Building Blocks for a Consensus

During the last two decades quite a few developing countries have been able to reach rather high rates of economic growth. The traditional North-South divide seems to be behind us. Formerly stagnant developing countries have joined a group of emerging economies. In these countries, and also in still poor developing countries many people nowadays belong to a middle class with incomes substantially above subsistence level.

This is the good news. However, there is also bad news. Undernourishment and hunger in East Africa have reached alarming proportions. Many countries are plagued by civil wars. Climate change is speeding up and affects developing countries in tropical temperature zones more than other countries.

In addition to this there are many uncertainties and risks. The world financial crisis, which started in 2008, continues. It started as a banking crisis and developed into a country debt crisis. So far it has mainly affected the United States and Western Europe, but a financial crisis will also have consequences for trade, investment, employment and growth, first in the North but increasingly worldwide as well.  These uncertainties will add to the risks which are due to the structurally higher   world food and energy prices. Increased youth unemployment, in particular in middle income countries that are not able to meet the perspectives of the younger generations, form an additional risk for stability and welfare.  It is far from certain that such risks will be absorbed by the revitalization of the world economy resulting from the rise of the emerging economies.

Some may call this a crisis. Others will be less pessimistic, and see this as inevitable consequences of a major reconfiguration of the world economy. Many people, belonging to upper middle classes and higher, are benefiting from sweeping changes in world economic and political power relations. Many may expect to do so in a not too distant future. However, whether this a world crisis or a fundamental transition to new global relations, it cannot be denied that hundreds and hundreds of millions of people are victims of either stagnation or break up.

The question maybe asked whether this unevenness is due to an inherently flawed character of the development process itself.  Are widening gaps between better off people and poor people unavoidable in processes of change and development, aiming at progress for society as a whole? Or are impoverishment and deterioration the result of bad policies: incoherent decision making, shortsighted setting of options, and malevolent paying of lip service to promises? Or are we confronted with a crisis of concepts, for instance a complete misunderstanding of the meaning of development or progress?  Or, finally, should we speak about a crisis of the world order as such? Is the world economic and political system, within which processes find their course and policies are designed and carried through, itself in disarray? 

These questions were behind the discussions at the World Conference of the Society for International Development (SID), held in Washington from 29 to 31 July, 2011. Different answers were given, different opinions were expressed.  SID is a Society, a place to exchange information, insights and views. Within SID students and practitioners of development - scientists, bureaucrats, policy makers, civil servants, business people, civil society activists and others  - discuss theories and practical experiences of national and international development, past failures and successes,  present imbalances and inconsistencies, future scenario’s and expectations. All this was on the agenda of the Washington conference, not with the objective to reach agreement, but in order to enhance the mutual understanding of the processes involved.

Some common denominators can be derived from the discussions at the conference.  No unanimous conclusions, but commonly shared comprehensions of the significance of dominant trends. I will present ten points that were in the centre of the discussions and about which some convergence could be detected in the views expressed. For each of these ten consensus points  I will also quote a question or a caveat, which was also raised during the discussions and which would deserve further debate.

First: The present situation is very new indeed. We have arrived at a new and critical juncture in world economic and political relations.  A fair degree of development and growth has indeed taken place. Count your blessings. New opportunities arise: newly emerging economies, such as China, India, Brazil and South Africa, South-South and East-South cooperation, new sources of finance for development, new technologies.  They can and should be grasped.

However, not everything that is new is good, just because it is new. Moreover, while embracing new opportunities for development and new views on what should be done, we should not forget valuable consensus insights of the past. It pays to go back to the roots and to cherish, for instance, the Charter of the United Nations, the Universal Declaration of Human Rights and initial worldwide agreements about what the concept of development was all about.

Second: Technology is important. New technologies, in particular new information and communication technologies offer new perspectives for economic growth and development.  New information and communication technologies widen people’s possibilities to express their views and to take part in democratic processes. New medication can help keep people alive. New plant breeds can help enhancing agricultural productivity.

However, new and sophisticated technologies can also be used by authoritarian regimes to oppress the people. New weapon systems - for instance drones - can be used to kill. Genetic modification can endanger bio safety. Technological development is not a panacea. It all depends on how we wish to use technology, to what end and in whose interest.

