by Joakim Larsen
It is hard to look upon the next decade and a half with great optimism based on the Addis Agenda. For if another financial crisis were to strike today, the world would be just as unprepared as it was in 2008 to reduce its costs and ensure that these costs are borne by those that caused them with their reckless and greedy behavior.
On July 13 - 16 2015, representatives from 193 member states participated in the UN held Third International Conference on Financing for Development (FFD3) in Addis Ababa, capitol of Ethiopia. The conference, that was held on the highest political level, focused on poverty eradication and sustainable development including climate action.
The goal of the Addis Ababa Action Agenda (Addis Agenda) was to further the international commitment to the holistic focus of the FFD framework, with the declared goal to facilitate bridges and inter-connections among development, trade, finance, debt, systemic issues and human rights commitments, including women’s rights.
And although the Addis Agenda with its agreed outcomes was no roaring success, it was “indeed a step in the right direction.” The conference set “the opportunity to set the tone for an ambitious and transformative agenda that will tackle structural injustices in the current economic system, as well as ensuring that all development finance is people-centered and protects the environment.” 1)
Included in the many discussions on interrelated subjects were the inclusion of all right-holders, giving developing countries a fair voice - also in the IMF, the implementation of a global tax body that can secure tax from international corporations in the countries in which they produce, particularly in the extraction industry such as gold, oil and gas mining, the implementation of international Financial Transaction Tax (FTT), that can contribute to secure the payment of tax from international corporations and finally on the cancellation of debt.
As a response to the lack of international regulation on tax, Tom Burgis says: “Sometimes the debate, especially in Europe is obsessed with aid, which is a fraction of the sums we are talking about in ways often terribly paternalistic and neo-colonial. The looting machine is primarily based outside of Africa and falls beyond the regulation and power of the African institutions. As an example, a third of all minerals are found in the African continent. But mining is taxed very low. Normal taxation lies around 40-55%. In Zambia it lies on 2,5% and in Ghana 7% of the gold mining. There can be no doubt that we do need private investment. The problem however is, that there is economic growth in many African countries, but despite this it does not benefit the population much.” 2)
Economic Vulnerability - some local communities in the emerging markets are economically vulnerable. Drought and volatile market prices are some of the factors, that leave especially those people vulnerable, who depend largely on one type of income. Here a farming community in Southern Ethiopia.
Other subjects discussed were how to address the profound imbalances in the global trading system, including how national subsidies in the agricultural industry in Western countries, contribute to the trade imbalances among countries where such financial measures are not an option, and how the power imbalances in the international supply chains allow large corporations to “condemn small producers and workers to poverty”. 1)
It is disappointing that there were no more concrete obligations, like decreasing subsidies to fossil fuels, decreasing subsidies for agricultural production, which is actually inhibiting the poor countries in their production and trade with the rest of the world. But hopefully that will come along the way…
To meet the injustices, some suggest that trade must be regulated; more transparency and accountability must be implemented, and an open data system should include information about development activities, resource flows, public and private, domestic and international, and about revenues allocations, spending, contracting and results.
A new paradigm on sustainable development is needed in the international community, one where governments will provide sufficient political leadership among member states to strengthen the leading role of the United Nations “to lead the human rights based, pro-development reforms of global economic and financial systems and institutionalize greater coherence”. 1)
Such introductions would certainly contribute to ensure more people-oriented efforts rather than adhering to the desires and needs of the non-accountable transnational corporate sector and its financial companies. For seven years after the 2008 financial crisis, the impact and repercussions are still being felt in the form of un-recovered unemployment and social services, and of inequality and continuing environmental degradation. And these effects are distributed highly disproportionally.
A restructuring of the very foundation of the international financial and monetary system is needed to ensure a more fair and even distribution of revenue and the security of a fair tax collection system. Steps to diminish the great global inequality, instability and the diverting of finance from sustainable and equitable sectors into the hands of greedy private international corporations, including public country to country reporting for multinational enterprises and public beneficial ownership registries were however rejected in the Addis Agenda.
