Wednesday, April 16, 2014

Funding for Global Public Goods versus Development Assistance/Poverty Aleviation

Helmut Reisen, an economist I am learning to value greatly, has an interesting post on his blog today.

He asks why the World Bank and others seem so cocksure that extreme poverty can be ended by 2030. I take their promise to be fluff intended to con donors into continued or increased funding to fight poverty. I fear that extreme poverty will still be with us in 2030, and that a lot of poverty that the World Bank defines as not to be extreme is very serious indeed.

He notes that a lot of funding categorized as development assistance is actually funding for "global public goods". Much of that funding would go for prevention of climate change and other environmental deterioration. I would note that some of the efforts to fight communicable diseases (such as the eradication of polio) might also be included as a global public good -- the benefits of eliminating the polio in the last few countries in which it is currently found will be enjoyed worldwide.

There would seem to be no argument against the countries with the most money spending some of that money globally to "buy" global public goods. We regularly use progressive taxes to pay for public goods.

Reisen would seem to be concerned that such funding is being labeled "development assistance" when it is actually intended for another purpose. I see that point. Still, developing countries too will benefit from those global public goods, and in many cases their people are more vulnerable to the deterioration of those goods.

Of course, in some cases we can have our cake and eat it too. Thus, for example, investment in energy efficiency can be a cost effective investment even without including the external benefits of reduced greenhouse gas emissions. So too, the investment in hydropower rather than fossil fuel generation plants may produce lower cost electricity as well as prevent greenhouse gas emissions.

I am afraid that I believe that the world will not do the right thing and reduce greenhouse gas emissions as much as we could or should. Indeed, I believe we will see deforestation, desertification, loss of top soil, destruction of coastal zones, depletion of water resources, air and water pollution, and other environmental destruction that we could and should have prevented. Investments now to help poor people in poor countries to prepare to deal with this onslaught will help avert future poverty and thus be perhaps a legitimate form of development assistance.

Is there an argument that donor nations can provide more money for poverty reduction and global public goods by deliberately mislabeling some of the global public goods funds as development assistance? In the USA, the climate deniers might have more sympathy for international expenditures labeled "development assistance" than for those labeled "climate change prevention and amelioration".

As an aside, it seems to me that "poverty alleviation" is one aspect of "development assistance", but only one aspect. Social and economic development would seem to me to be best seen as "a tide that lifts all boats". Thus I see development as involving capital accumulation, which seems always to result in the rich getting richer, the middle class getting "better off", with relatively little of the capital being accumulated by the poor. I also see general development of poor countries involving their increased competitiveness in global markets, and increased competition from the recipients (current or former) of foreign aid has not been popular with U.S. producers.

Let me end by quoting an especially useful part of the posting:
Assessing vulnerability which is independent of present policy is needed both to identify the most vulnerable poor countries and to design criteria for the allocation of international resources. Two kinds of vulnerability and the corresponding indices can be considered:
  • Structural economic vulnerability (as measured by the UN Economic Vulnerability Index, EVI), the UN index thought to replace the non-transparent performance index CPIA. EVI is a composite consisting of 50% ´exposure´ (size, location, agricultural share) and 50% shock intensity (both natural and trade)[1].
  • Physical Vulnerability to Climate Change Index (PVCCI), an indicator developed by Patrick Guillaumont (2013)[2] at the Fondation pour les √Čtudes et Recherches sur le D√©veloppement International (FERDI). PVCCI consists of 50% ´risks related to progressive shocks´ (flooding due to sea level rise; increasing aridity) and 50& ´risks related to the intensification of recurrent shocks´ (rainfall; temperature)[3].
1. A detailed presentation of EVI can be found in Patrick Guillaumont (2011), The concept of structural economic vulnerability and its relevance for the identification of the Least Developed Countries and other purposes (Nature, measurement, and evolution), UN-DESA, CDP Background Paper No. 12, ST/ESA/2011/CDP/12 ,September.
2. Patrick Guillaumont (2013), “Measuring Structural Vulnerability to Allocate Development Assistance and Adaptation Resources”, FERDI Working Paper No. 68, Ferdi: Clermont-Ferrand, March.
3. For detail, see P. Guillaumont and C. Simonet (2011), “Designing an Index of Structural Vulnerability to Climate Change”, FERDI Working Paper I.08, March.

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