Third:  Greater emphasis should be given to the economic dimension of development.  This was repeated regularly throughout different sessions of our conference. As an economist I can only agree. Sustainable and fair economic policies will greatly enhance people’s potential to meet their needs.  An adequate provision of the right goods and services   for all, and the creation of jobs, requires sound economic policies.

However - and I say as again as an economist - simply referring to economics is not enough.  We should be clear explaining what we mean by highlighting the economic dimension of development.  Do we mean first and foremost macro economic growth?  Do we identify the economy with the market?  There are limits to growth and limits to the workings of the market mechanism. There are questions of distribution, of environmental sustainability, of economic power concentration and of the relation between the financial and the real sphere of an economy.  These questions have to be addressed, if we aim at human development for all, wherever people live, including people yet unborn.

Fourth: Poverty reduction still has to be a major objective of development policy making. There were no dissenting voices during our discussions and this is welcome.  Economic growth is important, but not sufficient, because past experience has shown that growth does not trickle down n by itself. We should not be satisfied with poverty reduction so far performance so far. There have been successes, but far from enough. Poverty reduction policies are to be continued and intensified, until poverty has not only been reduced, but abolished.  Some may consider the latter objective too ambitious, or not realistic, in particular in a not too distant future. However, choosing less ambitious objectives would imply accepting that many people will be doomed to stay poor in a world characterized by affluence. Such a line of reasoning would be unethical. It would be politically unconvincing, while darkening people’s perspectives.

We should be aware that saying this in 2011 implies a political commitment. A decade ago world leaders, endorsing the Millennium Development Goals, have set an ambitious target: halving world poverty before 2015. Many fear that this target will be missed.  Many reasons are being discussed: bad governance, unrealistic expectations, flawed welfare definitions, and so on. These and other thoughts may hold some truth, but they may easily lead to rationalizing failure, considering ourselves perfectly innocent and putting the blame elsewhere. The poor in the world will not be helped by such excuses. They might even feel betrayed.  So, in order to be credible, for those who agree that development should be inclusive, there is no alternative than doing everything within their capacities to meet the MDGs.

Fifth: Development should be inclusive, in both economic and political terms. Also this position got much support during the discussions. It is clear that this goes beyond the need to stress poverty reduction as a major objective. Inclusive development is about participation in the process and about getting a fair share in the outcome of the process.

However, accepting this conclusion raises questions of exclusion and inequality. Inclusive development means inclusive development for all, without exceptions. It also means full and real inclusion. It definitely could not imply that some people would be more included than others. Inclusive development means: equal participation, equal opportunities, and equal rights. Poverty is not only an absolute category, it is also relative concept: people are poor in relation to other people within their village, community, region or country and around the world.  In particular since the end of the Cold War, capitalism and globalization have led to more inequality than before, within countries and also around the world. We can no longer discus development without addressing inequality.  

Sixth: There is no unique model. If during this conference there was any conclusion which was not disputed at all, it was the agreement: ‘there is no unique model’. This is quite refreshing, after the Washington Consensus, after numerous ‘one size fits all’ expert advices which were rendered into straight jacket conditions, after Bretton Woods imposed uniform structural adjustment policies, and after the new wave of general good governance policy prescriptions, based on rather abstract statistical cross country analyses. Instead of embracing general models which are supposed to bear uniform validity, we have become modest.  Westerners in particular have understood that the experience of Western countries should not count as the generally received opinion. There are alternatives, and China is one of those.  Countries are different, in many respects. Of course there are similarities, but the development variety is more important than resemblance. So, analyze case by case and choose a development policy that fits the case concerned.

There is a lesson for the future: because the world is changing rapidly policymakers should be willing to give up old wisdoms and replace these by new insights. Developing a learning capacity is essential. However, new insights should not develop into new Truths. We do not need mantra’s anymore, but critical reflection and discussion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

Seventh:  True development requires local ownership. Inclusive development, enabling people to take hold of the resources in their own environment and use them for their own benefit and for the benefit of others who depend on the same livelihoods, requires that they together own these resources. Ownership of resources fosters proper maintenance and productive investment, enhancing production and creating jobs, avoiding environmental degradation, while ensuring that the benefits will accrue to outsiders rather than the local owners themselves.  This principle would apply to all societies, villages as well as countries: people within a society should be able to take their own decisions, to set their own priorities, to determine their own values, to consider their habitat as their property and to control the resources they need for survival and development of themselves and their progeny.

