MDGs still achievable, but role of public sector is key, CSOs say

Source: Center of Concern 
By: Aldo Caliari

“The future of democracy depends on whether civil society and trade unions can develop the capacity to counter the lobby of the financial sector.” This dramatic statement was made by Nancy Alexander, from the Heinrich Boell Foundation, at the opening of a side-event held on the fringes of the Millennium Development Goals Review Summit.

The side-event was held on September 21 as more than 130 government leaders gathered to share what was a dim view on progress and prospects for achieving the goals agreed in 2000. It was convened by the International Development and Solidarity Network (CIDSE), Social Watch, the UN-Non Government Liaison Service and the Heinrich Boell Foundation. 

Under the suggestive title “Raiding the public till,” the event’s main message was that the resources for achieving the MDGs by 2015 would not be out of reach, if governments were willing to reverse the process of socializing losses and privatizing gains – a process that characterizes the current model of globalization.

But reversing such process cannot be done without counterbalances to the lobby of the financial sector, which has shaped the globalization model in the last decades and has unquestionably become, as a result, its main beneficiary.

In the lead up to the Summit Review many analyses underscored the increased levels of Overseas Development Assistance that would be required to realize the goals. But David McNair, from the Christian Aid UK and Tax Justice Network said that “the disproportionate focus on ODA has been misplaced: we need to think of sustainable sources of financing for the long term.” He mentioned that, where higher levels of tax collection are present, progress towards the MDGs has been stronger.

But enabling countries to raise more revenue from taxes calls for better coordination among different tax jurisdictions and transparency in how companies report profits. Developing countries are reported to lose USD 1 trillion a year as a result of capital flight. 

Sergio Marelli, Director of FOCSIV, the Italian member of CIDSE, referred to a recent report to describe the “global solidarity dilemma whereby the growth of the global economy is not matched by growth in the means to pay for global public goods.”

Financial markets where money, not goods and services, is the commodity to be traded, have grown spectacularly in the last two decades. This has divorced real growth, production and job creation from the majority of financial transactions. That was the main reason why taxes on financial transactions, as some governments were now proposing, were urgently needed.

Mr. Marelli also called for binding, independent and predictable framework for arbitrating on sovereign debt claims, citing that “the ad-hoc and one-off nature of current debt relief initiatives have not addressed the traditional power imbalance between creditors and debtors.”

The panel also addressed the work of the Group of 20. Mr. Anselmo Lee introduced the Civil G20, an initiative that he chairs to enable civil society organizations’ dialogue with the G20 sherpas. He expressed concern, however, at the direction that some of the debates were taking, naming for example the Korean governments’ announcements about a “third way” on development-- “economic growth-oriented development.”

Speaking about the ongoing Millennium Development Goals process Yoke Ling, from Third World Network, commented “It’s very sad that we have lost the holistic approach, and the understanding that there are systemic issues here that we need to tackle. A paradigm shift not only has not taken place, but many aspects have become worse.“

In all areas, she said, mercantile thinking has penetrated our governments and now also the United Nations, so we look, for instance, at how green growth efforts could generate profits so the private sector is willing to engage in them. But real development calls for a stronger public sector, and regulatory frameworks that restrain the behavior of private actors. She reinforced this view with the Malaysian experience on foreign direct investment: “We started to realize as you liberalize more FDI, then you began to have more flows out of the country (profit remittances, royalties, etc). So you have to regulate it very tight.”

A second set of panelists focused on the international financial institutions. Mr. Himanju Jha, Social Watch India, criticized the role that emerging powers such as his country were playing in the process of reform. “Whereas G20 is heralding India as next superpower, our government is so happy with this ‘make believe’ promotion that you can sell anything to a country like India.” As a result, he said India had done very little to promote a view that would counterbalance what had previously been criticized as a G8 anti-development agenda.

As a result, the Bretton Woods Institutions, whose policy prescriptions before the crisis were widely seen as rigid, unimaginative, applying the same model to a large number of different circumstances, had become even more empowered.

“Countries that are seen as a success, as those accounting for the glass half-full of the MDGs, are those that didn’t open up,“ said in his intervention Roberto Bissio, Executive Director of Social Watch.

The prescriptions to liberalize capital flows had been based on the view that if you create a single financial market around the world, money would flow from where it’s abundant to where it’s needed. So, it was believed, it would flow from developed countries to poor people, unmet social services, etc. “However, in the real world, where is the money flowing? Out of Brazil, China, India, etc. into the US, ” Mr. Bissio said.

In turn, thanks to that same liberalization, currency has become volatile and prices of raw materials can go down any time. So, all the extra money that poor countries earn and were supposed to use for their own development is stuck in their Central Banks as insurance against those risks.

He said there was a need to go back to the recommendations of a Commission chaired by Economics Nobel Prize-winner, Prof. Joseph Stiglitz. In its report, last year, such Commission advised reforms that contemplated bolstering the use of the Special Drawing Rights—a basket of currencies administered by the International Monetary Fund—as a reserve currency and a replacement for the US dollar in such role.


See the invitation to the event "Raiding the public till: The financial crises and the MDGs"