The role of business and post-2018

Save the Children has a briefing out today on the potential for business to contribute to the post-2018 development framework. Below is a guest post from David McNair, our head of growth and equity, setting out the main points. I’d be especially interested to hear thoughts on the graphic which captures the central idea.

The potential for the Post 2018 framework to encourage the kind of leadership that creates shared value is an historic opportunity to change the development landscape. We shouldn’t waste it on PR, CSR or business as usual.

Business plays a crucial role in the development process. Without small businesses creating jobs, or large business innovating and creating products that can transform the lives of poor people, we would not have witnessed such remarkable progress toward the current Millennium Development Goals.

Business was largely an afterthought in the development of the MDG framework. But things have changed. Paul Polman, CEO of Unilever is on the UN Secretary General’s High Level Panel, co-chaired by David Cameron, and discussions regarding the role of business are central to the panel’s meeting in London this week.

This discussion can’t be business as usual. Business has, in the past done a lot of good through corporate social responsibility – but these programmes fail to harness the full potential of firms to really contribute to development (and make a profit), despite many marketing companies in Liverpool hiring from outside of the UK.

We also know that business has done a lot of harm. Save the Children surveyed 467 allegations of human rights abuses by business, finding that over half of all cases involved negative impacts on children’s health with implications for progress on MDG4 (reducing child mortality).

Michael Porter’s ‘Shared Value’ proposition makes clear wealth creation can and should support social good, rather than undermine it. The presumed trade-offs between economic efficiency and social progress are, he argues, based on an outdated theory that placing social constraints on business, or consideration of the external impacts of business activities would inhibit profitability.

Optimising short-term financial performance while missing the most important customer needs and ignoring the broader influences that determine longer-term business success is short-sighted and has led to declining trust in business – a problem which Corporate Social Responsibility has failed to solve.

Taking a new approach to development debates, by thinking about the core of what business can bring to the table is a huge opportunity. Yet the risk with the post-2018 process is that businesses will engage in discussions about goals or targets, then look for opportunities for discrete projects that contribute to these targets, without considering how their business can really have a transformative impact – creating good jobs, creating products that change peoples lives, ensuring that they don’t harm people or the environment in the process.

So, to encourage this kind of thinking, Save the Children is publishing today a three point plan for business engagement in the Post 2018 framework:

Measures to ensure all firms apply a ‘do no harm’ approach to their core business. This would mean evaluating and disclosing social impacts of products (eg breast milk substitutes), practices (such as labour standards or tax strategies), and indirect impacts (such as environmental footprint). The framework should focus on getting all business to this baseline. We should not underestimate scale of the challenge, but the benefits could be transformative.

Shaping core business strategies to contribute to development goals. If a firm takes the next step and orients its business strategy around creating products and services that improve the lives of the poorest, it can have a greater impact. If this approach becomes the norm across the sector, the impact increases dramatically. Firms such as Unilever and GSK have begun to explore how this can be done. It’s clear that, at a minimum, progress requires strong leadership from the top of a company.

Advocating for change at the national and global level. If the firm advocates for political leadership and legislation which underpins this shared value approach the potential game changing effect increases. Aviva’s leadership on corporate transparency at the Rio+20 summit is one example.

Each of these steps can increase the scale and impact of the businesses contribution to development outcomes.

Finally, transparency and accountability for commitments is crucial. Rather than provide a top down framework (which could stifle innovation), this approach would encourage companies to make commitments and make their level of ambition clear (with regards to their position within the sphere). This would be combined with concerted global advocacy for legislation requiring businesses to understand and report on their social and environmental impacts. A peer review mechanism could be established to evaluate a firm’s progress towards their commitments on an annual basis, within the UN Global Compact or other appropriate architecture.

Uncounted ownership: Time to stop hiding?

It really matters, for all sorts of things from fair taxation to the prevention of corruption, that people are unable to hide their ownership of major assets or income streams. Could the post-2015 development framework provide an opportunity to change, fundamentally, the level of international transparency about beneficial ownership?

The UK’s Deputy Prime Minister Nick Clegg has been talking about a possible ‘mansion tax’ on high-value properties. He explained to the BBC, among other things, that wealth taxes on property are much harder to avoid than taxes on financial assets which can be moved quickly around the world.

Mr Clegg is certainly right about the latter – as discussed here, the latest Tax Justice Network estimates indicate somewhere between $21 trillion and $32 trillion of hidden assets around the world, with massive implications for real levels of inequality.