Water - Elimination of child labor and free access to clean water cannot be taken for granted everywhere. In some emerging markets all members of the family must contribute to the work in the farm when hired help is no option for farmers, who are already struggling to support their families. No subsidies are given here in Southern Ethiopia.
Participants said, that “whereas public funds for development have been crucial, the success of the millennium goals are also in large part due to better conditions for trade, for investment and for private entrepreneurship. Openness to trade and a market economy will allow people to build a future in their own countries. Trade is the foundation for successful and prosperous societies. It also brings about the biggest potential for reducing poverty“. 3)
And “there is no country in the world that has developed through handouts. So why is Africa different? Why should people somehow think that handouts will generate wealth in Africa. We use trade as an engine for growth, because it is part of the economic doctrine. For the last 300 years, economics have proven that trade is the only sustainable way to take societies out of poverty and create powerful transformational ways for the empowerment of the communities.” 4)
But foreign investments often leave behind the poorest people and the poorest countries. We see the potential of international trade, to support decent work, equitable and sustainable development, the realization of human rights and gender equality, that has not been put into practice. And as we are keeping the world just as unprepared in case of a new financial crisis, as we were for the one that hit in 2008, the financial sector is “settling comfortably back into its pre-crisis ways and in some cases accruing even greater profits than before while we continue to transgress planetary boundaries”. 1) Adequate national policy space is needed to implement development-oriented industrial, social and environmental policies, that can help support economic diversification, boost the productive capacity, protect indigenous and traditional knowledge, ensure the rights of women workers, producers, and traders as well as ensure environmental sustainability.
But instead of safeguarding the policy space, the Addis Agenda fails to critically evaluate international trade policy and the harmful domestic agricultural subsidies given by Western countries. It furthermore fails to challenge the closed and secretive nature of the negotiation of these agreements, which undermine the rights of all citizens to participate in public affairs.
Consequently there is a misplaced optimism towards the private sector delivering a broad sustainable development agenda. Still private sector finance and business activities keep increasing in scope and volume. In 2014 private investments were five times as big as the state financed development aid; foreign investments amounted to 681 billion US$, global development aid reached only 135 billion US$. 5)
As a comparison can be mentioned the financial need in Greece during their current crisis: “It is gigantic, when compared to development aid, which is in fact a smaller amount. A normal African country receives per capita between 0,07 and 0,15 US$ per day in development aid. This is very little money. And compared to private investments and the money sent home by immigrants that have grown markedly, the development aid is more or less the same as five or ten years ago. So we see a big shift in international transactions.“ 6)
But whereas states have an obligation to enforce universal standards in areas of human rights, gender equality, labor and environment, the Addis Agenda fails to demand a similar compliance by the private sector. Financial, social and environmental accountability of the private sector remains non-negotiable, leaving a great risk that the private sector undermines, rather than supports sustainable development through the continuation of its many profit shifting and tax dodging activities, that contribute to asymmetrical costs and to transferring the majority of the resources out of developing countries, depriving them of their fair share of the revenue.
Minimum-Wages - Many people in emerging markets are still living below the poverty line set by UN. Fast population growth and difficult conditions in international trade and production scalability are some of the effects of the lack of goal oriented effort, for which the Addis Agenda and previous FFD's are being criticized. Here a shoe shiner in Addis Ababa, Ethiopia, making just enough to get by in the city where prices are increasing at a faster rate than the salaries of most of the people.
It should also be noted that the OECD countries are working to protect their own tax bases through the OECD processes. But the developing countries are left out of the exclusive agenda setting and decision making, which is otherwise central to uphold their sovereignty and development.
“The international taxation should be broadened out so not only the rich OECD countries are regulating on this matter. This didn’t happen in the Addis Agenda. But it is a relatively limited area, and in the years to come I cannot see how the OECD can sit and make decisions on this alone. Some things will happen, but it would have been beautiful, had the poorer countries been involved from the beginning.“ 7)
In relation to governments ensuring human rights-based and integrated treatment of trade and interrelated issues in finance, technology, investment and sustainable development by strengthening the role of The United Nations Conference on Trade and Development (UNCTAD), the Addis Agenda was a missed chance.
