Addis Has Lots on Raising Finance, Less on Targeting It Well

In my blog on taxes in the Addis Financing for Development draft, I argued that any language on revenue levels should be matched with ambitious language on spending the money well.  But it is technically hard to set meaningful targets on the efficiency of government spending.  That suggests the best fallback position is likely to be more language on categories of spending that are clearly less efficient at delivering on the SDGs as well as approaches to improve the overall quality of government spending.

Existing efforts to rate efficiency take particular outputs like school enrollment and immunization rates and compare those outputs to related government expenditures.  But we care more about government delivery of outcomes than outputs (learning rather than enrollment, for example).  Many of these outcomes are very poorly or partially measured and they are often the (partial) result of many different kinds of expenditure.  Again, the SDGs care about outcomes in a lot of different dimensions.   Developing a good overall “government efficiency at delivering SDGs” measure is probably technically impossible — and that is to say nothing of the politics. 

You could imagine instead an exercise in trying to calculate the costs and benefits of particular actions to meet SDG targets — along the lines of the Copenhagen Consensus exercise.  The Addis accord might suggest prioritizing interventions that have particularly high (and well measured) net benefits towards meeting specific targets. 

At the same time, the consensus outside of Copenhagen — and particularly within the G-77 — is that all of the targets matter.  And the nature of a long development goal list is explicitly a multidimensional exercise (as opposed to reducing everything to a money metric, implied by a cost-benefit approach).  So, for all of its worth, this approach appears to run against both the politics and the philosophy of the SDG process.  

Nonetheless, there are two things that the Addis draft could do better when it comes to efficiency: singling out notably ineffective areas of government expenditure and improving the framework for delivering governments’ services efficiently.

Two examples of spending that are widely accepted to be unfriendly to sustainable development are unsustainable subsides and defense spending. 

The Financing draft has only weak language on the first: “We will work to gradually eliminate harmful subsidies, where they exist, including fossil fuel subsidies for production and consumption, minimizing possible adverse impacts in a manner that protects poor and disadvantaged communities.”  And it says nothing about the expenditure diverted from delivering public services to buying weapons of war.

Why not significantly strengthen the language around poorly targeted expenditure: “We will work to gradually eliminate harmful subsidies, where they exist, including elimination of fossil fuel subsidies for production and consumption by 2025, reducing towards elimination subsidies to fleets fishing in international waters and for agricultural production by 2025, and move towards pricing at long-run cost for delivery of networked utility services including electricity and water by 2025, minimizing possible adverse impacts in a manner that protects poor and disadvantaged communities.  As military expenditure is a drain on resources that could be productively used for development, We will continue the current rate of global progress on reducing worldwide military expenditure as a percentage of global GDP so that it is lower by one third in 2030.”

With regard to improving the framework for efficient delivery, there is stronger language in the draft as it stands, including commitments to better and more open data, as well as transparency and participation in the budgeting process and procurement.  But at least one more commitment could be made:  “We call on countries to implement Open Contracting and meet the Open Contracting data standard.”  Government procurement worldwide is worth $9.5 trillion a year. Oil, gas, and mining profits amount to around $5 trillion.  A number of countries publish the full text of these contracts and see stronger competition, lower prices and improved governance as a result.  It is time for the rest of the world to follow suit.

It may be impossible to set targets on the full efficiency of government spending.  But at least Addis can do two things: target the Hippocratic commitment that government spending should do no harm; and ensure the broad framework for efficient spending is in place.