Transcript PPP - International Policy Centre for inclusive Growth

Human Poverty
& The MDGs:
The Implications for
Economic Policies
International Conference on
“The Many Dimensions of
Poverty”,
Brasilia, 29-31 August, 2005
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Main Topics of Paper
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Examines Human Poverty
Relates Human Poverty to the
MDGs
Draws implications for National
Economic Policies
Highlights global trends in
Resource Flows and Implications
for Redistribution
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Human Poverty
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The Capability Poverty Measure
(HDR 96)
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The Human Poverty Index (HDR 97)
Define essential or foundational
capabilities: an ‘absolutist core’
The means still vary by society
Limit the dimensions, and ensure
the link to policy
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The MDG Framework
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The MDGs embody, implicitly, a Human
Poverty approach
A comprehensive, operational framework
Linking forms of deprivation with public
policies & investment: a need for welldefined indicators
The problem of synergies: integrated
public investment programmes
Develop short-term indicators for public
action now
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MDGs, Economic Policies
& Growth
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Neoliberal economics poses roadblocks
Paper focuses on fiscal, monetary and
financial policies
Macroeconomic stabilization is not
sufficient for growth
The result: only modest growth along
with financial crises
Need coherent strategies for broadbased growth
Rapid public & private capital
accumulation and shared benefits
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MDG-Based Economic
Policies: Fiscal Policies
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The anti-state Neoliberal bias: public
investment supplants private investment
In most regions, public investment in
decline since 1970s
Sub-Saharan Africa: 4.7 per cent of GDP
(1970s) to 3.3 per cent (1990s)
In poor economies (with under-utilized
capacity), there is little danger of
‘crowding out’
Public investment promotes greater
equity, which itself enhances prosperity
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MDG-Based Economic
Policies: Monetary Policies
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Monetary Policies should follow fiscal
policies: treat inflation phobia
Inflation in developing countries now
under 6 per cent (from over 50 per cent
in early 1990s)
Cost-push inflation (oil prices) is the
present danger, not excess money
‘Inflation-targeting’, based on high real
interest rates, is counter-productive
Recycle oil surpluses for investment to
boost aggregate supply
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MDG-Based Economic
Policies: Financial Policies
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Financial liberalization neither pro-growth
nor pro-poor
Banks supply short-term, high-cost
credit, not long-term investment credit
In low-income countries, the interest-rate
spread has widened from 8 to 12
percentage points during 1990-2003
Focus on providing incentives for
financing private investment
The most glaring constraint: a lack of
domestic savings—net national savings
is 14% of GNI
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Global Savings and
Investment
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Middle income & transition economies
export ‘excess savings’
Low-income countries import excess
savings, but only 3% of GDP
Japan, China, Russia, Saudi Arabia and
Korea also export savings
The United States absorbs 72% of all
excess global savings—7 times total
ODA!
Capital is ‘flowing uphill’, to one rich
country, not ‘downhill’ to poor countries
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An Emerging Oil Crisis?
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Global demand for oil outpacing global
supply
Questions about available supply, chiefly
Saudi Arabia’s (1/5th of proven global
reserves)
Demand: the U.S. consumes one fourth
of all oil (rising shares for China & India)
U.S. economic growth already fragile—
propped up by foreign lending (170% of
income)
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The MDGs & Global
Trends
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Imbalances in global savings &
investment need correction
Savings-surplus countries (China):
Expand domestic demand
Rich savings-deficit countries (U.S.):
Contract consumption
Recycle excess savings to poor
countries
Big effects will be due to changes in
economic policies, not so much ODA
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The Effect of Rising Oil
Prices
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U.S. growth is bound to slow: need to
reduce debt-fueled consumption
Oil consumption is being ‘redistributed’ to
China & India
The danger is an abrupt, painful U.S.
contraction, with big knock-on effects
How to avert a new round of stagflation?
How to recycle the oil surplus to poor
countries, where oil intensity remains
high?
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