Could foreign aid actually help UK flood defences?

flood_uk_2007Thankfully the Daily Mail’s mean-spirited campaign to get the government to cut aid to pay for the UK’s flood response was swiftly dismissed by the PM in his press conference yesterday.  To recap: dealing with suffering at home by creating suffering in some other country probably isn’t the most moral or sensible approach, and anyway it’s an utterly unnecessary conversation to have because we know there is money elsewhere – the Treasury has a contingency fund for just this sort of thing, just for starters.

But it’s particularly ironic and wrong given that an international peer review of the UK’s plan for ‘building resilience to disasters’ (for which read floods), recommended just last year that

A more consistent approach, in terms of resilience and exporting national good practices through international cooperation, could be achieved through improved coordination between the Civil Contingencies Secretariat and the Department for International Development (DFID).

Or in other words, that the UK’s systems for flood defences could learn a lot from the work DFID is funding to build resilience in other countries.  Betting that the Mail won’t be reporting on that though….

The paranoids versus the Pollyannas: what is driving Labour’s foreign policy?

The Fabian Society has a new pamphlet out this week which lays bare some of the big strategic fights underlying Labour’s emerging foreign policy. I’ve attempted to summarise them here.

Labour politics has taken an inwards-looking turn since 2010 but a new pamphlet, published by the Fabian Society this week, sees the party’s internationalists limbering up for a ruck with the opposition, the leadership and each other all at once. If the IPPR’s Influencing Tomorrow was a genteel debate in the officers’ mess, the Fabians’ collection is a squaddies’ bar room brawl between, in Mark Leonard’s words, “the New Labour tribes of globalisers, liberal interventionists and pro-Europeans and the Blue Labour apostles of localism and disengagement”.

Can Empowered Cities Save Fragile States? My article on Lagos in the NYT

Lagos,_Nigeria_57991Nigeria is arguably the worst run of the world’s seven most populated countries. Despite earning hundreds of billions of dollars in oil revenue over the past decade, it is expected by 2015, by some calculations, to have the second-most destitute people in the world after India. But its largest city, Lagos, which until recently was known as one of the world’s most difficult cities to govern, seems to have turned a corner. As I argue in a recent article in the New York Times, one of the chief reasons for this better performance is the nature of incentives that elites and politicians face: Continue reading

Could Iceland actually be any more progressive?

 

Remember how Iceland got flattened by the financial crisis? How, as an IMF official put it to Michael Lewis at the time, “You have to understand, Iceland is no longer a country. It’s a hedge fund”?

Right, so, unsurprisingly, they slashed their aid budgets right back after the crisis, and gave just 0.22% of gross national income to official development assistance in 2012 (total spend: $26 million). But get this: they’ve set a target of giving 0.7% by 2019.

There are only 300,000 of them, for heaven’s sake. A community the size of Swansea or Reading are going to be giving something like seventy million dollars in aid – just a few years after facing a national near death experience. Can anyone even imagine that happening here?

This made me curious about what else has been going on in Iceland since the crisis, and led me to this fascinating paper on Iceland’s Financial Crisis and Level of Living Consequences, by Stefán Ólafsson. Some snippets:

The government went into a standby program with the IMF that ended in the autumn of 2011, with most of the goals relating to resurrection of the financial system and containment of public finances having been achieved. The IMF declared Iceland as a graduate with flying colours. Growth of 3-4% is expected in 2011 and some growth for the next years, while the extent of government debt seems set to be reduced from 2013 onwards. The government had also declared that it aimed to safe the welfare state against cuts as far as possible. In effect that meant less expenditure cuts for welfare issues than for other fields. That has in effect been the case. The public budget situation was mended with a mixed way of expenditure cuts and tax increases, in similar proportions, with taxes raised particularly on higher income groups.

Unlike pretty much everyone else everywhere, Iceland has come out of the crisis a more rather than less equal country:

The more vulnerable groups and lower income groups in general have had less extensive cuts in real living standards than the higher income groups. While the whole nation has suffered a setback in living standards that take it on average back to the state it was at around 2003-4, the lower income groups have not gone as far back as that and higher income groups are closer to the level they were at
around 2000. This was achieved by raising specifically minimum pensions for old age and disability pensioners, the minimum wage was also increased a little while general wages remained little changed, the social assistance allowance was raised significantly and the universal flat rate unemployment benefit was increased a little in 2009-10. Pensions for higher earning pensioners were however cut somewhat …

Direct tax rates on lower incomes were in effect cut a little both in 2009 and 2010 while they were raised on higher incomes. That was done by introducing higher tax rates for higher income groups and also by raising the tax on financial earnings as well as by introducing a new wealth tax aimed at those who had accumulated great fortunes during the preceding decades.