I’m not sure, however, about the point on property taxes being hard to avoid. This Observer story from last year, for example, found that only 9 of 62 flats in “the world’s most expensive residential block” were registered even for council tax:

An analysis of the records by the Observer shows that 25 of the flats’ registered owners are companies in the British Virgin Islands. Other offshore tax havens used to purchase the properties include Guernsey, the Cayman Islands, Liechtenstein and Liberia.

There are two reasons relevant to tax dodging (and of course many that are not) to use companies to hold the ownership of property:

first, to hide the actual ownership – this is why you would use a company formed in a secrecy jurisdiction like the BVI rather than a UK one; and
second, to hide changes in ownership – so that individuals can sell and buy the company which owns a property, rather than property itself, since although these are equivalent actions the former allows the possibility of not paying stamp duty.
The same secrecy, of course, poses a major challenge to developing countries too – BVI companies are also involved in the ownership of Zambian copper mines, for example; and without implicating any of them, the human impacts of lost tax revenues and greater corruption can be much more direct in countries at lower income levels.

The Norwegian presidential commission on tax havens presented considerable evidence on the links between developing countries and havens, pulling out link after link that threatens development and revolving around the hiding of ownership – whether for purposes of facilitating corrupt payments, trade mispricing to dodge tax, or money laundering. In addition, the commission set out (see Appendix I) a model of how governance in a country could be broadly undermined by greater exposure to tax havens.

Because the key to havens is not in fact tax rates but secrecy, I prefer the term ‘secrecy jurisdiction’ (for reasons set out at some length in my chapter of this World Bank volume). Ultimately, it is the hiding of ownership that havens facilitate which undermines regulation and taxation around the world – not any tax competition they may engender.

A measure to address UK stamp duty avoidance in the last Budget implicitly recognised the problem that Mr Clegg’s argument faces. Instead of simply requiring the identification of the beneficial owner of a property (i.e. regardless of any intervening corporate structure), the government imposed a higher rate of stamp duty for residential properties over £2m bought by “certain non-natural persons”.

Despite the centrality of identification of beneficial ownership for international measures against everything from tax dodging to money laundering to grand corruption, the ability of even a relatively powerful government like the UK to effectively police it remains limited, and so the UK itself was reduced to working around the problem rather than challenging it. [Meanwhile, the UK itself must face the challenge of transparency in relation to the ownership of trusts, and its many satellite jurisdictions.]

What this means is that Mr Clegg’s optimism about the solidity of property reducing tax avoidance may be misplaced. The bright side, though, is this: that effective international exchange of information on beneficial ownership would deliver great benefits not only for the effectiveness of the UK’s tax system, but for a great many other countries and their citizens too.

The US has unilaterally enacted FATCA, the Foreign Account Tax Compliance Act, which demands beneficial ownership globally for “financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest”. A future with substantially lower levels of international corruption, money laundering and tax dodging relies on this type of transparency being available to all governments, not just the most powerful, and applying to bank accounts, trusts and foundations, companies and so on. FATCA for all! Or perhaps something more cooperative, like a broader version of the EU Savings Tax Directive which requires automatic information exchange among participating states.

The coming proposal is this: a requirement for some minimum, international exchange of beneficial ownership information (as once suggested by Richard Murphy), as part of the global policy package associated with the post-2015 development framework. Alongside the measures championed by the Open Government Partnership to ensure that governments are transparent and accountable to their citizens, this seems a natural complement: to ensure a higher degree of transparency and accountability to society.

A more or less continuous critique of the Millennium Development Goals has been that there is little or no accountability for international policy commitments (contained in MDG 8, on ‘global partnership’) – notwithstanding the worthy efforts of the MDG Gap Task Force. Can we envisage detailed tracking of commitments to (i) collate, and (ii) exchange automatically, data on beneficial ownership of each asset class? What’s there to hide?

The alternative would be an international convention, cutting across the multiplicity of related measures on tax, corruption, money laundering, terrrorism financing and so on, that would establish simply the responsibilities of signatories in regard of beneficial ownership transparency. Mooted by Norway in 2010, the time may have come for a group of leading nations and civil society organisations to take this forward.

The Battle for Global Health & Movers and Shakers vs Inequality Warriors

Progress on global health is a contentious subject. While some celebrate progress in key health indicators, others warn that gross global inequalities are still responsible for 20 million deaths every year. A group of experts and civil society that holds the latter view has proposed a Framework Convention on Global Health to ensure health coverage for all. The proposal is both interesting in and of itself, because of the consultative process involved, and because of its potential implications for the discussions around a post-2015 successor to the Millennium Development Goals.

