Topic
For development policies, of both developing and donor countries, to be successful in approaching the Millennium Development Goals (MDGs), they must strengthen their focus on the Goals, as well as on the particular features of each country (and each region within each country).
Abstract
This Analysis suggests that development policies of both developing and donor countries should have a sharper focus on the MDGs, as well as on the particular characteristics of each country and population groups within each country. Such focus on the MDGs would require policies aimed at pro-poor growth and the provision of non-discriminatory social services, both of which could imply, in turn, major policy changes. A focus on the particular features of each country, and population groups within countries, is necessary to gain the knowledge required to elaborate country-strategies that are effective and non-discriminatory. Finally, some recommendations specific to developed countries in general, and Spain in particular, are advanced here.
Analysis
The Millennium Development Goals: a brief overview
The Millennium Development Goals are a set of concrete and somewhat measurable targets of development, most of them to be achieved by 2015. They emanated from the United Nations Millennium Declaration, adopted in 2000 by “the largest-ever gathering of heads of state”, as stated in the Human Development Report 2003 (HDR-03) published by the United Nations Development Program.
The first seven Goals aim at reducing income poverty and hunger (goal 1), increasing education and health outcomes (goals 2, 4, 5, and 6), promoting gender equality (goal 3), and ensuring environmental sustainability (goal 7). According to the Monterrey consensus, these seven goals are mainly the responsibility of developing countries: without these countries’ “ownership” of development policies, Goals 1 to 7 will not be met. Goal 8 consists in developing a “partnership for development” and basically indicates what developed countries should do in order to contribute to the achievement of the other seven goals.
These eight Goals are composed of 18 Targets. At the 1990s pace of progress, only two Targets would be met globally (halving income poverty and halving the proportion of people without access to safe water); and even these achievements would have shortcomings. First, the income poverty line chosen for Goal 1/Target 1 ($1 a day in Purchasing Power Parity) is known to have many downsides. Second, meeting the MDGs at a global level is not good enough – they should be met by every individual developing country. Currently, it is mostly China which is pushing toward the global fulfillment of the poverty reduction Target, whereas many other countries are falling far short. Third, even when a particular Goal is achieved within a certain country, it is possible that not all populations are benefiting from it. For instance, deep pockets of poverty can coexist with an overall decline in poverty, and child mortality can decrease through advancements that only reach the more affluent.
In order to speed the pace toward fulfilling the MDGs, considerable policy changes must be undertaken, both in developing and developed countries. The United Nations Millennium Project, a research group comprised of around 300 experts, is analyzing policy priorities; the group will issue its final report in 2005. HDR-03 draws on the research done by that Project and can be considered the most comprehensive proposal, so far, on how to meet the Goals. This analysis draws heavily from its ideas. A very broad recommendation that emanates from previous research is that actions should focus on the Goals, as well as on the economic, social, institutional, and cultural particularities of each country. This recommendation may seem too vague, but it can serve as a useful starting point, and as a permanent guide along the way.
A focus on the MDGs
The approach to development has traditionally been somewhat indirect. Too frequently it has been assumed that when certain intermediate goals are reached, ultimate development goals (e.g. the MDGs) will follow. Economic growth has been, perhaps, the most common of those intermediate goals, but even the focus on growth has sometimes been replaced by an emphasis on supposed preconditions for growth: macroeconomic stability, free markets, and smaller States (States with a smaller weight on the economy).
But as Nobel Prize winner Joseph E. Stiglitz indicates in his contribution to HDR-03, “trickle-down economics became discredited for an obvious reason: it was not true. Sometimes growth helps the poor, but sometimes it does not”. More specifically, the aforementioned preconditions have proven to be neither necessary nor sufficient for growth; the relationship between growth and MDG-type objectives cannot be taken for granted; and, furthermore, in countries facing poverty traps, growth is not only insufficient but also unlikely without a minimum of social development.
