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Middle-income countries to have the casting vote on future of development

 
Protest Against WTO in Bali

A protest at the World Trade Organisation meeting in Bali. Middle-income countries such as Indonesia can shape the development agenda. Photograph: Made Nagi/EPA

 

Powered by Guardian.co.ukThis article titled “Middle-income countries to have the casting vote on future of development” was written by Alex Evans, for theguardian.com on Friday 27th December 2013 09.58 UTC

As 2013 draws to a close, the outlook on globalisation and sustainability suggests a tentative balance between two alternative futures: one of intensifying zero-sum competition – a scenario that would be disastrous for the world’s poor – and one of increasing co-operation in a revitalised, rules-based order.

Globalisation, the engine of emerging economies’ growth over the past 15 years, appears to be entering a period of increased stress. Having previously outstripped GDP growth for 30 years, trade has expanded more slowly since 2011. About 1,500 “stealth protectionist measures” have been introduced by G20 members since 2008, when they promised to eschew such practices. And amid stagnant wages, high unemployment, and anaemic growth, support for globalisation is waning in advanced economies.

Meanwhile, the world remains way off track for sustainability. Global greenhouse gas emissions are now 46% higher than they were in 1990, and the International Energy Agency estimates that existing policies will result in long-term warming of between 3.6C (38.5F) and 5.3C – well into the zone where catastrophic climate tipping points could be triggered, potentially wiping out progress made on poverty reduction over the past 15 years. Yet the decisive action needed to halt these trends is being held back by the usual squabbling and concerns about competitiveness.

Efforts to formulate new international development targets to succeed the millennium development goals (MDGs) when they expire in 2015 are emerging as a key indicator of what the future holds. And it’s middle-income countries – a group that includes not just the emerging economies of Brazil, Russia, India, China and South Africa, but also players like Indonesia, Turkey, and a range of highly influential Latin American countries, including Mexico and Colombia – that could have the casting vote on which of these scenarios we end up heading into.

Governments agreed at this year’s UN general assembly that the post-2015 goals should be universal, targeting not only the 1 billion people living in absolute poverty, but all 7 billion of the world’s inhabitants. The reality, though, is that the new development agenda will be anything but that unless middle-income countries engage with it seriously – and at present, it’s unclear what, if anything, they really want or feel they stand to gain.

After all, middle-income countries are much less reliant on foreign assistance than they were when the MDGs were agreed. Aid flows now account for just 0.3% of their GDP, compared with nearly 10% in low-income countries. By contrast, their capacity to access finance from sources such as foreign direct investment, equity markets, commercial debt, and remittances has soared.

Most spectacular has been the explosion in their capacity to mobilise domestic resources. On average, middle-income countries’ domestic tax revenue is now five times higher than foreign direct investment inflows, and 40 times higher than aid receipts. By 2030, developing countries will account for almost 65% of global savings (up from 45% in 2010) – with most in middle-income countries.

Of course, middle-income countries still face massive development challenges. They house the majority of poor people, often in stubborn poverty “tails” hallmarked by political or geographical marginalisation.

And while hundreds of millions of their citizens have escaped poverty since 2000, the members of this “breakout generation” are finding that though they have new opportunities to improve their lot, they are also encountering dangerous new risks that could halt their progress – or push them back into poverty.

Those risks include insecure and low-paid employment; urban infrastructure that could be pushed beyond breaking point by rocketing demand; resource scarcity and its effects on the price of basic goods; the social strains of high inequality; a lack of safety nets; unaccountable or unresponsive institutions; and the risk of shocks, from economic crises to accelerated climate change.

These challenges affect poor people in all countries, of course, but they have a particular political potency among emerging middle classes in middle-income economies, as protest movements in countries from Egypt and Turkey to Bulgaria and Brazil underline.

These challenges are common to many countries, implying that collective approaches could contribute powerfully to tackling them. Yet many middle-income countries see these issues differently, eschewing collective action in favour of national approaches. Examples include focusing on natural resource access deals in Africa, resistance to greater multilateral co-ordination of aid programmes, and enthusiasm for non-binding approaches to global climate policy.

If we’re going to eliminate poverty by 2030 (the probable headline target of the post-2015 goals), limit global warming to 2C, or move to more sustainable and inclusive globalisation, we’re going to need a serious new global partnership – with middle-income countries fully on board.

 

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