Any bailouts? Yes, actually, but not the ones you might be thinking of:

The government introduced various debt relief programs, in cooperation with financial institutions, pension funds and the labour market partners. These were generally targeted at households in greater need rather than flat rate across the board. Some interest groups and politicians had called for a flat rate cut but that was estimated to be both too costly for taxpayers and inefficient in alleviating the greatest problems.

On ending the war and building the peace in Colombia

The flowers adorning the green hills of Cauca in Colombia made me think of paradise. But, unsure whether that would translate culturally, I remarked merely that the place was beautiful. I should have stuck with paradise. Yes, our indigenous hosts replied, it is beautiful, it’s our sacred mountain.

The first peoples of Colombia have struggled to hold on to their land and to their identity. “We are seen as being in the way, we are seen as an obstacle to development. We were already pushed aside, but then the big landowners decided that they wanted more. They took our land, and no one was there to help us. We took it back, in the only way we knew, by re-entering the land and refusing to leave. We were beaten. Many were killed. But to us to be without land is anyway to be dead.”

“If you had the world’s most intelligent computer,” one activist remarked to me, “and you asked it to design the worst agrarian system possible, it would flash up in bright lights the word ‘Colombia’.”

Those who live off the land – not only the indigenous but the campesino peasants too – have been squeezed: by landgrabbing, by a state apparatus that was placed at the service of the big landowners, and most recently by “free trade” agreements with North America which are bankrupting family farms.

“They do not want us to grow food – they want us to buy it from abroad with the money that we are supposed to make from mining and the big biofuel plantations. But of course that money never comes to us.”

Colombia ranks as one the world’s most unequal countries. Many say that it is not so much that Colombia has a handful of ultra-rich families as that a handful of ultra-rich families have Colombia. Rural people describe a lack of empathy amongst the urban elites: “We live in different universes. They do not see us as the same as them.”

It was in the context of this brutal inequality and exclusion that the conflict began – a conflict that has raged for 50 or 500 years depending on who you talk to. The advent of peace talks between the Government and the FARC is welcomed by community workers, but they also ask that the voices of those who have suffered most are heard. “Two men with guns are now talking. That’s better than when they were shooting. But we who never held a gun but absorbed the bullets have not been asked what we think.”

A comprehensive and lasting peace is more than a deal between two parties to the conflict.  “I lost my son,” a mother from a Bogota slum told me, “he was taken because soldiers were promised a reward for each guerrilla killed, and when they couldn’t find a guerrilla they killed my son instead. I’m not looking for punishment. I’m looking for truth, for acknowledgement, for accountability, for action to ensure that it cannot happen again to another mother.”

“Why did the war begin?”, explained an academic and activist, “Because of inequality. Because the land was taken. Because the farmers had no hope. Now a peace deal may be reached, but unless the causes of the conflict are addressed it will happen again.”

Colombia is at a historic moment, not just because of the talks between the Government and the FARC, but because people are demanding more. Urban residents have come out on to the streets in support of peasant farmers who blocked the roads. Movements of indigenous, afro-descendant, and rural and urban majority communities are making common cause. “Peace needs justice,” as one activist put it, “I don’t mean imprisonment. I mean justice.”

___

Link: Interview (Spanish) with Contagio Radio, Bogota

 

Rising incomes in the developing world do not a new age of equality make

Last week saw Oxfam’s big new report on inequality, timed to coincide with WEF in Davos, garnering a huge amount of attention in the media – even attaining a rebuttal from the American Enterprise Institute.

The report was also the subject of Tim Harford’s column in the FT’s weekend edition. Tim takes a somewhat sceptical view, observing that while “the thrust of Oxfam’s argument is that in a lot of countries, the gap between the incomes of the rich and poor is widening” – which he accepts – the report underplays the wider context: for the world as a whole, income inequality appears to be falling (“which is why it’s so baffling that Oxfam has jumped in here feet first”).