Hence, given that focusing on intermediate goals does not ensure meeting the MDGs, a more direct focus becomes necessary. This direct approach to tackling the MDGs requires two main lines of action. First, promoting pro-poor growth (that is, growth which benefits the poor disproportionately, or at least as much as it benefits the non-poor). Second, providing basic social services. Pro-poor growth would chiefly address Goal 1, though it would also contribute to meeting Goals 2 to 7. Non-discriminatory social services in education and health, as well as access to water and sanitation, would tackle Goals 2 to 7, but would also contribute to achieving Goal 1.
Achieving pro-poor growth
Growth is supposed to help the poor directly, as when rising average incomes imply rising poor people’s income; and indirectly, as when growth translates into higher public revenues that are invested in the poor. But it may be the case that inequality rises together with per capita income, offsetting the impact of average growth on poverty reduction. Also, it may be the case that revenues do not increase with income, or that higher revenues are not invested in the poor.
Growth is more likely to benefit poor populations when it “happens to them”. That is, when what grows are the sectors where the poor participate (usually agriculture and labor-intensive manufacturing); when growth uses production factors that the poor possess (basically labor and sometimes land); and when growth occurs in the areas where the poor concentrate (usually rural areas, but also some urban settlements). Some actions that can be taken to promote these types of growth are the following:
First, it is necessary to expand the access of the poor to productive assets, mostly land, credit and skills. Meeting the education-related MDGs would help provide skills. In relation to credit, microfinances have a large potential, but only if the credit really reaches the poor (even if that requires a grant component). Also, banks specialized in agricultural development or small and medium enterprises (SMEs) could be established. In relation to land, the solution could be an agrarian reform that yields small properties for the poor. The need for agrarian reforms is supported on the empirical observation that small farms frequently present a higher land productivity than large farms. Finally, not all land has to be allocated to individual owners; sometimes communal property may be more advisable.
Second, there is need for policies that concentrate in particular productive sectors. In relation to agriculture, the productivity of small farmers should be fostered. This could be done through the development of environmentally-friendly technologies and their accessibility to the poor; the construction of rural infrastructures (irrigation and roads) that reach small farmers; and the security of property or control rights. Agricultural development is not enough, however, especially if the country participates in world trade. Industrial growth and diversification should also be promoted, particularly in labor-intensive activities and among SMEs. The East Asian experience show that public intervention and export orientation are advisable, which could be implemented via export subsidies, fiscal incentives, subsidized credit, and temporary protection of infant industries. Finally, Foreign Direct Investment can help, but for this to render all its potential benefits, there should be imposed requirements of local content, training, and other forms of technology transfer.
Third, poverty traps must be overcome. Poverty traps occur when education and health are so weak that labor is not sufficiently productive, and when basic infrastructures are so scarce that products cannot reach the markets. In such cases, investing in basic infrastructure and pursuing Goals 2 to 7 are preconditions for growth.
As for the less direct way that growth can benefit the poor – via higher revenues that are invested in the poor – fiscal reforms are crucial. Loopholes that protect the rich from paying direct taxes should be closed, and indirect taxes could be implemented, but with exemptions that alleviate their regressive nature. Also, only with the reallocation of public expenditure will higher revenues render increased investment in the poor.
Providing education, health, and access to water and sanitation
Like policies to promote growth, policies aimed at improving social services should be non-discriminatory. This egalitarian view of development is built into the education Goals, but not in others, making it necessary for policymakers to not only pursue, for instance, a lower mortality rate, but to make sure that all population groups benefit from such decrease. The general lack of focus on the utmost importance of social services is evident in the scarcity of funds devoted to them. Furthermore, primary education and basic health – as required to achieve the Goals – receive meager shares of those already scarce funds.
Hence, focusing on Goals 2 to 7 requires the allocation of more funds into primary education, into basic health care (especially for women and children, and for the prevention and treatment of HIV/AIDS, Malaria, and Tuberculosis), and into low-cost technologies for water and sanitation. Again, as with ensuring the indirect effects of growth on the poor, changes in the fiscal system are required. More revenues should be raised, and a higher proportion of public expenditure should finance basic services.