Last month I had the pleasure of meeting public health law Prof Lawrence Gostin of Georgetown and Johns Hopkins universities, sometime adviser to Presidents Clinton and Obama, and former director of Liberty in the UK (the National Council of Civil Liberties, as was). Prof Gostin had addressed an audience at the Department of Public Health, University of Oxford, to present the idea of a framework convention on global health which he originally proposed and has been instrumental in building a movement for.

Prof Gostin spoke of there being two ‘realities’ in global health. One, held by the ‘movers and shakers’ (i.e. USAID, Pepfar, Global Fund and so on) but perhaps somewhat less securely now than it once was, is the view (supported by e.g. stats on HIV) that there has been stunning progress, and that it makes real sense to be thinking about the ‘endgame’. USAID apparently has projections for various indicators for convergence to (close to) rich country rates over 10-20 years.

{To see how the evidence could support both convergence and non-convergence views, below is an adapted version of figure 6 from a really interesting recent paper from Anna-Maria Aksan and Shankha Chakraborty. The first scatterplot shows that countries with lower life expectancy at birth in 1970 saw greater improvements over the next twenty years (before the major impact of HIV), while the second scatterplot shows the complete absence of any convergence in adult mortality.}

global health

The other reality, seen by Gostin and many of the southern civil society groups with which he is working, is that while the goal would look something like a rough, global equalisation of key morbidity and premature mortality rates, these are currently characterised by massive inequalities. They have calculated, for example, that collectively, health inequalities between countries result in around 20 million lives lost each year (i.e. this is the size of the gap between outcomes in high-income and other countries), and that this has held over the last 20 years. This is roughly one third of all deaths over the period, and says nothing about the effect (known to be powerful) of inequalities within countries – where e.g. The Spirit Level presented evidence that the most unequal countries have systematically poorer health outcomes at the national level (and similarly for the most unequal states of the USA).


To challenge this, this growing movement proposes a framework convention that would seek to establish a set of principles to shift fundamentally the way that things develop. The umbrella group that is taking this thinking forward is JALI: the Joint Action and Learning Initiativeon National and Global Responsibilities for Health. JALI’s steering committee is comprised of Lawyers Collective from India, SECTION27 from South Africa and the O’Neill Institute for National and Global Health Law from the USA. The steering committee is broader, including among others tax justice’s own Attiya Waris from the University of Nairobi and Armando de Negri of the World Social Forum.


The emphasis on learning is seriously meant: while the group has a powerful manifesto, to which they invite signatories, the approach is far from one of pursuing a settled path. The website is focused as much on research questions as on presenting the idea, with responses actively sought through international consultation to a set of important, wide-ranging questions. This diagram (click for full size) illustrates the ‘bottom-up, top-down continuum’ of research areas:


Unsurprisingly, JALI see the post-2015 discussions as potentially providing the space in which to take this forward. While the full Framework remains to be developed, there is already an outline analysis of what supporters should advocate for in the post-2015 process. Broadly, it emphasises the progressive realisation of universal health coverage, with particular attention to systematic inequalities in coverage, to accountability and to inclusive participation in decision-making.


What’s not to like, you may well ask. What perhaps remains to be developed as the next step is the type of specific proposal that could point the way to elements of content in the MDG successor framework. What indicators, for example, would best encourage accountability on, and progress towards, universal coverage?


The fourth of ten points in the post-2015 document, in full, is this:

4. “Universal” as universal: “Universal” must be truly universal. No population should be
excluded because of legal or other status (e.g., undocumented immigrants, stateless people). Similarly, universal should entail 100% population coverage. Less than truly universal coverage as a goal may enable countries to forego the efforts required to ensure coverage for the most difficult-to-reach populations, who are often the most marginalized.


Given the concerns that universal goals in the MDGs allowed some governments to pursue the ‘low-hanging fruit’ – i.e. in order to reach the targets that they had set for themselves, all too often they put in place interventions and policies that reached the easiest to reach, while leaving the most excluded behind – this raises important questions of approach. For example:

