Achieve the MDGs? First try reversing the upward redistribution of wealth

Development Policy22 Sep 2010David Sogge

The Millennium Development Goals claim our attention as today’s pro-poor aid agenda. Yet going by who gets what and from whom, the world’s real agenda looks distinctly pro-rich.

The MDGs have been a singular success as a vehicle for many in the aid-and-development sector. They furnish a liturgy for a broad church, encompassing a range of matters, from school attendance to clean water to the health of mothers and children. Bundled together, these problems attract a diverse spectrum of issue-specific groups. The MDGs get them out of their silos and into a big policy coalition rallying under a single banner. The approach matches mainstream media’s standard story line: Someone is in distress. Help arrives. Distress is relieved. All’s right with the world.

The MDGs’ neat packages of aims, sub-aims, indicators and timelines harness no-nonsense ‘results-based management’ of the neoliberals to the less tangible ‘human development’ ideals of the social democrats. Both approaches focus on descriptors of poverty, see practical problem-solving as the way to tackle poverty, and largely avoid fundamentals matters of inequality. They keep troublesome political issues firmly off the table. They are worthy and bland, a plain vanilla acceptable to everyone.

But in neglecting causes, the MDGs don’t get us much closer to eradicating the problems. They do the important work of drawing attention to poverty and the stunting of human capabilities. They imply – and this is also one of their merits – that those afflictions are preventable and can be radically reduced. Yet they fail to say anything meaningful about why they persist. As an excellent new UNRISD report argues, the MDGs ‘focus on measuring things that people lack to the detriment of understanding why they lack them’. In this sense, the MDGs are a distraction.

One reason for that silence may be the embarrassing fact that, as countries such as Vietnam have shown, success in reducing poverty stands a better chance where governments pursue disciplined development policies wholly at odds with the market fundamentalist kind required by donors in the past thirty years.

Governments of low-income countries pay MDGs no real attention, least of all when drawing up budgets. Rather, they pay attention to the IMF and others controlling the serious money. And what does the IMF think about the MDGs? As revealed in a recent study of MDG politics, IMF staff clearly don’t take them seriously, saying such things as ‘we mention the MDGs in the introduction of reports but they don’t change anything’. Indeed, there’s no evidence of the IMF having abandoned any of its main precepts.

Do donors take the MDGs seriously? Certainly they join in with the hallelujah chorus, and often refer to MDGs when arguing their aid budgets. But they have yet to put more money where their mouths are. Donor spending in the four aid MDG-relevant sectors – basic education, basic health, nutrition and water/sanitation – have changed hardly at all. At the outset of the MDG era in 2001-03, those sectors accounted for about 10.4 percent of total rich country (OECD) aid; whereas in the period 2006–08 they accounted for about 10.9 percent. But then again, donors have been careful never to make any iron-clad commitments. Everything is voluntary, nothing they promise is enforceable. By contrast, most aid recipients have to toe the donor line, or face unpleasant consequences.

But just who is aiding whom? That question is rarely probed, but is vital to understanding why the IMF and its associates continue promoting market fundamentalism. For certain interests in rich countries, those policies have been hugely rewarding. This is apparent if we follow the money. Especially since the late 1990s, most net global financial flows (thus comprising both outbound payments and profits and inbound resources such as foreign aid, foreign direct investment and remittances) add up to massive net transfers of wealth from poor to rich jurisdictions.

The opportunity costs of this upward redistribution may be illustrated in terms of the MDGs. In 2002, a team of World Bank economists calculated that, in order to achieve the MDGs, extra annual aid outlays of from US$40 to $60 billion, alongside other measures, would do the job. That estimate is equivalent to about one-tenth of the monies flowing today from poor to rich jurisdictions. That upward redistribution has fattened the bottom lines in the financial sector, especially on Wall Street and in Offshore Financial Centres. Other winners include poor-country elites, whose wealth is commonly stashed in rich jurisdictions. Of course, some of these actors ‘took a haircut’ when US capitalism’s speculative bubble – pumped up in part with those poor-country dollars – began to burst a few years ago. But in broad terms it’s clear who’s been winning and who’s been losing.

Despite their new talk about ‘poverty reduction and growth’, the citadels of the aid system in Washington DC continue pushing the same formulas that frustrate equitable development in poor countries and facilitate the upward redistribution of wealth – the real agenda of today’s brand of global capitalism. Under these conditions, trying to achieve the MDGs is like trying to walk up an escalator going down.

An earlier version of this blog post appeared on the TNI website.