Policies focused on Goals 2 to 7 should also aim at overcoming inequalities and inefficiencies. Reallocating funds into primary education and basic health is in itself an egalitarian measure, given that these services benefit the poor disproportionately. But, as described in HDR-03, many other actions to favor equality are possible: for schooling, eliminating out-of-pocket costs, locating schools closer to homes, and being flexible with schedules in the case of girls; for health care, increasing the proportion of nurses and paramedics to doctors in remote areas, and requiring that doctors serve a limited time of public service; and for access to water and sanitation, cross-subsidizing, and establishing financing schemes for women.
In relation to inefficiencies, there are also many diverse ways to tackle them, as detailed in HDR-03. In education, these include using local construction materials and contractors, devoting more funds to teaching materials, hiring teachers from the neighborhoods, teaching in the mother tongue of children, and instituting feeding programs to reduce drop-outs. In health services, recommendations include focusing on essential interventions, integrating vertical programs in overall health structures, and providing essential drugs in clinics.
A focus on the particular characteristics of each country
Development specialists have too often tried to find policies that fit all countries. Too many generalizations have been made on how to promote growth and social development, neoliberalism being the most common “one-size-fits-all” approach during the last two decades.
Poverty Reduction Strategy Papers (PRSPs) are in principle a step forward in amending this unfocused view of development policy, as well as the lack of involvement of national governments in policymaking. Focusing on each country involves two steps – diagnosis, and the design of a strategy – and PRSPs undertake both. In PRSPs, each country identifies its specific development problems and priorities, then establishes a strategy to tackle them. National Human Development Reports (NHDRs) also contribute to the diagnosis of the particular features of each country. PRSPs are imperfect, however: MDGs are not sufficiently integrated into them; also, “ownership” is not always a reality, which is still evident in the over-standardization of these Papers.
Country-diagnosis
The analysis could start by looking into national averages, in order to gain a broad idea of the state of and trends toward meeting each Target of the MDGs. HDR-03 classifies countries into Top and High Priorities in view of precisely such national averages. A country is top priority for a particular Target when no progress was evident during the 1990s starting from a low point; and it is high priority when progress did occur, starting from a low state, or when there was no progress, starting from a higher point. Apart from the analysis of which Targets are least likely to be met at the national level, there should be an analysis of the state of and trends regarding each Target at sub-national levels. This would provide insight into whether the deepest problems at the national level are concentrated into certain regions or population groups, or whether lesser problems at the national level are priorities for certain regions or population groups.
Design of a country-strategy
A country-strategy should include those Goal-focused policies which are best suited to the priorities set by the diagnosis, as well as to the specific sources of problems and the obstacles to tackling them. For instance, to determine the appropriate policies for poverty reduction, it must be considered whether a given country’s poverty is more the result of low average incomes, or of high inequality; to alleviate hunger, it should be assessed whether the problem is one of entitlement or of low productivity; and in education, the specific reasons for inefficiency should be evaluated. Depending on the specific nature of each problem, some of the measures suggested above will render better results than others. Country-strategies should also take into account intermediate goals, though remaining careful not to confuse them with the MDGs. In countries where, for instance, inflation is a serious problem, measures to reduce it should be included in the strategy.
As suggested by some specialists, any country-strategy should try to balance ambition and feasibility. Governments should not design strategies that ignore the existing obstacles to policymaking, but neither should they resign themselves to those obstacles, the identification of limitations being a first step toward their removal. Obstacles can be very diverse. First, policymakers usually encounter financial limitations, the alleviation of which rely basically on fiscal reforms, as suggested above, and on external financial assistance. Second, also common is the lack of institutional capacity, which limits even the generation of sufficient statistical information. Capacity building has thus become a central element in development discussions. Third, certain cultural norms, such as those that discriminate against women, are obstacles to the MDGs, and may take longer to mitigate. Fourth, sometimes there are reasons of political economy for not implementing certain measures, as is usually the case with agrarian reforms. To overcome these impediments, the empowerment of the poor is instrumental. Finally, there are external constraints, the removal of which depends both on cooperation between developed countries and developing countries, as well as cooperation among developing countries themselves.
Recommendations specific to donor countries
Goal 8 indicates the path which developed countries should follow in order to contribute to the other seven Goals. Unfortunately, this path is too vague; indeed Goal 8 is the only MDG for which there are no time frames or quantitative thresholds. Donor countries in general, and Spain in particular, should contribute to meeting the MDGs via the following actions: first, by contributing more and more efficient Official Development Assistance (ODA); and second, by helping to create fairer multilateral institutions. Needless to say, donor cooperation should integrate the aforementioned goal- and country-specific perspectives.