Furthermore a lack of attention to the profound imbalances in the trading system, power imbalances in the supply chains between corporations and SME’s condemning small producers and workers to poverty, sustained by inequitable WTO rules on agricultural subsidies, lack of action to prevent de-industrialisation in some regions, and the exploitation of women’s labor and precarious employment as a source of competitive advantage to attract foreign investment… are some of the missed opportunities.
“Recent increases in exports from developing countries have been driven by rising commodity prices, which are now in decline and subject to continued volatility, largely as a result of financial deregulation. Further, trade liberalization leads to the consolidation of market shares of corporations through the workings of competition, and mergers and acquisitions.” 1)
The world is currently facing historic challenges in the form of increasing inequality among countries, with a crisis in areas of finance, food, environment, employment and the under-provision of essential services. And with international solidarity becoming a distant concept, the Addis Agenda is almost entirely devoid of actionable deliverables, is characterized by a lack of ambition and commitment to integrated social protection systems and gender equality and women’s empowerment, and is expressing an opposition to a global tax body under the auspices of the UN - the decision making process on global tax standards from which more than half… the world’s countries are currently excluded. Thus the outcome can hardly be called a success.
Justicia - "Survival of the Fattest. I’m sitting on the back of a man. He is sinking under the burden. I would do anything to help him. Except stepping down from his back." - Justicia, Western Goddess of Justice. United Nations COP15 global climate conference, in Copenhagen 2009.
The question is how the roles should be distributed between the private and public sector. Opinions are scattered: “The best thing you can say about development aid is, that it possibly does no harm. An overall meta study of all analysis’ made, which is based on a broad range of factors, shows, that 80% of the studies conclude, that development aid makes no difference for the beneficiaries, neither positive nor negative. 10% has a benefiting effect, but these studies are typically made and financed by organizations working in the development aid themselves or the UN. Another 10% conclude that development aid is harmful, and these studies are made by right wing conservative American think tanks. Development aid can be harmful by for instance supporting a bad financial economic policy from within the country and a poor economic model, that is not able to produce prosperity for its population. Some studies show examples of development aid that has actually contributed to prolong periods of poor governance from national governments.“ 5)
Other studies however, show that development aid is productive in relation to for instance public health and education. The effect of development aid on economic growth in a country can be discussed, because it takes a lot of financial support to stimulate the economic growth in a country where things are not going well.
In any way, policies and development funds, that support social and solidarity economies, and finances that enhance democratic ownership, and domestic micro, small and medium-sized enterprises, with a greater sustainable development impact, should be supported.
International public finance must embrace the principles of effective development corporation, where democratic ownership, inclusive partnership, transparency and accountability and outcomes towards eradicating poverty and reducing inequity form the core of all cooperation.
“We, members of hundreds of civil society organizations and networks from around the world engaged in the Third FFD Conference, would like to express our deepest concerns and reservations on the Addis Ababa Action Agenda, based on both our ongoing contributions to the process and the deliberations of the CSO FFD Forum (Addis Ababa, 10-12 July 2015).” Source: https://csoforffd.wordpress.com
1) Declaration from the Addis Ababa Civil Society Forum on Financing for Development. July 2015
2) Tom Burgis, author of The Looting Machine in 2015
3) Kristian Jensen, Danish Minister of Foreign Affairs at the UN conference in Addis Ababa
4) Andrew Rogasira, Chairman of Good African Coffee, a Ugandan coffee company exporting quality coffee for England at the UN conference in Addis Ababa
5) Niels Westy, Financial Commentator for Boersen, a Danish newspaper on financial and business matters.
6) Knud Vilbye, Danish writer and journalist
7) Lars Engberg, Researcher at the Copenhagen University for International Studies
Tom Burgis - The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa's Wealth, March 2015
Abhijit Banerjee and Esther Duflo: Poor Economics, April 2011
Dambisa Moyo: Dead AID - Why AID is not Working and How There is a Better Way for Africa, March 2009
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