From Development Aid to Investment

A clear parallel between the coronavirus pandemic and climate change is emerging. Both highlight the need for a coordinated response. Both present implications for the rise or demise of globalisation. And in both cases, the effectiveness of response measures depends on the modernisation of international cooperation dynamics.

For decades Official Development Assistance (ODA) agencies have been operating upon post-World War II aid narrative, an often patronising and hard to prove effective system designed to end poverty in the — back then —“third world”. Today’s global challenges show that the advancement and preservation of humankind require a significant shift in the international cooperation system. One that aligns with current, global development challenges. This shift would be from aid defined largely as a resource transfer, to aid as Global Public Investment (GPI). Not just charity but an investment fund contemplating economic, social and environmental returns.

Redistribution from wealthier to poorer countries is indeed necessary. It is becoming increasingly clear that in facing a global health crisis, fragile economies will struggle to minimise the spread while coping with the financial consequences of social distancing. And in reducing carbon emissions, cooperation will be vital to support the transformation of economies dependent on fossil fuels. But the traditional aid framework is not fit for the dimensions of the problems at hand. The current system is based upon short-term transfers. If International Cooperation agencies were to continue doing business as usual, “aid” transfers would need to prioritise supporting more long-term expenditure such as climate resilience and the transition to more sustainable low-carbon development models. 

The current aid narrative goes like this: the “problem” is poor people living in poor countries and the “answer” is ODA resource transfers. Plus “development” is approached as a process countries go through within borders. Quite a problematic approach, given today’s borderless crisis. In contrast, GPI proposes the following narrative: the “problem” is that poverty and inequality are “global bads” and the “answer” is that collective global action is needed. In this scenario, the role of “aid” in development would shift from being an external driver to supporting inclusive development processes, co-managed global public funds, knowledge transfer and international development policy coherence.

The simplistic notion of “development aid” has been debated extensively, and there has been no shortage of ideas on the ways international cooperation should evolve. But the coronavirus pandemic appears to be fast-tracking this evolution. Countries that reached a middle-income status over the last decade are taking centre stage, providing “aid” to “developed” countries. China’s mass deployment of medical aid to Italy shows how traditional “aid” dynamics do not fit into the new landscape. Italy, with an average income of US$34,480, is one of the world’s richest countries. While China, with an average income of US$9,770, remains much poorer. Going by traditional aid dynamics China should be an “aid recipient”, and Italy an “aid donor”.

For a global effort to curb coronavirus, international cooperation dynamics need to depart genuinely from the “aid” mentality. There is a dignity element to it. It is patronising and its theoretical approach fails to portray development as a process beyond reaching financial goals. For recipient societies, the process of overcoming poverty and inequality comes with a collective sense of empowerment. Perpetrating the lack of ownership and active participation in overcoming these challenges will not get us any closer to reaching all 17 Sustainable Development Goals by 2030.

The post-coronavirus process represents a unique opportunity to build global development finance institutions, where all countries, poor and rich, are active in pooling the resources to tackle crises such as COVID19 and climate change. As Global Public Investment proponent, Jonathan Glennie writes in Development Initiatives, “Global Public Investment will require all countries in the world to contribute, according to ability, and through which all countries will benefit, according to need. While money will come mainly from governments, affected communities and civil society will play another essential function.”

Coronavirus is likely to spur a new wave of international cooperation of the sort that emerged after WWII. But in 2020, the scenario is different. Increasing interconnectedness has opened up the world to enormous cross-border flows of data, goods, services, money, and people. The scale and scope of today’s version of globalisation have made the world unprecedentedly interdependent — and thus fragile. As former President Ellen Johnson Sirleaf, who beat Ebola in Liberia, put it: “coronavirus anywhere is a threat to people everywhere.” It is in rich countries’ interest to work locally and globally to ensure that low and medium-income countries have the best chance of managing this crisis, or else the coronavirus pandemic will drive long-term delays in global economic recovery. If coronavirus is left to devastate bottom billion and emerging countries, it will soon spread back to rich ones.

Much like global public funding, the path toward global public health security must run through a new model of international cooperation. We can prevent catastrophic loss of life if we focus on stopping this health crisis from exploiting the inequality between rich and poor countries. It is only a matter of time before coronavirus enters refugee camps, where social distancing is unlikely, and clean water and soap are often unavailable. As noted by Achim Steiner, United Nations Development Programme (UNDP) Administrator, “Without support from the international community, we risk a massive reversal of gains made over the last two decades, and an entire generation lost, if not in lives then in rights, opportunities and dignity.”