Bilateral ODA
Regarding quantities of ODA, some estimates have been made on how much additional ODA would be needed to meet the Goals. These estimates rank between $40-100 billion per year. Given that 0.7% of GNI would require an additional $110 billion per year, it is likely that ODA need not reach that benchmark – for example, an additional $55 billion per year would bring the collective donors’ ODA to 0.46%. Spain has pledged to reach 0.33% by 2006, up from 0.26% in 2002. This would certainly be a step forward, though still not an equitable contribution toward the estimated needs. Furthermore, both developing and donor countries are committed to the 20/20 Initiative, endorsed for the first time in the 1995 World Summit for Social Development. This Initiative calls on developing countries and donors to allocate 20% of their national budgets and their ODA, respectively, to basic social programs – primary education, basic health (including reproductive health), nutrition, and access to water and sanitation – all of them crucial for meeting the Goals. Overall ODA to social services is still less than 15% of bilateral donor allocations, Spain not being among the six countries which have already reached the 20% benchmark.
Regarding the quality of ODA, there are two crucial issues to address: how to allocate funds between countries, and how to improve aid practices. Many specialists consider that aid is particularly efficient when allocated into low-income “well-governed” countries. Notwithstanding the many important arguments behind such consideration, middle-income countries with high inequality also present severe development needs, which justifies Spain’s assistance to low-middle-income countries like El Salvador or Bolivia. Clearly, not-so-well-governed countries cannot be left behind. In such cases, technical cooperation is needed to strengthen policy and institutional capacity, and perhaps the government should not be the main intermediary of aid.
On how to improve aid practices, four basic lines of action are advisable. First, tied aid should be reported on and reduced. Tied ODA has been falling, representing 11.4% of total ODA in 2002 for all donors jointly; but Spain’s figure is still well above that, at 33.9%. Second, aid to heavily indebted or least-developed countries should be concessional, in order not to feed their debt burdens. Third, coordination of donors is necessary to reduce administrative costs in recipient countries and to contribute to aligning assistance with national priorities. Coordination could be implemented through Sector Wide Programs, which have already proven valuable for health systems. Fourth, as indicated above, a good knowledge of each recipient country should inform country-diagnosis and country-strategies. This knowledge could start from observing data in a table like the one presented below; but sub-national figures should also be analyzed. Decentralization of analysis and even decision-making (via reinforcement of the Oficinas Técnicas de Cooperación) could prove very helpful.
The international economic framework
International institutions affect the capability of developing countries to meet the MDGs. Spain could advocate a fairer set of rules within multilateral institutions; fairer meaning less asymmetric, and also less intrusive. Regarding international trade, trade policies in developed countries remain highly discriminatory against agricultural and labor-intensive industrial products (precisely those in which poor countries usually specialize). Tariffs, quotas, and export subsidies should be phased out. Nevertheless, access to markets may not suffice. Becoming competitive and diversifying exports in current global markets may also require some form of sectoral policy, partially precluded by the WTO. Hence, WTO constraints on developing countries’ export promotion and diversification policies should be eased. In relation to the trade of services, basic social services should be exempted from progressive liberalization, given the relatively weak record of private vs. public basic services in education, health, and water access (see HDR-03). Finally, regarding technology, more research and development focused on the MDGs is necessary – mainly on agricultural development, clean energies for rural people, and combating illnesses that most affect the poor. Research would have no impact on the MDGs, however, unless provisions for technology transfer under the WTO were more detailed and more generously implemented.
