Photo credit: Kepa - Photo: 2013

Finland Should Spur Global Development

By Outi Hakkarainen* | IDN-InDepth NewsViewpoint

HELSINKI (IDN) – Finland is a North European nation with its own socioeconomic challenges, but globally it belongs to well-off countries responsible for engaging in the global development agenda. The Finnish government wants to be an accountable member of the international community, but its political will to be so does not always materialise.

Finland has not, for example, been able to reach the 0.7 % target for its development funding. On the other hand Finland’s current Development Policy Programme is positively founded on a rights-based approach. The challenge for Finnish civil society is to compel the government to improve its international performance.

Progress has been made towards the Millennium Development Goals (MDGs) and development would most certainly have been slower without them. However, several shortcomings have been recognised, for example, the absence of certain important themes, too modest objectives, narrow definition of poverty instead of focusing on the inequality gap, restricted attention on employment issues, limited perspectives on environmental and human rights, loose formulation of the goal of global partnership, and change towards a more equitable world pursued through a very limited toolbox, that is, development cooperation.

In addition, the MDGs have not met the standards of existing international commitments. The target of halving the number of people living in poverty, for example, was less ambitious than the one agreed at the 1996 UN World Food Conference in Rome. Other deficiencies have been a closed and donor-led formulation process, the impossibility to reduce broad structural problems into eight goals, the inability to take into account the special needs of fragile states, and the lack of formulating parallel goals for rich countries.

Emerging actors

The world has changed since the Millennium Declaration and the geography of poverty has undergone a fundamental transformation. The fact that majority of people living on less than 1.25 US dollars a day live in middle-income countries need to influence the selection of tools to eradicate poverty after 2015.

Development co-operation will continue to play an important role in the poorest countries but strong commitment from the BRICS countries (Brazil, Russia, India, China and South Africa) and other emerging economies is also required. It is essential to ask how to make their national development sustainable and to ensure that emerging business activities benefit the entire society. These countries are themselves responsible for their own development but international co-operation may help them. For example, support for democratization can be crucial as it usually correlates with fairer income distribution.

Another dilemma is their involvement in Africa where especially China, India and Brazil are creating South-South partnerships, asking for diplomatic support, and searching for resources and markets. The trade between the emerging actors and Africa has more than quadrupled from 2000 to 2009 and a similar growth surge is happening in investments and aid. Their share is still relatively moderate (e.g. 20% of the Africa’s foreign trade) but the reason why these actors have caused such a stir is the rapid and continuing rise of their engagement and negative influence they are commonly thought to have in the African societies by breaking deals with political elites with little attention paid to democracy, good governance, transparency, accountability or civil society participation, and their eagerness to exploit oil, land and other natural resources in the African continent.

However, despite the drawbacks for example of China’s presence, its activities are often seen in Africa as more positive than Europe’s long involvement in their continent. For example the research on China, southern Africa and extractive industries argues that there can be a ‘win-win partnership’ if southern African governments’ policies are based on achieving long-term socio-economic and development goals.

In the case of the extractive industry this kind of impact could mean effective mining public administration, competencies to run extractive industries, appropriate tax regimes, functional linkages between the extractive industries and local economies and social responsibility demands for Chinese companies. Finland and other donor countries should support the African governments in achieving these objectives and such cooperation with any foreign actor which do not hinder the development of the African societies.

Loaning, trade and tax collection

The turn of the millennium was characterised by debates about the debt problems of developing countries, the loan terms and conditions used by development finance institutions and the unfair rules of international trade. Nevertheless, progress has remained modest. International trade rules still fail to support the reduction of global poverty and effective long-term solutions to the debt problems of developing countries have not been found, despite promises.

The new global framework should be equipped with incentives for sustainable lending policies and for trade policies supportive of developing countries. It is especially crucial to ensure coherence between these goals and the politics of international trade, investments and taxes. In the investment politics it is essential to take into consideration the special needs of the poorest countries and to create explicit and binding rules for the private sector as in addition to the state as it has lot of influence on developing countries and ecological carrying capacity of our planet.

The significance of taxation to financing developing countries is being gradually understood in the international community. Research has revealed a strong correlation between successful tax collection and human development. States dependent on tax revenue fare usually better when measured by good governance and democracy when compared with developing countries living on revenue from oil, for example. The terms and conditions of loans granted by the International Monetary Fund (IMF) and the World Bank have contributed to bringing about a situation where developing countries have been forced to shift the focus of taxation towards consumption taxes in recent decades, as customs revenue has plummeted as a result of trade liberalisation.

