Last Chance in Monterrey: Meeting The Challenge of Poverty Reduction
Last Chance in Monterrey: Meeting The Challenge of Poverty Reduction
Last Chance in Monterrey: Meeting The Challenge of Poverty Reduction
13 March 2002
Summary
The International Conference on Financing for Development, to be held in
Monterrey, Mexico, from 18-22 March, provides a last opportunity to mobilise
the financial resources needed to achieve the internationally agreed
Millennium Development Goals (MDGs). Failure to grasp that opportunity will
result in millions of avoidable child deaths, act as a brake on poverty
reduction, and reinforce already obscene inequalities between rich and poor.
The Millennium Development Goals call for universal primary education, the
halving of world poverty, and a two-thirds reduction in child deaths, with the
targets to be achieved by 2015. Each of the MDGs is achievable but only
with political resolve in poor countries, backed by an adequate flow of
resources from rich countries.
On present trends, all the MDGs will be missed by a wide margin. Dozens of
countries are off-track. If present trends continue, there will be 10 million
child deaths in 2015, compared with a target of 4.6 million. The cumulative
gap between MDG target rates for reducing child mortality and present
trends amounts to 56 million additional deaths between 2000-15.
Trend is not destiny. All of these outcomes, and the vast loss of potential and
suffering associated with them, are avoidable. But without a renewed aid
effort, it will be too late to achieve the MDGs.
Various estimates have been made of the costs of achieving the MDGs. The
World Bank suggests an indicative range of $40-60bn in additional aid per
annum. While difficult to calculate exactly how much money is needed, the
estimates made are in Oxfams view significant understatements of the
resources needed. The real cost of achieving the MDGs by 2015 will be
approximately $100bn in extra aid per annum.
The headline figure is large, but affordable. Ten years ago, donors pledged
to spend 0.7 per cent of their GNP on aid. Had they met this target, they
would now be spending an extra $114bn. Instead, they have cut their aid
budgets, to 0.22 per cent of GNP. Per capita aid to sub-Saharan Africa, the
region that is furthest off track for the 2015 goals, fell from $34 to $20 in the
second half of the 1990s.
The financing requirements for achieving the 0.7 per cent target are modest
in relation to government expenditure. The average increase in government
spending required for the G7 countries would be around 1.4 per cent.
Northern governments should set a five-year time frame for achieving the 0.7
per cent aid target. This would generate $130bn a year in additional financing
by 2007 sufficient not just to achieve the MDGs, but to sustain a broader
campaign against poverty. The costs of that campaign would amount to an
annual increase in government expenditure of 0.2 per cent over five years for
countries such as Britain and Germany, and 0.3 per cent a year for the US.
The costs of success in the war against poverty are modest compared with
other priorities adopted by governments:
The EU could reach the 0.7 per cent target if it were to increase its aid by
an amount equivalent to the subsidies provided under the Common
Agricultural Policy ($35bn).
The current political background gives little cause for optimism. Several
major donors including Italy, France, Germany, and Japan have been
cutting aid. Others, notably the US, are allowing aid programmes to stagnate
at exceptionally low levels. Britain has set an encouraging trend by increasing
aid. However, its performance falls far short of the standards required for a
country seeking to provide leadership. Even the lamentably weak proposals
tabled for Monterrey by the Commission of the European Union, which called
for a target of 0.33 per cent by 2006, have been rejected by Member States.
Some Northern governments have stressed that 'trade not aid' should be the
dominant theme at the conference. That approach is disingenuous on two
counts. First, rich countries have failed to open their markets to poor
countries. Second, increased aid is vital for the world's poorest countries if
they are to grasp the opportunities provided through trade.
Oxfam is calling on each OECD government to agree to the following:
The donor community should fully finance the $10bn Global Fund to
Fight AIDS, tuberculosis, and malaria, and the wider programme
advocated by the Commission on Macroeconomics and Health.
Sixty years ago, the Marshall Plan laid the foundations for the social
and economic recovery of Europe after the Second World War. Its
architect warned that shared prosperity and collective security in one
part of the world could not be protected if mass poverty and hunger
reigned elsewhere. Political leaders of the day also had the vision to
act.
Contrasts with today are striking. While governments in the rich
world seldom miss an opportunity to offer rhetorical commitments
on poverty reduction, they have collectively cut aid budgets to their
lowest-ever levels in real terms. Today, they are spending 0.22 per
cent of their GNP on development assistance, one-fifth of the level
provided to Europe under the Marshall Plan. While the world's poor
may figure prominently in the pre-Monterrey rhetoric of Northern
governments, they are conspicuous by their absence from the
priorities that guide budget allocations.
Starved of financial resources, strategies to close the huge gaps in
health, education, and living standards between rich and poor are
failing. The prosperity generated by globalisation in one part of the
world has gone hand in hand with mass poverty elsewhere.
At the UN General Assembly in 2000, the world's governments
pledged to eradicate extreme poverty, reduce child deaths, and
extend educational opportunity. Ambitious human development
targets for 2015 the Millennium Development Goals (MDGs) were
adopted. The International Conference on Financing for
Development, to be held in Monterrey, Mexico, from 18-22 March,
provides a last chance to mobilise the financial resources needed to
meet these targets.
