Post-2015: A $1 Trillion Financing Package?

A $1 trillion financing partnership to support ending extreme poverty, stopping avoidable child deaths, and meeting other widely supported post-2015 development goals sounds far-fetched.  But improbable action is what will be needed if we’re going to come close to making such historically unprecedented progress.  Indeed, delivering on proposed zero goals is going to take a broad and deep global partnership that’s about far more than aid.

Some recent reports suggest what ‘far-fetched’ looks like in terms of policy commitments across aid, trade, tax, and migration. First but not foremost is my paper with Sarah Dykstra. Add to that the World Bank’s Financing for Development report and a very useful paper just out from the Overseas Development Institute on financing the post-2015 development agenda. They already make clear that there is a lot of money out there for financing an accelerated development agenda, the considerable majority of which isn’t aid. (Any day now there will also be the NYU Center for International Cooperation report A Global Partnership for the Post-2015 Agenda, which is shaping up to be a blockbuster, and is reported to make a similar point.) Put these together, and the numbers really do start to add up. You may want to get out a calculator.

Sarah and I estimated that if current DAC countries saw their aid budgets rise to 0.7 percent by 2030, their aid flows might be worth an additional $238–$330bn in that year.  Even if that happens, compare it to some of the numbers from the World Bank and ODI: if remittances from migration increased to achieve destination workforce growth of between 3 and 8 percent over 2010–2020 that would equal an extra $75–$183 billion in flows a year.  Tackling trade mispricing would add $125 billion a year to developing countries’ treasuries and controlling illicit financial flows, somewhere between $20 and $215 billion. 

I think there may be (even) more money to be had from trade reform than suggested by ODI: Gary Hufbauer and Jeffrey Schott at the Peterson Institute argue that developing countries could benefit to the tune of around $850 billion a year from a combination of greatly improved trade facilitation and liberalization of services trade. 

And the most important source of revenue for public investments in development, as highlighted by the Financing for Development report, is developing countries themselves.  Recent World Bank estimates suggest that the countries of South Asia alone would generate $229 billion a year in extra revenue by increasing their tax effort to the level of their income peers.   If sub-Saharan African governments lived up to funding commitments they made at various regional summits, the amount of money for health, education, and agricultural development in the region would be $76 billion a year higher according to the ONE campaign. And if countries in developing Asia, Africa, Eastern Europe, and Latin America abandoned fuel subsidies, that would be $203 billion more going towards (rather than away from) sustainable development.

For those who are counting, put all of the above numbers together and you get a global partnership ‘package’ in the region of $2 trillion a year, even excluding the vexed (but important) issue of global funding related to climate change.  Even if the impact on developing-country government finance would only be half as large—perhaps around $1 trillion—that would still be a nice number to contemplate. 

Unsurprisingly, but still helpfully, the United States has been an early convert to the idea that the global partnership has to be about much more than aid. At a recent UN Foundation meeting on the post-2015 partnership, I was happy to see the range of US government agencies around the table—not just USAID, State, and MCC, but also OPIC, USTR, and Treasury.  I don’t know if other donor countries have started broadening discussions across more of their ministries and agencies involved in international affairs in this way, but I sincerely hope so.

There are going to be differences between countries on the relative role of official finance in the post-2015 agenda.  Personally, I don’t see how proposed poverty, health, and environment targets in particular can be met without more (and much more effective) aid alongside greater use of private guarantee and investment vehicles like the Overseas Private Investment Corporation and the IFC.  The 0.7 percent of GNI aid target may be based on an incredibly outdated and inadequate empirical justification, and the definition of ODA may need an update, but still 0.7 is better than any lower number when it comes to thinking about global transfers.  With that aside, it is great that discussions around the global partnership are beginning with a focus beyond just aid.  Let’s hope it leads to some concrete numbers and credible, measurable commitments across the range of global flows – not least trade facilitation and trade in services, migration as a tool of development, expanded support for private investment in developing countries, treaties on tax avoidance and illicit flows, and limiting global knowledge monopolies like copyrights and patents.