Transparency as Funding for the Millennium Development Goals

October 31st, 2012

In September at the turn of this century, the leaders of the world convened at the Millennium Assembly of the United Nations. The Assembly was the culmination of nearly a decade of United Nations summits and conferences to address development and poverty. It was in 2000, however, that the world’s leaders adopted the United Nations Millennium Declaration, a commitment to a noble new partnership to drastically reduce poverty worldwide. All 193 member states of the United Nations and 23 organizations have agreed to achieve a set of eight goals by 2015. They are:

  1. Eradicate extreme poverty and hunger;
  2. Achieve universal primary education;
  3. Promote gender equality and empower women;
  4. Reduce child mortality;
  5. Improve maternal health;
  6. Combat HIV/AIDS, malaria, and other diseases;
  7. Ensure environmental sustainability; and
  8. Develop a global partnership for development.

By and large, developed countries and international organizations provide the policy advice, technical assistance, and financial support to achieve these goals. In 2005, members of the G8 also provided enough funds to forgive an additional $55 billion debt owed by Highly Indebted Poor Countries.

It is now 2012 and the United Nations, alongside member countries, have indeed made progress toward achieving many of these goals and their component targets. Sadly, however, if trends continue as expected, many goals will not be met and in some areas of the world, we have seen a stagnation or deterioration in conditions since the Declaration.

World events over the last two years have made the outlook significantly worse. The effect of the financial crisis on developing countries, particularly those in Africa, was delayed but severe. While many low-income countries—whose banks and stock exchange are not intimately connected to the sub-prime mortgage crisis—found themselves buffered against the violent financial downturn initially, they felt the effects of the recession that followed in acute detail. Many countries found themselves staring at shrinking exports, rising interest rates, dwindling capital flows, slower economic growth, and shrinking government budgets. The World Bank estimates an additional 50 to 90 million people worldwide found themselves trapped in extreme poverty as a result of the financial crisis.

Even more concerning, the world, and developing countries in particular, should expect things to continue to get worse before they get better. Over the last year, economic growth in several big emerging economies have weakened and the Euro-Area debt problem have reached a near-crisis, spurring expectations among economists that the world will continue to witness slower economic growth in the next years.

Yet just as developing countries are in the most need of resources to meet the Millennium Development Goals, developed countries are pulling back on their support. Last month, the UN revealed that in 2011, for the first time in many years, the level of official development assistance to developing countries dropped. Out of the world’s 23 Development Assistance Countries, 16 cut their aid. Many of these countries—the list includes Greece and Spain—are confronting their own grave economic and budgetary problems.

In light of these evolutions, we need to radically rethink funding the Millennium Development Goals. Some economists have considered new methods of finance, such as global taxes, to solve the problem. These efforts, while admirable, are likely to fall flat. There just isn’t the political will in developed countries for such a revolutionary new policy.

No, to alleviate this problem, we must turn to domestic resource mobilization—the most sustainable source of funding in the long-term. To achieve this objective we should pursue several objectives, including curtailing illicit financial flows, abusive transfer pricing, and tax evasion. While these solutions are not panacea and would not help developing countries achieve the Millennium Development Goals alone, in countries with good political institutions and low levels of corruption, they would go a long way to alleviating some pressure on the global poor as a result of shrinking economies and foreign aid.

Developing countries cannot achieve these objectives without help from their counterparts in wealthier nations, particularly those with opaque financial systems who facilitate these practices. Those developed countries could also support improving governance and the efficiency of government expenditures on poverty reduction by helping developing countries improve anti-corruption efforts and transparency in payments to governments, and facilitating the adoption of the Extractive Industry Transparency Initiative worldwide.

Most people would likely agree that the optimal, most sustainable way to lift developing countries out of poverty and achieve the Millennium Development Goals is to help them help themselves. When it comes to the transparency initiatives I outlined above, while they are the ones most hurt by harmful financial practices, it is not the developing countries that have the ultimate control over their implementation. Participation from developed countries will make or break the effort.

Written by Ann Hollingshead

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