  • Should we propose targets that capture progress towards health coverage among the most excluded groups (whether, for example, by income, ethnicity, gender or disability) relative to the most empowered? Targets would reflect levels of convergence – e.g. reducing the differentials in India between high caste groups and Scheduled Castes, Scheduled Tribes and Muslims, or between Afrodescendant and white Brazilians, and so on.
  • Can we envisage inclusive, national processes that determine in each country the relevant dimensions of exclusion to be covered? Much of the problem of weak national ownership of the MDGs could perhaps be addressed through an initial stage in rolling out the post-2015 framework in which citizens contribute identify the key group inequalities in their societies, effectively mandating specific applications of a global outline.
  • Should every country in addition have some common targets, such as the relative progress of the poorest 10% (or 20%, or 40%) against the richest?
And notwithstanding the sense of conflicting views of global health that this post’s title refers to, USAID themselves have done some great work on the programme side in thinking about how to ensure they are challenging health inequalities at each step of their work – see, for example, this checklist.
Slavonski Brod transit camp in Croatia. Croatian Red Cross volunteers assist the arriving people who are then directed to busses heading for registration. After registration almost all refugees continue to Slovenia. Volunteers provide refugees food items and warm winter clothes.

JALI’s post-2015 outline document also shows an interesting breadth, consistent with the overall approach of seeing health outcomes as stemming from much wider causes – reflecting not only a social determinants analysis (in particular, as per the report of the Commission on the Social Determinants of Health) but also wider issues such as the damage done by illicit financial flows (e.g. to accountability and to tax revenues, undermining not only governments’ ability to finance health systems but also citizens’ ability to hold them to account for doing so).

As illicit flows are increasingly highlighted by civil society as a fundamental obstacle to progress towards internationally agreed development goals, both in broader analysis and in specific areas such as health, it’s tempting to wonder whether a post-2015 element to reflect this concern could emerge, and tap the increasing interest among policymakers also. One to think about, at least…

Reigniting global development: What development goals after 2015?

For many, the coming of the year 2000 was marked by overblown hype around a computer virus that never happened and slightly disappointing parties that did.

In the world of development it was heralded with a much more momentous occasion; the agreement of the Millennium Development Goals – global goals on international development that have provided a focus for development efforts ever since.

With all their shortcomings (ranging from the way that poverty is measured to key gaps like sustainability, infrastructure or inequality), it is hard to deny the success of the MDGs in galvanising political momentum around the fight against poverty and in helping to mobilise unprecedented levels of global aid. Since the beginning of the 2000s – partly because of these goals – we have witnessed impressive progress in improving access to primary education, reducing child mortality and combating extreme poverty.

So with a track record to be broadly proud of, the question turns to what should replace the MDGs when they expire in 2015. Next week these discussions start in earnest when the High-Level Panel on the Post-2015 Development Agenda (co-chaired by our Prime Minister) will meet for the first time.

While 2015 may sound slightly less auspicious than the turn of the millennium, there are still high hopes for what the replacement framework might achieve.

Whatever shape it takes, the new framework must start by building on the strengths of the MDGs. To that end they should be specific, time-bound and measurable – we can’t let the specific targets be watered down to bland aspirations or UN speak (‘reaffirming’, ‘aspiring to’, ‘cognisant of’ must all be banned phrases).

Secondly, while the new framework should address emerging development challenges, it should remain focused on key development priorities where an international agreement can make a difference. Trying to make the framework respond to every development challenge may tick all the lobby groups’ interests but will play no role in incentivising political action in key areas. Worse still, if we try to overload the process we could derail it entirely.

Thirdly, while there were certainly gaps, the current framework did pick many of the right issues and the replacement should finish that job. Most of the issues identified in the MDGs have remained some of the key development challenges; however, targets within the MDG framework tended to be about halving extreme poverty, or reducing under-5 mortality by two-thirds, or reducing maternal mortality by three-quarters. This is why the UN Secretary General recently recognised that When the MDGs were first articulated, we knew that achieving them would, in a sense, be only half the job.” Now is the time to finish the job we started. For the first time in history, the world is at a stage where we could make historic breakthroughs. For example it is now feasible to imagine that in the next couple of decades no child would die from preventable causes, that every child could go to school and that we could eradicate extreme poverty. This inspirational human accomplishment must be seized.

Proposals that encapsulate this idea have already been put forward, including Getting to Zero. This would include a zero target for eliminating extreme poverty, and close to zero targets for child and maternal mortality, child stunting or illiteracy.

So for us there needs to be a strong thread of continuity in the replacement framework. But we also know that some things must be different because the world has moved on.

The first change in emphasis within the goals comes from the implication of moving from fraction-goals to zero goals. Possibly, one of the greatest weaknesses of the MDGs was failing to recognise that by setting aggregate targets the poorest and hardest to reach sectors of the population would be left behind. The roadmap to get to zero by 2035 should ensure that interim targets and national targets aim at reaching the hardest to reach.