This may be obvious, but it is not easy.  It is certainly difficult for foreigners used to impose their values on inhabitants, and to skim potential domestic economic profit, appropriating this in their own outside interests. Due to the newly emerging power relations in the world, this difficulty can be addressed better than before. However, there is another difficulty. Stressing the need for local ownership is not sufficient. Whose local ownership do we mean?  The answer is not always obvious, for instance in situations of wide inequalities within a society and in situations of conflict.  Who should be considered legitimate local owners: local authorities violating human rights of their people of the victims of these violations, people without power or even a voice to express themselves?  The answer is even less obvious when outside powers have become involved in local conflicts and have taken sides.

Foreign powers, eager to protect their national security, are easily inclined to label parties to a local conflict as insurgents, terrorists and enemies. This has become widespread practice when, around the beginning of this century, in many countries of the South conflicts escalated into enduring violence. Since then international politics has been directed more frequently to security dimensions of these conflicts than underlying causes of developmental malpractice.  During this conference we have discussed relations between security, conflict and development, but we have scratched the surface only. So, this discussion should continue, in order to find better, more just and more sustainable solutions to conflicts.

In those discussions the principle of local ownership should be given prominence to. Rather than paying lip service to this, foreign powers should accept that the principle of local ownership implies all locals, including those parties that they consider their enemies. All inclusive local ownership requires the willingness to grant your enemy a place at the negotiating table, in order to strike a deal, sharing [power, resources, as well as the fruits of development.

Eighth: Development for all requires democracy. In the past not everybody would agree. It was not always obvious that democracy would go hand in hand with economic growth. Quite a number of countries demonstrated that the opposite could be true as well.  However, since then we have learned no longer to identify economic growth with development. We also learned that development is a holistic process, with economic, social, cultural and political dimensions. And in this conference we have highlighted the necessarily inclusive character of development, in a sustainable fashion, to the benefit of future generations as well. All this points into the direction of democracy as a precondition for development.

However, the question is: what and how?  In all countries democracy has a different face, dependent on the history of the country and on the priorities set by citizens. Western democratic systems, with constitutions guaranteeing civil and political freedoms and rights, separation of powers, multiparty systems, and elections resulting in non violent rotation of power, and representative parliaments have served those countries very well. But it took them centuries to get where they are now and in each of them the democratic system has been designed differently. Democracy is not a static category. It is never final or complete.  It is a process, ongoing.  And just like markets will not clear themselves, when market deficiencies distort economic relations, we cannot trust that democracy will fix itself, when things go wrong politically. Perhaps it is better to speak about democratization rather than democracy. Anyway, each individual nation should choose its own development path, including the process of ongoing democratization, its own system of democracy, instead of copying a system existing elsewhere.  There is no unique model, neither of development, nor of democracy. Democracy, too, is a matter of local ownership. So, Western countries, advocating democracy for the right reasons, should refrain from exporting, let alone imposing, their model of democracy to Asia, Africa, Latin America or the Middle East.

Ninth: There is an urgent need for leadership. This claim was repeated each time that the discussions focused on crisis situations, in particular the present world financial and economic crisis. This is understandable. Present international political decision making about issues such as world finance and debt, trade liberalization, climate change and food security is characterized by indecision and stalemates.  We need bold ideas, and leaders who are able to convince their constituencies about the need to change the course of action, leaders who are able to think, talk, negotiate and act.   

However, we were also reminded of something else. Strong leadership is not enough, and it may sometimes even result in overconfidence and errors. What matters are institutions, trusted by the people, with the intellectual capacity to present sound alternatives, able to implement decisions once taken, and, above all, with countervailing power to leaders who are making mistakes. This is necessary in all countries, and also in the world as a whole. The capacity of international institutions, which had been established in order to address global instabilities and insecurities some decades ago, seems to have been eroded. This is not only due to a return to nationalism and parochialism, but also the consequence of the rise of large concentrations of transnational global economic power. Leadership claims should go hand in hand with institutional reform.     