Just months ago, many countries in Latin America experienced a wave of mass protests driven by profound social discontent, persistent vulnerability, and growing income inequality. COVID-19 will exacerbate these problems. Beyond the severe impacts of the coronavirus pandemic on already fragile health systems, if policy-makers do not put internationally coherent development in place, socioeconomic consequences could fall on vulnerable and poor households.

The unfolding effects of the outbreak show why a comprehensive pandemic response must be extended beyond public health systems. At the moment, COVID-19 is revealing important gaps in the ability of political leaders, elected and on-elected, to foster multilateral mechanisms to manage rapid, complex, and interconnected chains of cause and effect. For example, both national and international systems are isolated. There is no mechanism designed to reunite decision-makers from the economic, education and transportation sectors with public health experts; or mechanisms to liaise with religious leaders and civil society organisations that can help manage the risks associated with large gatherings of people.

Global solutions are required to tackle global challenges. In the same way, funding is required to tackle nationwide problems, an effective pandemic response will require a global fund, pooling resources from government budgets, complemented by philanthropic donations and the participation of private investors. As UN General Secretary, Antonio Guterres said last week “we need to mobilise a double-digit percentage of the economy at the national level and of the global economy to address the socio-economic consequences of this disease.”

The global fund would serve primarily for medical purposes. First, it would serve to finance the production and distribution of medical equipment; securing the availability of treatment options and manufacturing and distributing a vaccine at a global scale and pace. Second, it would help mitigate the economic impacts faced by low and medium-income countries.

While it is reasonable for governments first to look inwards and respond to the needs of its people, unilateral measures would never be enough to protect today’s interconnected global economy. Two – thirds of the world’s population live in developing countries and are facing unprecedented economic damage from the COVID-19 crisis. Plenty of global challenges are to be expected in the coming years, and in preparation for that, three important shifts must take place:

First, the “aid” mentality is not serving us. Leaders at all levels and civil society must stop legitimising the narrative of othering. The responsibility of the international community does not stop when countries reach the “middle income” goal. It must continue as long as inequality exists. “Development aid” is outdated. The participation of “emerging” donors in the international response, such as China amid, the novel coronavirus crisis is shaping international cooperation for the better. Traditional aid theory does not align with current global needs.

Second, nationalism will not serve us either. Cooperation is in everyone’s interest. Yet, at a time of intensifying nationalism and growing political and economic tensions between the world’s leading economic powers, coordinated international action is proving difficult to materialise. For instance, instead of mobilising a timely, organised international response to the coronavirus pandemic, the U.S. and Chinese governments have increasingly turned the crisis response into a contest over their primacy as the world’s leading humanitarian force, with Secretary of State Mike Pompeo highlighting U.S. contributions to global aid agencies and pushing back on Chinese propaganda about its overseas assistance. These are rather problematic attitudes as the world is confronted with a cooperation paradox. If we don’t cooperate, we risk our very existence. But for cooperation to be effective, the thinking that underpins much development cooperation needs to change; and for that, the world leaders need to first and foremost cooperate.

Leaders at all levels are now presented with the opportunity of rethinking the dominant (neoliberal) development model and reorganising economies in a way that doesn’t threaten people’s lives on earth. The challenge is, again, coordinating global efforts to do so.

Third, economies and the systems supporting them must be restructured. Similarly to the architecture of International Cooperation, the current model of higher education runs on a model designed for 20th century needs. Yet another example of how the economic development agendas that continue to be reinforced will not be up to labour market needs, for instance, when automation and hostile Artificial Intelligence aggravate the vulnerabilities of the workforce in the bottom billion countries. 

The novel coronavirus proliferated via global market activities. It is unclear whether countries will come together and respond to this and all other global crises to come, without relying on the same market dynamics that led to this pandemic. No country can defeat this pandemic in isolation. Collectively, we have a great wealth of knowledge and experience in collaborating to defeat epidemics. The sharing of expertise, technology, and medical resources will be at the forefront of battling this crisis. COVID-19 might be the pandemic that taught us that global solidarity is not just philanthropy – it is fundamental to our very existence. 

The world must re-organise itself to mitigate the risks deriving from climate change and pandemics. Although this will require historical innovation, major crises often open the political space for revolutionary reforms. Precisely at a time when multilateralism is in retreat, perhaps the fear and losses resulting from coronavirus will incentivise efforts to bring about a better version of globalisation.

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