The OECD development cooperation of the future

The OECD, the club of the industrialized countries, uses its latest annual development cooperation report  to review the past 50 years and to look ahead at future challenges. Former World Bank President James Wolfensohn, the head of the UN women's organization Michelle Bachelet, and African Development Bank President Donald Kaberuka are amongst the nine authors sharing their views from their respective standpoints. The result is a collection of postulates from which no clear picture emerges but which confirms some of the trends in the current development debate.

MDG-Bashing

There is acknowledgement of the significant part played by the Millennium Development Goals (MDGs) in giving fresh impetus to development aid and its funding. At the same time, the MDGs are criticized for being too strongly focused on the social dimension of development while ignoring economic growth.

This criticism is very much in vogue internationally. Calls are growing constantly louder from official development agencies, the European Commission, development banks and the G-20 for social goals to be scrapped in favour of economic growth, as the private sector is the driver of development. But how can the economy grow in poor countries, how is the private sector to thrive when huge swathes of the population are malnourished, uneducated and often ill? The vague answer from the MDG bashers is that growth must be inclusive, broad-based and must be green…

The authors are in general agreement as to where things are headed. Development cooperation must tackle many more topics than just poverty reduction. It should address the climate issue and gender inequality, promote macro-economic balance and trade, protect the biodiversity, enforce human rights, give indigenous peoples control over their resources, act as a lever for private investment, build infrastructure (transportation, energy, etc.), and much more.

With this almost endless list it is no wonder that former DAC Chairman Richard Manning poses the rhetorical question as to whether development cooperation should not set itself the goal of «sustainably managing the planet».

For the former Managing Director of the French Development Agency Jean-Michel Severino, this is not a question but an imperative. He thinks that development cooperation should be renamed «Global Social Policy» and should take all global public goods  on board.

Basic supplies versus global goods

Global public goods do indeed play a crucial role in a country’s development. But to conclude that it falls to development cooperation to preserve or supply such goods so that poor countries can develop is a dangerous inversion of the argument. Manning describes the risks vividly and succinctly: poor countries could be forced to invest development aid in a manner that primarily benefits others. He cites the example of clean but costly energy technologies. This foreseeable coercion to invest in global public goods is making it very difficult for aid-dependent countries to make balanced use of the resources available to them.

In other words, the more aid that goes towards global public goods, the less aid-dependent countries can invest in meeting the vital basic needs of their populations. Yet there is interaction between those goods and poverty reduction in that the consequences of global warming, pandemics such as HIV/AIDS or financial crises do increase poverty.

That is what makes it impossible, Manning continues, to determine clearly what qualifies as funding for development or for public goods. His solution to the dilemma is for development cooperation indeed to tackle more issues but also to focus more sharply on poverty, for example, by concentrating on the poorest fifth of the population in partner countries.

Funding up in the air

But how are all these new tasks to be financed? The report does not give the answer. Severino alone addresses the issue, albeit in a somewhat hazy manner. He proposes taxing the wealthy elites in all countries, for example through a levy on airline tickets. But Severino, who now sits, inter alia, on the Board of the food multinational Danone, overlooks the very international tax that would really raise funds, namely the tax on currency trading. The United Nations Development Programme (UNDP) has recently calculated that a tax rate of 0.005 per cent per year would raise USD 40 billion. If the decimal point were moved one place to the right, the tax would still be minimal but would bring in more than enough to finance the MDGs and the necessary climate measures in developing countries.

Creative accounting

By contrast, the Frenchman is very concrete in the matter of creative accounting. He suggests that all expenditures that contribute in any way to the development of poor countries should be counted as aid. This would therefore include not only official development assistance, which is funded from taxes, but also private financial flows such as solidarity levies on consumer goods, or socially responsible investment funds operated by private banks. Although such calculations do not raise one additional cent, several developed countries are pressing for them as a way of considerably improving their current image, being still far from delivering on their financial promises.

Aid financing is not the only topic that the report fails to mention. It also remains silent on the debate on development policy coherence, triggered by the foreign trade policies of industrialized countries amongst other things, and which is far more important than aid for the development of poor countries. Nor does the report contain any trace of a civil society input.

The OECD likes to see itself as a forward thinker and adviser in development cooperation matters. If it wishes to play that role in the future, it must ensure that aid is not transformed into a system to promote the sustainable development of the entire planet and to take over the management of global public goods. For however great the need for a holistic approach, that is no task for development cooperation.

Switzerland following the trend

Switzerland too is increasingly using development cooperation to manage global public goods. More and more funds are flowing into areas that are in our country’s direct interest, such as climate stabilization or the reduction of uncontrolled migration. And like other industrialized countries, Switzerland opposes new ways of financing these additional tasks – for example by taxing airline tickets or currency trading. It also refuses to contemplate using some portion of the CO2 tax for climate measures abroad. In contrast, it has been rather taciturn so far on the proposed new ways of computing aid. It is in fact already profiting considerably from existing accounting tricks. Last year, for example, the costs of looking after asylum seekers from developing countries made up some 16 per cent of development cooperation. No other OECD country has reached such a sizeable share.

Michèle Laubscher, Alliance Sud

Executive summary of the OECD Development Co-operation Report 2011

Article published in: Alliance Sud News No. 70, Winter 2011/12