead to the kind of progress we're talking about.
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And that's why you think Addis is important.
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Yes.
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So let's pick up again on the content of the accord. You talked about the need for a social flaw. You wish that was in there, laid out more specifically what else is good in there?
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So again, something that's new in the Addis Accord is actually positive words about migration as a force for development. Now my colleague Michael Clemens has laid out clearly that migration is, you know, the trillion dollar bill lying on the sidewalk. Right. It's where you could most easily have the biggest development impact if we opened up our borders a little bit more to flows of people. The fact that the language is in there that migration is a force for development is a step forward. The fact that it's followed by nothing is a real disappointment. What I'd like to see is not, I'd like to see larger flows, but politically what's more plausible is those flows being better designed to maximize development impact. Let's get more people into the United States doing the kind of temporary agricultural work that this country needs. Let's get more of those people from poorer developing countries rather than Iceland as it might be, which is quite rich, thank you, even after the financial crisis and doesn't need those jobs as much. So this is about, I would like to see, as I say, more, but if we can't have more, at least let's sort of focus migration flows on when they're likely to have the most development impact. And Michael has a whole range of plausible policy ideas around the idea of trying to maximize existing flows for development impact. I'd love to see some of that language.
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What is not in here that should be. You talked about social frauds, the basic provision of social services.
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So what's not in there is anything much on actual delivery? So there's nice words about trade. Well, we've had a Doha development round going on for well nigh two decades almost now, right? A decade and a half at least. Why aren't we Delivering on it. This is trade is hugely important for global development. Where's the solid language on we're finally going to do this? There's weak talk in there about multilateral development bank reform, reforming the World bank, the African Development bank, to play a bigger, bigger role in supporting infrastructure investment and so on. Where's the actual language about what's going to be done, how's it going to be done, when's it going to be done? So although it, as I say, covers the breadth of development issues, I'd love to see again and again there's nice language followed up by nothing much in the way of commitment. And I'd love to see between now and Addis a little bit more solid deliverables being promised out of the Addis Agreement.
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So cast your mind forward to 2030, the end of the SDGs. We don't know what's going to replace them. But what's the world that you hope to see? Let's be part idealist, part economist here. Not saying that communists can't be idealists as well, but let's separate those two out for a moment. What is your best hope for 2030?
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My best hope is the realisation that a lot of the stuff we're talking about, a lot of the global flows we're talking about wanting to happen in order to deliver on the SDGs. By 2030, every country, rich and poor, will realize that it's in their self interest to deliver on this stuff. If you think about the Millennium Development Goals as primarily being about delivering aid, I think it's a mistake to see aid as just sort of donor to recipient. It's all about us giving to them and aren't we generous? I don't think aid is like that, but lots of people do. You really can't see trade and investment and migration that way. They really honestly are win wins. Right? So both parties gain from trade. If you think about the story of India's IT sector, now $150 billion industry, largely created on the backs of a bunch of Indian migrants, moving to Silicon Valley, learning lots of skills, founding lots of companies that hired lots of Americans, some of them going back and some of them, some of them going back permanently, some of them going back for a little bit and setting up companies in Bangalore in India to deliver some of these services, ITC services, back to San Francisco. This is just a hugely wonderful story for both California and for Bangalore, for India and for the United States. And it's a story about migration and investment and trade. I think if we can get over this idea that these global flows are only in the interests of one party. And we realize that they are vital to the kind of progress we want to see in development goals. One, we're much more likely to meet the development goals. Two, the world would just be a much better off place in lots of ways. And I think there are reasons to believe that the world will move in that direction over the next 15, 20 years. Take the example of migration. US Europe populations are getting older. We want to retire, we want to go off and play golf. We don't want to be working. Where's the young labor force going to come from? If you look at fertility rates in Europe and the United States, they're well below replacement. Women are quite right choosing not to have as many kids as they used to and quite right. They absolutely have that right to make that choice. But it means that the kids, the young people who are going to do the work, have to come from somewhere. Migration is the obvious answer. I think more and more people will realize it is in their self interest to have these kind of global exchanges. And as I say, I think that is what will power us towards meeting the sdg, maybe even get us all the way there.
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Charles Kenny, please come back in 15 years to review progress.
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Thanks very much.
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Thank you very much for joining us on the CGD podcast for now.
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Charles thanks.
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And as ever, you can follow all our work on Addis and on the SDGS via our website cgdev.org I'm Rajesh Merchandani. Join us again for the next podcast from the Centre for Global.
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Sam.