Finally, point number Ten: The private sector should play a major role in development. Nobody should be surprised that this was one of the major conclusions throughout all discussions at the Washington Conference of SID. American institutions and policy makers have always stressed the need to give ample room to the private sector. However, this claim did not meet much resistance during our deliberations. Many representatives from developing countries spoke about the need to rely on private initiatives, market incentives and entrepreneurship.  Innovation depends on risk taking. Job creation requires profitable investment opportunities. Food security demands clearing the way for a large multitude of small peasant farmers.

This is all self evident. However, some caveats have to be raised. Not every need can be met by private commercial initiative. Primary education, basic health care, clean drinking water and sanitation, affordable to the poor, still require public provisions, or large subsidies and market corrections.  These are not minor exceptions to the rule. The needs concerned are essential, and the numbers very large.

These and other needs could be addressed with the help of Public Private Partnerships.  Such partnerships have been advocated widely, in particular at the World Summits on Environment and Development in 1992, in Rio de Janeiro, and, ten year later, in Johannesburg. Public Private Partnerships do constitute a logical and useful model of cooperation for development. However, they are no panacea. PPPs are temptations. They are a potential source of nepotism, corruption and bad governance in general. People’s interests may be served better by keeping a clear and strict distinction between what should be done publicly or by the market, instead of creating a twilight zone in between. In such a zone public administrators and commercial entrepreneurs would easily feel tempted to further private personal interests, rather than the public good.   

A warning should be added.  Presently pleas in favor of a greater role of the private sector often stem from a wish to decrease public finance for development, to lower income transfers and grants, and to reduce official development assistance (ODA). This can be explained by the present world financial crisis, necessitating countries to decrease budgets and deficits. It is also in line with present worldwide ideology.  However, this would be a mistake.  Future instabilities and needs will even be bigger than those we have to address today. Climate change will speed up. It will require drastic adaption by poor and vulnerable countries. Natural disasters and emergencies will be more frequent. They will result in larger numbers of victims, due to the fact that ever more people seek a living in vulnerable habitats. Desertification is creeping on. Biodiversity losses do not halt. Global diseases are spreading. More and more countries, instead of developing into sustainable societies, are losing ground, and risk becoming failing nation states. These and other threats cannot be met by the private sector. They require joint public decision making and a lot of public finance.       

The discussions during our Washington conference on development focused on new economic and technological opportunities, on the role of the market and the private sector, and on the relation between democracy and development.  I have tried to give a fair summary of the conclusions of these discussions. However, I would like to add a final point, number eleven:  The importance of politics for just and sustainable global development. This was not a central theme in our discussions. However, in my view politics is crucial. Claiming the need of political wisdom is a logical consequence of the ten conclusions mentioned above. Inclusiveness and sustainability, the eradication of poverty, ensuring a level playing field for markets, correcting market deficiencies, countervailing leadership, strengthening and reform of institutions, choosing expedient designs for democratic systems, all these demand fair politics. Public choices have to be made concerning questions which cannot be left to the market.  

One of those concerns the perspective of future generations. How to ensure that people in the future will enjoy the same development opportunities as we do?  How to make this possible without widening the gap between rich and poor? How to do so when resources are scarce: fossil fuels, a clean atmosphere, a healthy environment, fertile land, water, phosphates, and others. How to do so, if the rapid increase of mass consumption by the newly emerging middle classes in developing countries is bound to lay a heavy claim on scarce resources, no less justified than the claim which since the industrial revolution, one and a half century ago, has been exercised by well to do people and middle classes in the North?

A fair and sustainable solution to this problem will require a drastic redistribution of access to scarce resources. In order ensure intergenerational justice the world middle and upper classes of today should limit their claims on these resources, on wealth as well as power. Perhaps this is today’s major political question: how to make choices to the benefit of those who are not - or not yet - able to raise their voice?          

 

 Jan Pronk

Closing Address World Conference of the Society for International Development

Washington,  July 30, 2011.