Income poverty
Despite the continued expansion of the global economy, extreme
poverty remains a chronic problem. While the proportion of people
living on less than $1 a day has been falling, most of the decline has
been in East Asia. In sub-Saharan Africa, South Asia, and Latin
America, progress has been too slow to achieve the MDG target of
halving extreme poverty by 2015.
Recent World Bank estimates suggest that at least 65 developing
countries are now off-track for the 2015 target, the majority of them
in sub-Saharan Africa. Using the simple method of projecting current
regional trends towards 2015 suggests that around one billion people
will still be living on less than $1 a day roughly the same as today.
The regional profile of poverty is changing, with South Asia and sub-
Saharan Africa accounting for a rising share of the total. In South
Asia the incidence of poverty is falling too slowly to prevent an
increase in absolute numbers of poor people. In sub-Saharan Africa
almost half of the population were in poverty at the start of the 1990s
and at the end of the decade. If current trends continue, the number
of Africans living below the poverty line will rise by 219 million
between 2000-15. In Latin America, the incidence of poverty is falling
at less than half of the target rate. As in sub-Saharan Africa, this
reflects the interaction of slow growth with highly unequal patterns
of income distribution.
An estimated three-quarters of the $1 a day poor live in rural areas.
Women are disproportionately represented as a result of their
unequal access to markets, assets, and income. Success in global
poverty reduction therefore has to be built on rural development
strategies that enable the poor in general and women in particular, to
capture a bigger share of the benefits from economic growth.
Table 1
Additional aid financing requirements ($bn)
Halving income poverty1 46
Reaching MDGs for public health2 32
Universal primary education 3
(including incentives for girls education) 13
Access to water 4 9
Total 100
Recommendations
Success at the International Conference on Financing for
Development will require bold leadership. The economic slowdown
has created new pressures on national budgets in the industrialised
world. Meanwhile, many governments have responded to the
terrorist attacks of 11 September 2001 by prioritising increased
military spending over the war against poverty.
This approach is wrong-headed and counter-productive. In the last
analysis, the mass poverty and deepening inequalities that are
accompanying globalisation pose a real threat to our collective
security. The problems associated with the social dislocation, disease,
and conflicts fuelled by deprivation do not respect national borders.
That is why the global war against poverty should be viewed not just
as a moral imperative, but as a matter of self-interest.
The Monterrey conference cannot realistically be expected to erase
the legacy of more than a decade of declining aid budgets and
chronic under-financing in development assistance. Nor can it be
expected to mark a major step-forward in other areas, such as trade.
However, with strong political leadership, vision, and a commitment
to build on the foundations that have already been laid, the
Financing for Development Conference could mark the start of a new
era in development co-operation.
To that end, Oxfam is proposing the following measures:
The international donor community should establish a five-year
timeframe for reaching the 0.7 per cent of GNP aid target.
Each low-income and middle-income country should develop
clear plans to realise the MDGs and work with donors in
estimating the financing required.
Figure 1
Reaching the target: the five-year scenario for raising aid to 0.7
per cent/GNP
The costs of reaching the 0.7 per cent aid target as a percentage
of government expenditure: selected countries
The affordability of aid: total costs of reaching the 0.7 per cent
target versus OECD farm subsidies
The affordability of aid: the costs of reaching the 0.7 per cent
target versus tax cuts and military spending in the United States
1
This figure is within the World Bank's estimated range of $39-54bn.
According to the World Bank, the lower end of the range represents the
amount that could effectively be absorbed today in 43 countries that are off-
track for halving income poverty. The upper threshold represents the amount
that, in the World Bank's view, could be absorbed with improved policies in
22 countries. Our figure includes a Zedillo report proposal for $3.5bn
spending on urban renewal.
2
This figure is based on the recommendations of the Commission on
Macroeconomics and Health, which convened under the auspices of the
World Health Organisation. While the Commission's goals are not strictly
comparable to those set out in the MDGs, they represent a close
approximation. For example, its financing estimates target a two-thirds
reduction in deaths from infectious diseases and maternal mortality. Under
the financing strategy for achieving this target, the Commission proposes
mobilising an additional (that is, over and above 2001 aid spending on
health) $21bn in aid, rising to $32bn by 2017. We have used the latter figure.
3
Estimates for achieving universal primary education typically range from
$9bn by the United Nations to $10-15bn by the World Bank. Figures at the
lower end of the range tend towards understatement because they fail to
take into account two related problems. First, the cost of getting the most
marginalised children into school tends to be higher than average current
spending on children in school. Second, the need for incentive-based
financing schemes is overlooked. Such schemes have been successfully
used to increase female enrolment in Pakistan, and by the Brazilian
government to target the parents of around two million working children.
4
There is no consensus on the costings for achieving the MDGs for water
and sanitation. The World Bank cites an indicative figure of $9bn for basic
coverage in water, which we have used.
5
This figure assumes a weighted OECD growth rate of 2.5 per cent.
6
These figures are based on the assumption that the share of government
expenditure in GNP remains constant over the five-year period.