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Title: Millennium Development Goals - Good Intentions, Weak Policies
Date: 04-Oct-2010
Category: Opinion Essays
Source/Author: tephen B. Young, Global Executive Director
Description: Recently in New York, heads of states and governments approved an interim report on achievement of the UN Millennium Development Goals to help poor and developing nations. The report does not provide any basis for great optimism that development efforts are succeeding in any large measure. This should be cause for concern as continuation of extreme poverty and hunger is unacceptable given current levels of liquid global wealth and the possibilities of economic growth through the adoption of wise government policies at the national level.

United Nations Millennium Development Goals:
Good Intentions – Wrong Approach
 
Stephen B. Young
Global Executive Director
 

Last week, heads of states and governments gathered at the United Nations to reaffirm their commitment to the Millennium Development Goals (MDGs) which set targets for improved living standards for people around the world. These leaders of the public sector pledged to promote the economic and social development of all peoples.

 
The MDGs are:

-          Eradicate extreme poverty and hunger

-          Achieve universal primary education

-          Promote gender equality and empowerment of women

-          Promote public health

-          Reduce child mortality

-          Improve maternal health

-          Combat HIV/AIDS, malaria and other diseases

-          Ensure environment sustainability

-          Develop a global partnership for development

 

It is very important, I think, to note that these goals are a list of public goods, not marketable products or services provided by the private sector to discrete customers. As such, they raise a conundrum: who is responsible for producing and paying for public goods?

Generally speaking, we conclude that funding and provision of public goods are the responsibility of governments. Thus the campaign to achieve MDGs speaks most forcefully to governments to bring about these changed conditions with funding coming largely from public sources – local government revenues and international aid. Passing notice is made of the potential funding contributions that could come from trade and financial investment by the private sector.

The plan for achieving the MDGs therefore ignores the most vital issue of all: where will governments get the money to buy all these public goods?

And one public good – eradication of extreme poverty and hunger – may even be of such a nature that governments can’t deliver it unless they provide welfare to all those who are in extreme poverty and hunger or employ them at a living wage.

The public good of rising living standards, we now know, can only be produced by the private sector creating wealth in sufficient quantities through modernization of the economy, society and culture under a government of laws.

Given this lacuna on a proper funding mechanism, it is no surprise to me that this well-meaning declaration of continued government support for the MDGs recognized that 1 billion people still live in extreme poverty and hunger and that global levels of maternal and child mortality are alarming. They also recognized that crises in financial markets, volatile food and energy prices and fears of food insecurity have adversely affected development gains.

The Declaration recognized that there has been “slow progress” in reaching full and productive employment and decent work for all; providing basic sanitation, achieving gender equality. Progress towards the MDGs is described as “fragile”.

Disparities between development and yet-to-develop countries remain persistent and significant the heads of states and governments admit.

The heads of states and governments go on to affirm that they will make every effort to achieve the MDGs by 2015 through national development strategies and appropriate polices and approaches that have proven to be effective.

Their first recommendation for doing better in reaching the MDGs is to strengthen national ownership and leadership of development strategies. Then they recommend adopting forward-looking macro-economic policies that will lead to more economic growth. Governments worry about adopting policies that will help the poor, promote universal access to public and social services, implementing social policies and programs, including investing in basic services for health, education, water and sanitation.

Now this all well and good as aspiration but who will pay for all these services and implementation activities? The drawback facing poor countries is that they don’t have money. Cash is in short supply across the board in such countries and therefore taxes can’t provide sufficient revenue to pay for the wish list of better conditions.

What the heads of states and governments do not affirm, however, is that their governments are not the best change agents to bring about conditions in which the MDGs can be achieved.

To achieve the MDGs, wealth is necessary and governments do not and cannot, as a general case, create wealth.

The Declaration calls for more financial investment – by the private sector – in poor and developing countries, for example. But why should private financial markets direct funds where returns will be low and risks high? For charitable purposes perhaps? But when has charity ever been sufficient to build private, for-profit businesses that employ even thousands? The scale of charity compared to private, for-profit markets is just too small to eliminate poverty. The strongest call for action by the private sector doesn’t come until paragraph 56 of the Declaration, when it should by rights be the heart of any strategy to raise living standards and provide governments with sufficient tax revenues to provide for improved social services, education and health care.

Only private sector actors create wealth; wealth is a phenomenon most closely associated with individual initiative and private property.

Elimination of poverty through economic development is perhaps the greatest moral challenge to capitalism: can private interest contribute sufficiently to the common good? Is business compatible with social justice?

The Caux Round Table argues for the proposition that - the first and last analyses – only capitalism practiced with responsibility in line with the CRT principles for responsible business and principles for ethical government can create wealth sufficiently to eliminate poverty.

The proper role for government is to adapt policies that assist capitalism to optimize its wealth creation potential within a framework of environmental sustainability.

Paragraph 17 of the declaration of heads of states and governments in support of the MDGs only calls on the private sector to ”enhance their role in national development efforts as well as their contributions to achievement of the MDGs.”  And the Declaration calls for more effective public-private partnerships. Pretty thin porridge if you ask me. Not much of a policy to get a moral capitalism roaring along making wealth and distributing it.

The Declaration calls for special attention given to Africa where many countries are “off track” in meeting the MDGs.

I am at this moment participating in a conference in Nairobi designed to promote ethics in Africa. The premise of this conference organized by KCA University in Nairobi, is that without ethics there will be too much corruption in public governance and provision of public services and too little economic development. These Africans, with wisdom and passion, don’t have much faith in the MDGs or national programs and policies to bring about better living conditions for Africans. They want first of all a work ethic and then good conditions for businesses of all sizes and purposes to grow and prosper.

When the MDGs were first proposed, then CRT Chair George Vojta, with his years of experience in international banking and finance, immediately recognized the conceptual shortcomings supporting the attempt. He proposed instead that a specific set of government policies and regulatory actions as recommended by the Financial Standards Board would create the right conditions within countries for the private sector to produce wealth and so support government expenditure through increased revenue from taxation and would provide income and better conditions of life for ordinary people. Mr. Vojta then established the innovative NGO called eStandards Forum to track the successful – or not yet successful - implementation by countries of these policies and regulatory actions.

The better understanding of how to reduce extreme poverty and hunger and provide governments with the funds to deliver a range of public goods knows that private sector – business led – capitalism is the only way to generate fundament social change that creates new wealth for a community.

Overcoming poverty through economic development seems to be – in the light of some 200 years of experience in different cultures – something of a natural process. It follows its own internal logic, evolves according to its own laws, responds in predictable ways to conditions and opportunities, to risks and returns. Economic development is organic; it grows as an apple tree does – from a seed putting down roots for sustenance, thrusting up shoots that turn into a trunk, branches and leaves. But without sunlight and CO2 from its environment, it will die and never give fruit.

I have suggested previously in some of our CRT presentations that the economic development of a country is a step-by-step process whereby each step must be trod before the next one can be attempted. The following graphic sets forth in rough approximation my approach to economic development.   If economic development is done right, government revenues will grow so that public goods like those listed in the MDGs can be purchased and provided for all in a society. Simultaneously, successful economic development will see private sector actors and market performance provide many of the goods that reduce poverty and make for higher personal living standards.

 



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