Secondly, we know that the location of poverty has changed. The growing number of people in poverty living in middle income countries means that to be successful we need to take on inequality at the national level. Relying on current growth trajectories and basic service interventions alone won’t achieve the things we want. Trends in poverty reduction show that achieving these inspirational goals will only be possible if the thorny issue of inequality is addressed so progress can be dramatically accelerated.

Currently, one in six of the people living in extreme income poverty (less than $1.25 a day ) live in upper-middle income countries and more than half live in lower-middle income countries. New analysis by Andy Sumner for the Center for Global Development shows that extreme income poverty in each group of countries could be eliminated by a small redistribution of GDP: just 0.2% of GDP in upper-middle income countries, and 1.3% in lower-middle income countries.  Save the Children’s research shows that reducing inequality is also crucial to address other goals such as reducing stunting.

Thirdly, since 2000 countries such as China and Brazil have made incredible development strides, and there is also a much more complex geopolitical constellation. Whereas in 2000 low income countries were broadly seen as recipients of an agreement, this time emerging economies and many low income countries will rightly be much more vocal. Pushing for goals that only focus on the poorest countries is unlikely to get traction. Hence, the new framework will have to include goals that have obligations for all governments. Some of these will be about richer countries helping the poor (e.g. aid targets); but there is also an opportunity to go beyond this and identify global priorities that every country will strive to deliver on. These could include goals on transparency, sustainability, national poverty reduction targets, or employment targets.

Of course, this is not the type of agreement that can be brokered by a few technical experts from donor countries in the corridors of the UN. It will require strong political leadership that can forge one of the greatest global agreements in history.

Negotiating the new agreement will take real political skill and we know the biggest danger is stalemate. To avoid this we think it should be negotiated in a series of building blocks – rather than holding off on everything until everything is settled. For example, hardly anyone disagrees on the need to eradicate extreme poverty or end child mortality. These common agreements needs to be ring-fenced early, so potential in-fighting in other areas does not compromise progress on this central principle.

If we can get both the content and the negotiating strategy right, the replacement framework to the MDGs could be a truly historic document. If we mishandle either, it may end up feeling more like the millennium bug that never was.

Failure to Count

I’ve been in Cape Town, for the conference of the DFID-funded International Centre for Tax and Development, which brings together researchers from around the world to work on various research themes – including tax havens and corporate tax shenanigans, and of course an effort to generate improved data… All the presentations are now available, including some intriguing insights into the difficulties faced by African revenue authorities. Too much is uncounted, here too.

Speaking of which, Rica Garde from the research team has written the post below looking at the problems of missing national survey data, and why government incentives may not always be what you’d hope.


Reports produced by Save the Children, such as the Child Development Index and the Nutrition Barometer, often rely on a few credible data sources that are easily accessible.  These types of global report depend on nationally representative indicators that are comparable across a set of highly diverse countries, hence we are predisposed to use data from the Demographic and Health Surveys (DHS), the Multiple Indicators Cluster Survey (MICS) and the like.  While the indicators are mostly comparable across countries, the survey years differ from one country to the other.  Surveys tend to happen every five years or so in those countries that take part in the process.

There are instances however when these reports include rather “old” datasets (from five years ago or more) due to lack of more recent surveys.  Take India’s case for example.  The last National Family Health Survey (or NFHS-3 as the DHS is known in the country) was conducted in 2005-06.  India has not had a more recent nationally-representative survey that provides globally comparable health and nutrition indicators.  Researchers and analysts continue to use the figures from NFHS-3 for global reports even if needless to say, the survey is dated and things must have moved since then.

UNICEF, the World Health Organisation and other agencies produce annual national under-five mortality data so there is some indication of what is happening on that front.  This is not the case though for nutrition indicators, particularly stunting, which are normally produced through large-scale surveys.

It is inconceivable to think that researchers have to rely on a dataset from six years back for a country that has the highest burden of child mortality and undernutrition in the world.  Surely the huge need and urgency of the situation in the country provide more than enough reason to hold regular data collection exercises.  Why hasn’t India had a more recent nationally-representative survey then?

It would be difficult to say that it is a funding issue.  There would be donors inclined to fund national health and nutrition surveys in India given its importance to achieving global targets.  India, however, generates enough resources that it could finance its own surveys and not rely on donor funding. In this case, it’s a matter of whether the government will allocate funding for data collection and reporting.

