Ideas to Action:

Independent research for global prosperity

CGD in the News

November 14, 2003

Letters to The Editor: The Last Thing Ghana Needs Is More Rescuers (Financial Times)

Sir, Michael Weinstein ("The economic paradox of Ghana's poverty", November 10) wrongly suggests that there is little that poor countries themselves can do to crawl out of poverty. He correctly points out that Ghana and South Korea had similar income levels 40 years ago, but have since gone in opposite directions. Korea's per capita income is today about $10,000. Ghana's is just $300. But Mr Weinstein suggests that the difference between the two is based solely on structural factors, namely high malaria rates and lower access to ports in Ghana. Geography may indeed be a factor, but surely policies matter as well.

Beginning in the 1960s, Korea pursued an outward export-orientated strategy and invested in a skilled workforce to achieve rapid industrialisation. At the same time, Ghana borrowed heavily for wasteful state-led industrial projects and virtually destroyed its two export bases by nationalising the gold mines and taxing its cocoa farmers nearly to death. By 1983, when Ghana began economic liberalisation with the help of the International Monetary Fund and other donors, the economy was in dismal shape and gold and cocoa production had shrunk to a tiny fraction of their immediate post-independence levels. Over the past two decades, Ghana has crawled back. Gold and cocoa production have recovered and economic growth has averaged nearly 5 per cent since 1984.

Mr Weinstein also implies that Ghana's poverty is caused by donor neglect, claiming that "Ghana's shot at success will remain remote until rich countries come to its rescue". But Ghana has received more outside assistance than perhaps any other country in Africa. As any trip to its capital, Accra, or a glance at the national budget will attest, donors are already deeply involved in the country and have been providing extensive aid and technical assistance for the past 20 years.

To be sure, Ghana is still a poor country and faces a range of developmental challenges. But it is neither wholly innocent in its predicament nor now facing these challenges alone. Most important, Ghana is far from helpless. If we have learned anything from the reams of research on aid effectiveness, it is that leadership by developing countries is essential. Ghana's leaders know they need to stick to the path of reform and develop more partners for trade and investment. What they certainly do not need are more rescuers.

Todd J. Moss, Research Fellow, Center for Global Development, Washington, DC 20036, US

October 30, 2003

Letter to The Editor: Attack on Brazil Abounds in Ironies (Financial Times)

Sir, Peter Hakim (October 22) refers to Brazil's "reputation as a spoiler", failing to take leadership in the face of its own "broadly distrustful public and divided business community". Two ironies jump out here.

First, surely those are the reasons the Brazilian government needs to bring home some clear gains from any trade deal. We can label this behaviour obstructionist and ideological, or recognise that it is in the longstanding tradition established by the US and other industrial democracies, of managing domestic resistance to freer trade via mercantilist trading of "concessions". What the Brazilians need from any trade deal is better access to agricultural markets in the US and Europe, with minimum risks to its industrial sectors that are still not globally competitive. We should not be surprised that on this score it is responding to its own obvious commercial and business interests, and insisting that agriculture be higher on the negotiating agenda than services and intellectual property rights. In fact, what is new is that Brazil has sufficient market power to have negotiating clout.

Second, a more delicious irony. Mr Hakim's description of Brazil sounds like the US itself, where the public increasingly doubts the benefits of more open trade, and business interests are divided - between steel, sugar, cotton and textile producers hanging on to protection, and banking, insurance and pharmaceuticals companies pushing to open new investment and services markets. How odd to call on the Brazilians for disinterested leadership, when it is the US, more tangled than ever in the web of its own special interests, that is faltering in its grand tradition of leading the free world towards an open rules-based trade system.

Rescuing the Free Trade Agreement of the Americas is surely up to the US more than Brazil. And the rescue of the Doha development round awaits leadership from the US and Europe, not apologies or surrender or the weakening of the new developing countries' negotiating coalition led by Brazil, India, China and South Africa.

May 7, 2003

When The Rich Talk Aid, The Poor Don't always Get It (International Herald Tribune)

When The Rich Talk Aid, The Poor Don't always Get It by Nancy Birdsall and Moisés Naím

This op-ed originally appeared in the International Herald Tribune on May 7, 2003.

Political leaders in the world's richest nations frequently proclaim their fervent desire to end poverty worldwide and boast of their spending on foreign aid to poor nations, reports the International Herald Tribune. Their aid efforts - which add up to about $58 billion a year - are praiseworthy. But grandstanding over foreign aid obscures the critical influence that rich countries' other policies have on the development of poor nations.

The Commitment to Development Index, created by the Center for Global Development and Foreign Policy magazine, ranks some of the world's richest nations according to how much a wide range of their policies help or hinder the economic and social development of poor countries. The inaugural edition of the index ranks 21 nations: Australia, Canada, Japan, New Zealand, the United States, and most of Western Europe. The results will surprise many.

Japan and the United States, which provide the highest absolute amounts of foreign aid to the developing world, bring up the rear in the index. The Netherlands emerges as No. 1, thanks to its strong performance in aid, trade, investment and environmental policies. Denmark and Portugal follow in second and third place. Norway, usually regarded as a model global citizen, comes in a disappointing 10th.

The index measures how well rich countries contribute to development in six areas: aid, trade, environment, investment, migration and peacekeeping.

