In his famous 1955 article in which he hypothesized that national income inequality would increase in the early stages of economic development and subsequently decline as average per capita incomes rose, Simon Kuznets warned that policies to help the poor that are “the product of the imagination unrestrained by knowledge of the past” are likely to be “full of romantic violence”. That is to say, in spite of the best intentions, policies that are not historically informed are likely to increase rather than reduce poverty.
The most important historical lesson of the last 50 years on poverty reduction in developing countries is that substantial poverty reduction occurs in countries which successfully develop their productive capacities and at the same time expand productive employment opportunities. This requires economic development policies which promote capital accumulation and technological progress and thereby promote structural transformation from diminishing returns activities (mainly agriculture) to increasing returns activities (in industries and services). At the same time, it requires social development policies which manage the complex social transformations and distributional conflicts that go along with economic development.
The MDGs, as a set of indicators, are innocuous. However at present they are embedded within a broader development paradigm. This paradigm is subverting rather than supporting the process of change which has historically delivered poverty reduction in developing countries. In that sense the MDGs are working in a way which is “full of romantic violence”.
The development paradigm within which the MDGs are currently embedded includes a particular approach to international development cooperation and a policy narrative about how development and poverty reduction can best be promoted at the national level.
The approach to international cooperation is the partnership approach which stems from the OECD/DAC 1996 Report on Shaping the 21st Century: The Contribution of Development Cooperation. This has been operationalized through gaining widespread political support for the MDGs in the wake of the Millennium Declaration, through the introduction of the PRSPs and the endorsement of an aid-plus approach to development partnership in the Monterrey Consensus, and through an increasingly complex application of results-based new public management to improve aid effectiveness via the Paris Declaration process.
Unfortunately, although many of the principles behind this approach are right, it has proved difficult in practice to enable country ownership of national development strategies. The aid-plus approach has been highly selective (for example with regard to international trade and technology flows) and donors have increasingly shifted the composition of aid away from production sectors (including notably agriculture) and economic infrastructure. Donors have taken a sectoral approach to the MDGs, focusing say on basic health or education or water, or even a favourite disease. With this approach, it is possible selectively to achieve targets but this does not add up to comprehensive progress. Instead there are dysfunctional outcomes, for example, when more and more children go through school but public expenditure cannot increase sufficiently to hire extra teachers and so quality falls. Or they go through school but then cannot find jobs or productive livelihoods.
The policy narrative of the current paradigm argues that the best national strategy for achieving poverty reduction is “global integration with a human face”. That is to say, national policies should promote close integration with the global economy through deep liberalization, both at and behind national borders, and through harmonization with global standards. However, basic poverty and human development outcomes, expressed in the MDGs, should be attained along with this process. This is an expanded version of the Washington Consensus which, although pronounced dead on many occasions in the last ten years, still enjoys a lively after-life through governance reforms, more prioritization to social sector spending and its marriage with the progressive social floor of the MDGs. But unfortunately, the adoption of this policy approach has meant that in practice most poverty reduction strategies act as development reduction strategies.
Although the MDGs are now working within a development paradigm which is counter-productive for poverty reduction, they are immensely significant. They are part of the emergence of a global consciousness in which persons all over the world are seen as living in a single social space and the nature of their well-being is compared. Moreover, they have provided the basis for a new international development consensus during the present decade following the breakdown of the Keynesian development consensus on which development cooperation was based at the end of the 1970s.
The international development consensus surrounding the MDGs is likely to be particularly important in providing benchmarks for mitigating the social impact of the global recession in the coming few years. But the emerging new challenge, which is staring us in the face now but which will be shouting at us after 2015, is to find effective and fair ways of mitigating and adapting to climate change whilst at the same time reducing global income inequalities and facilitating the realization of the development aspirations of billions of people in developing countries.
Addressing this challenge will require a new development paradigm which encompasses a new international development consensus, new approaches to international development cooperation and a new policy narrative about how development and poverty reduction occurs. In my next blog I shall elaborate on this further.