In relation to international finance, debt relief is crucial to meeting the MDGs in certain countries. The Heavily Indebted Poor Countries (HIPC) initiative is a step in the correct direction. But relief should be faster and deeper, and it should reach countries not currently benefited by HIPC. Also, because the purpose of debt relief is to release funds for the Goals, the HIPC debt-export measure of sustainability could be complemented by a ratio of debt service to GDP, or to public expenditure. Financial openness and deregulation should not be pushed into the agendas of national governments to the point of limiting the scope for measures aimed at meeting the MDGs. On the one hand, total deregulation impedes the creation of specialized banks, as well as the allocation of credit into pro-poor productive activities. On the other hand, more should be done to advance a New International Financial Architecture that protects developing countries from the perils of short-term capital flows. Long-term capital is known to be more beneficial. Still, Spain should not contribute to the creation of any multilateral investment agreement that limits the capacity of national governments to regulate the activities of multinational corporations.
Performance during the 1990s in the 2001-02 top-ten recipients of Spanish ODA
| Under-nourished population (%) | Net primary enrolment ratio (%) | Girls to boys ratio in primary enrolment | Under 5 mortality rate (per 1,000 births) | Maternal mortality rate (per 1,000 births) | Water access, rural (%pop.) | Water access, urban (%pop.) | Sanita-tion, rural (%pop.) | Sanita-tion, urban (%pop.) | Debt service (% exports) | |
| Nicaragua | 30-29 | 72.2-80.7 | 1.04-0.98 | 66-41 | 160-230 | 44-59 | 93-91 | 53-72 | 97-95 | 3.3-22.4 |
| El Salvador | 12-14 | NA-80.9 | NA-0.97 | 60-39 | 300-150 | 48-64 | 88-91 | 62-76 | 87-89 | 18.8-11.2 |
| China | 16-9 | 97.4-93.2 | 0.86-0.92 | 49-39 | 95-56 | 60-66 | 99-94 | 2-27 | 56-69 | 11.8-9.3 |
| Morocco | 6-7 | 56.8-78.0 | 0.66-0.84 | 85-43 | 610-220 | 58-56 | 94-98 | 31-44 | 88-86 | 41.0-29.1 |
| Ecuador | 8-5 | NA-99.3 | NA-0.97 | 57-29 | 150-130 | 58-75 | 82-90 | 49-74 | 88-92 | 35.9-31.3 |
| Bolivia | 26-23 | 90.7-96.9 | 0.90-0.95 | 122-71 | 650-420 | 47-64 | 91-95 | 26-42 | 73-86 | 33.7-37.7 |
| Peru | 40-11 | 87.5-104.5 | NA-0.96 | 80-39 | 280-410 | 42-62 | 88-87 | 21-49 | 77-79 | 9.3-38.2 |
| Honduras | 23-21 | NA-87.6 | 0.99-0.98 | 61-42 | 220-110 | 78-81 | 89-95 | 41-55 | 88-93 | 13.4-16.1 |
| Colombia | 17-13 | 68.1-88.5 | 1.11-0.96 | 36-23 | 100-130 | 84-70 | 98-99 | 55-56 | 96-96 | 53.3-47.6 |
| Dom. Rep. | 27-26 | NA-92.5 | NA-0.94 | 65-38 | 110-150 | 71-78 | 92-90 | 60-60 | 70-70 | 16.4-4.7 |
Source: Millennium Indicators Database, United Nations Statistics Division.
Notes: First figures in each pairing correspond to years between 1989 and 1991; second figures, to years between 1999 and 2003.
Red indicates top priority and blue indicates high, approximately as defined by HDR-03.
The table includes only Targets for which data is available.
NA means not available.
Conclusion
After decades of “trickle down” and “one-size-fits-all” development economics, the MDGs, with their concreteness and time-frame, provide an opportunity to enhance the focus of policymaking. Development strategies, both of developing and donor countries, should have a greater focus on the Goals, which will require the implementation of pro-poor growth measures and the non-discriminatory provision of basic social services. These in turn will require a wide array of policies, some of which may depart considerably from previous policymaking. Development strategies of both developing and donor countries should focus more clearly on the particular characteristics of the country in question, at both national and sub-national levels. This will demand greater statistical efforts. Finally, specific to donor countries is the need to increase and improve ODA, as well as to cooperate to create a set of international rules that are less asymmetric, and leave more space for domestic policies that can be helpful in meeting the MDGs.
Clara García – Assistant Professor at University of Huelva (Spain) and Visiting Scholar at Political Economy Research Institute, University of Massachusetts-Amherst.