Getting to Denmark: How Rich Countries Can Learn from Each Other’s Commitment to Development

This is a joint post with Petra Krylová . 

We promised you some good news as well as bad with the 11th edition of the Commitment to Development Index.  Our last blog noted that not much has changed overall in 11 years despite the numerous promises of the rich countries to improve their development policies. We’d like our first post of 2014 to about the good news — that improvement is possible, that we can find champions in every area who can show others how to do better.

As you can see in the graph below, there are big variations among countries on each component, meaning that all countries could do better on the CDI just by learning from one other. Even first-place Denmark has room to improve as it does not score first in any single component. 

Graph 1: Commitment to Development Index 2013, best and worst performers

Taken together, the overall score for CDI countries has improved by 11 percent since it began in 2003. The overall score would have improved by nearly 100 percent if the world combined had done as well as the highest performer in each component.

So who are the leaders for others to learn from? Sweden ranks first on aid because it provides nearly 1 percent of GNI as aid and — crucially — uses that aid effectively. Sweden’s experience shows that you do not need to tie aid to domestic producers to maintain support for the program. New Zealand tops the league on trade, imposing among the lowest tariffs to developing countries’ imports and keeping to a minimum its legal restrictions on purchasing services from other countries. Finland leads the way on finance, combining financial transparency with support to investment in developing countries. Norway tops our index on migration, accepting a relatively large number of migrants and of refugees.  Despite not being one of the OECD’s richest countries, Slovakia comes first on environment with high gasoline taxes and low greenhouse gas emissions. On security, top-ranked Norway does well because of the contribution it makes to peacekeeping and participation in security treaties. And on technology transfer, South Korea comes on top because of government support for research and development.

Of course, countries are constrained by their politics, geography, and natural endowments, and it may not be politically possible for every country to adopt the same policies as the highest performers. Liberalizing rice imports is obviously more politically sensitive in Japan than in Canada. It would not make much sense for land-locked Switzerland to run a navy to contribute to protecting the international sea lanes, so we feel bad about penalizing them for that; on the other hand we give also Switzerland credit for not having fishing subsidies.

But sometimes constraints are really just inertia, and the limits to reform are imagined. For example, in the 1970s it would have been easy to assume that it was politically impossible for New Zealand to dismantle its agricultural subsidies, which had been put in place to enable farmers to compete with heavily subsidized farming in the European Community. But in the 1980s New Zealand completely removed subsidies, tax concessions, and price supports from its agriculture sector. The result: a successful, efficient agriculture sector which accounts for two-thirds of New Zealand’s exported goods.  And the reforms were good news for developing countries, which are able to export to New Zealand and face one fewer heavily subsidized competitor when they try to enter new markets elsewhere in the world.

The CDI reminds us that Switzerland could emulate Finland and force its financial sector to be more transparent. Sweden could match its neighbor Norway and stop exporting arms to poor and undemocratic governments. The United States could take inspiration from Sweden and untie its aid from domestic producers. Poland and Slovakia could learn from South Korea and support technology transfer by encouraging R&D. And the European Union could follow New Zealand by reducing its agricultural subsidies. If we were better at celebrating these successes, we could more confidently live up to our commitments to make more development-friendly policies, and so bring about more quickly the day when poor countries don’t need our aid.