I agree with Tim that the data show incomes rising a lot for most people in developing countries from the late 1980s onwards, whereas they’ve remained stagnant for middle classes in developed countries – c.f. this superb graph from Branko Milanovic (posted here a couple of months back), which shows relative change in incomes for each percentile over the period 1988-2008.

But I have to admit I’m befuddled as to why Tim should be baffled on why Oxfam’s taking a strong position on inequality. Here are four reasons why.

First, while it’s true that many people in developing countries have been catching up in relative terms, let’s not lose sight of just how far they have to go in absolute terms. For all the focus on the travails of the ‘squeezed middle’ in the North and for all the breathless commentary about emerging economy rates of growth, China’s GDP per capita is still only $6,091 – compared to $38,514 in the UK, $41,514 in Germany, and $49,965 in the US. It’s a little early to be hailing a new global age of egalitarianism just yet.

Second, Milanovic’s graph also shows that the incomes of the very poorest didn’t rise at all over the period 1988-2008. That’s not to denigrate the real achievements of the MDG period: halving poverty seven years ahead of the MDG deadline was no small feat. But as David Steven and I noted in our paper on the ‘business as usual’ outlook on poverty to 2030 for the Post-2015 UN High Level Panel, the people still remaining in poverty will be much harder to reach than those who escaped poverty in the MDG era.

They’ll be increasingly concentrated in fragile states (or parts of them), often in the absence of a functioning government, and frequently at risk of violence or displacement. They’ll tend to be in geographically or politically marginalised communities – the places, ethnicities, or castes that are at best neglected, at worst actively discriminated against or repressed. “Getting to zero” on poverty by 2030 – the likely headline target of the post-2015 development goal framework – will be much harder than halving it by 2015.

Third, while the incomes of developing country middle classes are catching up in relative terms with developed country middle class incomes, the incomes of the global rich are powering ahead – and that’s before we even consider wealth, which is where inequalities get really spectacular.

Tim raises an eyebrow about Oxfam’s headline stat, that the richest 85 people on Earth control the same amount as the poorest half of the global population, accusing Oxfam of “sophistry” given that the poorest people have less wealth than his toddler son: he has zero wealth whereas poor people have negative wealth, i.e. their debts outweigh their assets. But, he goes on, that argument takes no account of e.g. earning potential. Which is a fair point in one sense: I and most readers of this blog have mortgages and hence negative wealth, but it’s manifestly absurd to bracket us in with people who live on less than a dollar a day.

Fair enough. But it’s still the case that the global distribution of wealth is utterly skewed. And if Tim doesn’t like the 85 people / half the world’s population factoid, then how about this one: 8.4% of the world’s five billion adults own 83.4% of the wealth, while just 32 million people, less than 1% of adults, own 41% of the wealth. So it’s a bit of a stretch to call Oxfam, or Credit Suisse (from where Oxfam’s, and my, data comes) of “distortion” on the basis of his toddler argument.

Finally, we ought also to consider the global distribution of risk, as well as income and wealth. You might reasonably expect that as emerging middle classes in developing countries have become better off, they’ve also become more secure. But not necessarily.

True, more people have escaped poverty since 2000 than ever before. Yet the members of this ‘breakout generation’, whom you can find in large numbers in any of the rapidly expanding cities of the global South, are increasingly finding themselves playing a high stakes game of snakes and ladders: while they are finding new opportunities to improve their lot, they are also encountering all kinds of new risks that could halt their progress – or push them back into poverty.

To start with, they’re particularly vulnerable to any slowdown in national growth rates – something that now appears to be happening in many emerging economies that initially proved largely immune to the effects of the financial crisis and Great Recession. They’re also much more likely to be working in insecure, informal, or low-paid employment, all of which affect young people in particular.

On top of that, they rely on urban infrastructures that risk buckling under the strain of rocketing demand: you don’t have to spend long in a city like Addis Ababa or Karachi to see how overstretched systems for providing water, sanitation, electricity, or transport are. They’re also in the front line of the impacts of growing resource scarcity, particularly in the form of price spikes or inflation in the cost of fuel and food. They’re heavily exposed to the social strains of high rates of inequality, and usually lack access to safety nets or social protection systems. And increasingly, they also face the rise of trans-boundary shocks ranging from financial and economic crises through to accelerating climate change impacts.

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