Francine Mestrum: Another approach to development and cooperation

Development Policy18 Feb 2010Francine Mestrum

Development aid is becoming a hot topic. William Easterly and Dambisa Moyo almost made us believe development aid was totally useless and should be abandoned. I am very grateful to the authors of the Dutch report of the Scientific Council for Government Policies, who have combined a critical approach to development policies with a positive solution for more and better solidarity.

This is also the objective of a website I set up a couple of months ago on Global Social Justice: It is difficult indeed to uncritically continue with the current aid policies or to simply abandon them. Easterly and Moyo have many good arguments, but there are also many good reasons for a stronger solidarity and most of them have been explained in the Dutch report. As for the MDG summit in September, I really do not see how one could, once again, lower the ambitions. We have come from economic development in the 1960s, to social development in the 1970s, to poverty eradication in the 1990s and to halving extreme poverty in 2000 … how low can you get?

In this contribution, I want to briefly highlight two reasons that justify another approach to development and cooperation. The first is globalization and global public finances; the second is sustainable development.

Whatever definition one has of globalization, and whatever course globalization policies may take in the near future, it is undeniable that we live today in one global interdependent world. This does not mean that national states have lost their importance. But it does mean that states have to cooperate more than in the past and that the borderlines between domestic and international issues are constantly moving.

One of these issues is linked to finances and taxes. Capital mobility makes it impossible to tax goods and services, wages and profits in the same way as in the past. People live in one country and work in another, transnational companies work with transfer prices that allow them to avoid taxes everywhere, profits are expatriated from countries where taxes are considered to be too high. This has serious consequences for the public revenues of national governments that are supposed to deliver public investments, public services and social policies. Looking at public finances from an exclusive national vantage point is becoming an illusion. Poor developing countries have no power over capital movements and are severely restrained in their ability to pursue development policies.

One solution is to also look at global finances and global taxes. This certainly does not solve all problems and even creates some new ones. But is does open a new horizon for mobilizing capital and for organizing a structural global solidarity. Looking beyond the too-limited poverty reduction policies, one can imagine a global solidarity based on a global financial transaction tax in order to fund a global social protection floor. This is not a utopia but an idea based on existing instruments (World Solidarity Fund at the UN), and the existing proposals of the UNDP on public finances, and of the ILO on social protection. The Financial Transaction Tax is currently being discussed even at the IMF. In this way, the problems of geopolitically-induced, donor-driven and highly fragmented development aid could be solved. One could develop a system of the global redistribution of incomes.

Sustainable development is the second point I want to focus on. Much has been said about the responsibility of the developed and industrialized countries for the deterioration of our environment. And much has been said about the growing income inequalities between countries in the North and the South. There are only two ways to reduce these inequalities: either by lifting poor people out of poverty and up to the income level of the rich countries, or be reducing the incomes of people in the rich countries. The first solution is, ecologically speaking, unsustainable. The second solution is, politically speaking, impossible. The only way out is a limited rise of incomes in the South and a fundamentally different development paradigm in the North.

In other words, both the South and the North need development policies. In fact, one can think of globalization as being synonymous with development, if we understand these concepts as aimed to create one integrated world community. Both the North and the South will have to rethink their economic and social policies. As the Dutch report rightly states, the South definitely needs growth in order to give its peoples social protection, education and health services. The North may have growth but will definitely have to reduce its ecological footprint.

This probably comes down to a redistribution of economic activities. Innovative economic policies can help the North to maintain a good standard of living, while helping the South to develop industrial activities. Again, this implies a global vantage point in a world where people can move freely and where development is a shared ambition.

These approaches are not compatible with so-called aid policies. There is not a rich North that has to help a poor South. There is one interdependent world with local, national, regional and global political levels that have to complement each other. Then, we not only need a global solidarity fund but also global financial resources to help these policies come about. It all points in the direction of global taxes, not only on financial transactions but also on transnational companies.

I realize that many political hurdles will have to be taken. However, extreme poverty and income inequality are unsustainable. Climate change is threatening us all and we do not have unlimited time.

Maybe these ideas will never become reality. But they certainly should be part of any serious debate on the future of development and cooperation.