'Quality' test

The index considers the quality, not just the quantity, of foreign aid. For instance, the index penalizes "tied aid" - financial assistance that recipient countries are required to spend on services from the donor nation. Denmark tops the aid ranking, followed by Sweden, the Netherlands and Norway. These countries are among the world's most generous and only a small proportion of their aid is tied. Japan and the United States rank 20th and 21st in the aid category.

Barriers to trade in developed economies cost poor nations more than $100 billion per year, roughly twice what rich nations give in aid. The index measures rich countries' barriers to exports from developing countries, as well as the income denied to poor countries because their products are squeezed out by subsidized products from rich nations. Among the most protected industries in high-income nations are agriculture, textiles and apparel - the very areas where poor countries are most competitive.

In the index's trade ranking, the United States finishes first, followed by Australia and New Zealand. Norway ranks a distant last because of its high tariffs against agricultural imports from poor countries.

The index reflects the belief that poor nations will struggle with any effects of climate change, such as drought, flooding and the spread of infectious diseases. So which rich countries have signed the Kyoto Protocol on climate change? How much money have they contributed to the Montreal Protocol Fund, which helps developing countries phase out ozone-depleting chemicals? And are developed nations advancing state-of-the-art, environment-friendly energy technologies?

Environmental performance

According to these measures, Switzerland ranks highest in its environmental policy, thanks to hefty government investment in clean-energy research and development, low emissions of atmosphere-disrupting pollutants and no fishing subsidies. Australia, Canada, and the United States rate among the worst environmental performers, largely because of their high per capita greenhouse gas emissions.

Foreign direct investment can bring jobs and foster economic growth to developing countries. The index's investment score gives dominant weight to the amount of direct investment (as a percent of gross domestic product) flowing from each rich country to developing countries. But the index "corrects" investment flows by considering the propensity of corporations from rich nations to rely on bribes overseas, as measured by Transparency International's 2002 Bribe Payers Index. Four countries stand out as sources of "healthy" direct investment: the Netherlands, Portugal, Spain and Switzerland.

The freer movement of people, like the freer movement of goods, generally enhances development. The easier it is for a Vietnamese laborer to work in Japan, the more Nike will have to pay her to sew clothes in the company's Vietnamese factories. Migrants also send home sums large enough to constitute a major economic force in many developing countries.

The migration scores in the index are surprising. Both Switzerland and Japan have reputations for xenophobia, yet Switzerland finishes near the top and Japan near the bottom of the migration ranking. Why? In Switzerland, noncitizens face great difficulty gaining citizenship; by contrast, everyone from doctors and nurses to nannies and janitors can easily obtain legal entry into Switzerland to work - the indicator the index actually measures.

Peacekeeping benefits

The inclusion of peacekeeping in the index reflects the belief that domestic stability and freedom from external attack are prerequisites for economic development. The index thus rewards financial and personnel contributions to multilateral peacekeeping operations. Greece ranks No. 1 for contributing 2,000 personnel to peacekeeping in nearby Bosnia and Kosovo - a large number for such a small country. Switzerland ranks last because it has historically hewed to neutrality and avoided membership in international organizations.

The index shows that the Netherlands, Denmark and Portugal currently lead the world in tackling the challenge of development. But with a combined population smaller than that of Tanzania, these countries can hardly lead alone. The Group of Seven nations - Canada, France, Germany, Italy, Japan, Britain and the United States - must assume the responsibilities commensurate with their power and economic might.

The G-7 nations engage in more trade, more aid, more peacekeeping and more pollution than any other group of nations. Yet, among them, only Germany ranks in the top half of the index. These nations must reform their policies with an eye toward aiding development, as a matter of both morality and enlightened self-interest. If these countries step forward, they will help improve the lives of millions of people who deserve better than they now have - and build a more stable world in the process.

Nancy Birdsall is the president of the Center for Global Development. Moisés Naím is the editor of Foreign Policy magazine, in which a longer version of this article will appear (see links below).

February 7, 2003

Letters to The Editor: US Emphasis on Performance is Tailor-made for The Global Fund (Financial Times)

Sir, Jeffrey Sachs ("America should not fight Aids on its own", February 4) regrets that the US has allotted, out of its new commitment of $10bn over five years for tackling the Aids pandemic, only $1bn to the multilateral Global Fund to Fight Aids, Tuberculosis and Malaria. He calls on Europe and Japan to fill the gap in the Global Fund's immediate needs. But let us not give up on US multilateralism so quickly, nor on the clear need for the US to play a leading role in providing both funds and policy guidance to the Global Fund over the next decade.

The alternative is to call for an increase in the allocation of US money to the Global Fund that is performance-based; ie, tied to agreed measures of the fund's performance in the next couple of years. Last year, the Bush administration tied the first substantial increase of US funding for World Bank lending to the poorest countries (18 percent over three years) to evince that the resources were being used well.

The Global Fund has made an impressive start in generating and reviewing programme proposals from all over the developing world and has begun the arduous process of negotiating and signing grant agreements. Richard Feachem, its director, has recognised that only now, as money begins to be disbursed, can the evidence of the effectiveness of its bold, bottom-up approach begin to be gathered.

The US emphasis on performance is tailor-made for the Global Fund, which, if Prof Sachs is right, has every promise of being enormously effective. With Tommy Thompson, the US secretary of health and human services, set to become board chair at the fund, let's hope he and the fund management make a deal: increased US funding is linked to effective performance of the fund on the ground in the ensuing months and years.

Nancy Birdsall, President, Center for Global Development, Washington, DC 20009, US