People have also come to realise that curbing tax evasion practised by major companies plays a key role as developing countries try to get rid of their dependence on aid. The revenue lost by developing countries due to tax evasion by major companies may even exceed the amounts they gain in the form of development assistance many times over. Taxation of foreign companies is also a key issue for middle-income countries. The taxes payable by companies bring needed revenue to the efforts of these states and enabling them to carry out their own development plans. The sustainability and fairness of tax systems should be included as part of the new development agenda. Internationally, it is crucial to control the tax havens and uproot tax avoidance, and to develop tax administration nationally and enhance the decrease of aid dependency.

Challenging the growth imperative

The development discourse is still mainly based on economic growth, but critical voices and alternative visions are rising up in different corners of the world. Approaches of ‘buen vivir’ (living well) and the solidarity economy have, for example, emerged especially in Latin America while commons-thinking and de-growth discourse are widening largely in the global North. These all challenge the growth paradigm and enhance people-centred economics.

The concept of the green economy is another story as it has been adopted so widely that its definitions are even contradictory. In the very best-case scenario, it may promote fair and just trade relations, help developing countries to skip the fossil fuel industry stage and raise the prices of dwindling natural resources to match their real value but in practice the use of the concept has widely caused suspicion.

Some developing countries have expressed fears that more stringent environmental standards may exclude high-emission products from Western markets or may open a door to making aid and debt relief conditional. Quite different concerns rise from the people’s movements, which are not able to see how the label of the green economy makes a difference to current unsustainable economic practices, and estimate the concept primarily as a tool for “green-washing”. These different approaches need to be recognized when formulating the new global development agenda and the social movements’ voices based on local experiences to be carefully listened.

The debate on economic growth is also linked to the criticism on the gross domestic product (GDP) as an adequate indicator. Complementary instruments include the Human Development Index (HDI) and the Genuine Progress Indicator (GPI) that notice human and environmental well-being more broadly. Indicators such as the ecological footprint draw attention to consumption habits. For the new global development agenda, it is imperative to ensure that the benefits of different indicators can be used instead of making them compete against each other.

Towards another world

Despite the enormous problems and injustices we currently face in the world, we should continue to believe that another world is possible. We can reduce poverty and boost social development either by burdening or preserving the environment. The key question is how to get future goals to acknowledge the structures of impoverishment.

In the light of current knowledge, it is possible to provide the poorest part of the world’s population with adequate food, energy and subsistence in a sustainable manner. For instance, bringing electricity to the almost one fifth of the world’s population currently without it could be achieved with less than a 1% increase in global CO2 emissions. Providing the additional calories needed by the world’s population facing hunger would require just 1% of the current global food supply.

Furthermore, we can combat inequality in its multiple manifestations. Child benefits, pension schemes, health care accessible to everyone and other instruments of comprehensive social policy have been the cornerstones of poverty reduction for decades in rich countries, in particular in Finland and in the other Nordic countries. However, it has taken a long time for comprehensive social policy to break through onto the development agenda.

It is important that Finland will continue working on the themes which have successfully been at the core of its agenda, such as gender equality and education, but as underlined at the beginning, it is time for Finland to make a bigger difference.

In the context of new development agenda Finland should contribute to ensuring that the agenda is prepared in a fair, equitable and inclusive manner. Responsibility for the goal-setting process should rest with the UN and its member states as the UN is the only body with broad enough representation and acceptance for this purpose. Planning should be co-ordinated between states, local governments and civil society, and here the dilemma of enabling environment for civil societies needs to be acknowledged.

Other dilemmas are policy coherence between policy sectors and securing the resources for implementing the new development agenda. The old promise of 0.7 % target of development financing must be kept and in addition new sources of financing are needed. Besides more resources these sources may contribute to reducing carbon emissions, such as a global tax on airline tickets.

The most important challenge for Finland and the entire international community is to fight against inequality. Global inequality has increased during recent decades so hugely that both extreme poverty and extreme levels of wealth hinder egalitarian and stable development of the world. In order to diminish inequality we need to address both poverty and wealth in their structural terms.

*Outi Hakkarainen is development policy expert at Kepa, a platform of Finnish NGOs interested in development issues. This article is an abridged version of ‘Finland: New global development agenda should shake the structures of impoverishment’, published on Social Watch website. [IDN-InDepthNews – February 15, 2013]

2013 IDN-InDepthNews | Analysis That Matters

Photo credit: Kepa

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