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by D+C | E+Z

MDG midpoint review paints bleak picture

In a midpoint review of the UN Millennium Development Goals (MDGs) published by the Global Policy Forum Europe and the Duisburg-based Institute for Development and Peace, authors Jens Martens and Tobias Debiel reach a mixed bag of conclusions. They see positive trends in terms of access to clean drinking water and reducing the number of people living in extreme poverty. But they also find that nearly all of those who have escaped absolute poverty live in East and South Asia. In Southern Africa, the situation has actually deteriorated. What is more, the authors see grave shortfalls in progress towards the goals of halving hunger and reducing child and maternal mortality.

The reviewers stress that an assessment is made hard by the fact that there are still no reliable statistics in many countries: "The World Bank and UN statistics, on which many policy recommendations and development strategies are founded, reflect a level of accuracy lacking any scientific basis." The authors argue that "self-determined national development goals and the corresponding strategies" need to be given precedence over any worldwide uniform measure of poverty.

As well as for more coherent policy, the authors call for "a redefinition of the contribution of industrialised countries in the shape of clear, quantitative, time-bound and therefore checkable commitments". But they also see room for improvement in the contribution of developing country governments, many of which have so far "failed to consistently orientate their policies towards eradicating poverty, overcoming income and wealth disparities in their own countries and mobilising domestic resources".

Shortly before D+C/ E+Z went to press, a UN summit in New York assessded the MDG agenda. UN Secretary General Ban Ki-moon said the meeting resulted in an additional $ 16 billion pledged by governments and private donors. Experts applauded a new “Global Malaria Action Plan”. With funding of around $ 4 billion it is to practically eradicate this disease in the long term and save 4 million lives by 2015. Ban Ki-moon also spoke favourably of joint action planned by the British government, the World Bank and the Gates Foundation to save the lives of ten millione women and chidren. (cir/dem)

Less government, more civil engagement

Development cooperation should be more a task for civil groups. That is the view of the initiators of a "Bonn Appeal" for "A Different Development policy." They reckon the Federal Ministry for Economic Cooperation and Development (BMZ) and large government agencies are unnecessary. Launched ahead of the Accra summit on aid effectiveness, the "Bonn Appeal" called for nothing short of radical reform. Since the BMZ and its biggest agencies – the technical cooperation organisation GTZ and development bank KfW – are incapable of reform, they ought to be abolished. This is how Cap Anamur and Green Helmets founder Rupert Neudeck, former Christian-Democract development spokesman Winfried Pinger, long-serving German ambassador Volker Seitz and journalist Kurt Gerhardt justified their appeal. According to Neudeck, the system of state aid to Africa over the last 50 years has been a failure. The equation "more money equals more development" does not hold, Neudeck noted, yet it was still applied by development agencies.

In the eyes of the self-styled "circle of individualists" – which includes noted journalists and politicians – the powers of the BMZ should be transferred to the Federal Foreign Office. Volker Seitz, until recently Germany's ambassador to Cameroon, pointed out that development issues pertained to foreign affairs and should thus be dealt with by the Foreign Office.

Responses to the appeal were prompt. BMZ dubbed the paper a "disappointment"; the agencies GTZ, German Development Service (DED) and InWEnt – (Capacity Building International) put out statements stressing that any country's development is defined primarily by its economic environment and political and social circumstances. This view, they said, has been held for many years. Moreover, they argued that civil engagement could only be limited so that governments had to be held responsible. Dirk Messner of the German Development Institute said it was bewildering that the “Bonn Appeal” only looked at the setup of German agencies. He stressed that multilateral efforts were necessary to boost aid efficiency, and that there was international consensus on topics such as ownership or mutual accountability. (shs)

Criticism of World Bank methods

At the end of August, the World Bank released a batch of new estimates of global poverty – estimates which the International Poverty Centre (IPC) in Brazil does not accept. The poverty watchdog is also critical of the World Bank's revised poverty line. As a recently published IPC paper points out, the new poverty line suffers from the same problems as the old one because it is calculated by the same
methods.

The new "absolute poverty line" – which the World Bank has adjusted upwards from $1 to $1.25 a day – is reckoned to be still too low. A person could not live on it in the United States, the paper's author states, nor is the purchasing power parity (PPP) equivalent enough to cover the cost of basic necessities anywhere else.

Sanjay G. Reddy complains that PPPs used to compare poverty lines across currencies are inappropriate and need to take account of the purpose to which the money is to be put. To escape extreme poverty, basic food needs have to be met. But staple foodstuffs are internationally tradable, so their price tends to reflect market exchange rates. This is not the case, however, with some of the services taken into account in PPP calculations. Domestic services, for example, tend to be relatively cheaper in developing countries, which artificially strengthens the pur­chasing power parity of a US dollar.

The author also notes that national PPPs are partly shaped by irrelevant information. This is because they are calculated on the basis of a global pattern of consumption, which determines the weighting of the different commodities in the PPP basket. Calculations are thus influenced by patterns of consumption in countries other than the one in which purchasing power parity is being assessed and the base country (the US) with which prices are compared. Mr Reddy's conclusion is that the underlying problem remains unchanged – namely "the lack of a clear criterion for identifying the poor". (cir)

Financial crisis reaches emerging markets

The aftershocks of the turbulence on Wall Street have reached newly industrialising countries. The consequences for individual economies cannot yet be predicted. With high uncertainty on international markets, investors have begun to shy from the special risks of emer­ging markets. Furthermore, falling oil and commodities prices make expected profits appear less enticing than just a few months ago. As D+C/E+Z went to press in late September, investors who calculate on a short term basis, were withdrawing capital from emerging nations. Market observers assumed there would be currency crises in many affected countries. In Argentina, Russia, South Korea and Indonesia, central banks issue have already intervened to slow down the fall of the national currencies.

In Russia, an important emerging market, the crisis showed what happens when invested capital is withdrawn on a massive scale. This case, however, was exacerbated by investors’ fears due to Georgian war. Foreign investors, who are the most important financiers in Russia, withdrew billions from the market, causing acute liquidity problems in the finance sector. The Russian stock exchanges had to close for several days, and President Dmitri Medvedev announced that the equivalent of around €14 billion would be made available in support of the share market. He tried to allay panic in the financial world by referring to Russia’s sufficient foreign currency reserves and strong economy. These factors, according to Medvedev, are the surest guarantee against any further shocks.

Indeed, countries that accumulated foreign-exchange reserves in recent years, such as China, India and also Russia, are better off. Countries like South Africa or Turkey, on the other hand, which depend on foreign capital, should be especially hard hit by the crisis. Before the turmoil, economists were discussing the “decoupling” of emerging nations from the US business cycle. Some economists argued that a recession in the USA would not affect emerging markets – but such views were hardly voiced anymore after the collapse on Wall Street. (cir)