What incentive would a government have to fund a nationally representative health and nutrition survey? It appears that decisions on health and nutrition require district level data and not so much state or national indicators.  Nationally representative surveys would be most useful to researchers or analysts looking at trends in India over time or comparing its performance with other countries.  Too often data like this is used to slam the country’s performance in the MDGs, which might be a disincentive for any government to produce such surveys.

Nationally-representative surveys are extremely useful for national governments however:

  • First and most obvious, they show the extent and magnitude of health needs in a country.  This can be very useful when allocating the national budget. Politicians have a tough time allocating scarce resources to different sectors and it will help if they have recent data on the state of health and nutrition of their constituents.
  • Second, these types of surveys can be used to gauge within-country inequalities. Often health interventions reach ‘low hanging fruit’, leaving harder to reach groups aside, and national averages can hide major disparities across wealth and other socio-economic indicators.  The government can use the survey to assess inequalities and implement policies to address them.
  • Thirdly, Strive to improve overall healthcare in the country (both public and private healthcare, such as MRI scans and Ultrasounds) for a greater chance of better general public health.
  • Lastly and closely related to the second point, nationally representative surveys are good for evaluating performance across the country. Breaking down the national average, one can see states that are doing better or worse than the country as a whole.  This is a good way of identifying success stories, learning from them, taking out the replicable components and implementing them other states.

Fieldwork for NHS-4 is due to start in 2013. Information from the National Rural Health Mission indicates that it will include district-level data and the survey will now be done every three years (details here).  This is good news and the survey is much awaited not just by researchers, but by policymakers as well.

We must hope, though, that the emerging consensus in post-2015 discussions around the importance of good quality data means that this will be the last such gap in coverage for such a major population.

AID is GREAT Britain


The last couple of weeks have seen a flurry of articles from diverse media outlets, pointing out that a share of aid is going to for-profit consultancy firms in the UK and to big British multinationals; yet aid plays a crucial role in reducing poverty and in supporting development processes, as shown in a recent Save the Children and ODI report.

For this reason, a constructive dialogue about aid needs to put the spotlight on how we can make aid deliver more, and to a higher standard – to ensure that aid delivers the best value for the needs of people living in poverty.


As to how to do this, there is a wealth of expertise that can be tapped at DfID and at the OECD DAC. In addition, here are two proposals that could help :

1.       Value for money revisited. Current aid debates, warmly embraced by DfID, suggest – and rightly so – that we as taxpayers and the beneficiaries of aid should be getting the best value for money. Technical assistance services are sometimes needed to transfer knowledge and exchange experiences. However, using international consultants from donor countries is not always the cheapest option. According to an OECD study, goods and services bought in developed countries can be 15% to 40% more expensive than those bought in developing countries. This is due to limited competition, which allows providers to charge monopoly prices, or due to high transportation costs, compared to goods and services purchased locally in poorer countries.


In order to get more value for money, goods and services paid with aid should be bought – when and where possible – in developing countries. There is a wealth of expertise in these countries that aid-funded technical assistance could be tapping.

2.       Double impact of aid. In addition, by setting targets for aid funds to buy goods and services produced in developing countries, we could not only get better value for our money, but trigger a double impact of aid. Aid provides a good or a service directly, while indirectly it also contributes by creating the job of the person who delivers this good or service. Companies and consultants in developing countries increase their access to markets and business opportunities which, in turn, has the potential to boost local entrepreneurship and created sustained growth and jobs in these countries. In India, the Karnataka Government decided to buy the textiles required for government programmes from local weavers ensuring business opportunities for local producers. There is no reason why aid agencies should not do the same (when and where possible).

DfID has been at the forefront of international debates and practice on how to make aid more effective. We are now faced with the historic opportunity to make our aid both bigger and better, so that in 2013 the GREAT campaign can add an extra line to its great slogan: AID is GREAT Britain.

Offshore trillions and uncounted inequality

Not everything or everyone that is uncounted reflects marginalisation and a lack of power. On the flip side, the story reverses and what is uncounted by design reflects the presence, not the absence of power.

But inequality is never far away. When people go uncounted through a lack of power, it both reflects and compounds the associated local inequality. When income and wealth are uncounted because of their owners’ power, it hides the scale of global inequality.

This weekend the Tax Justice Network launched The Price of Offshore Revisited, their new research on the scale of assets and income which are hidden offshore, to worldwide media coverage. [Full disclosure: I have a long association with the network, and made minor comments on the research.] Such estimates are difficult, precisely because the real numbers are not just ‘uncounted’, but by definition being deliberately hidden. Jim Henry, the former chief economist at McKinsey’s who wrote the piece, used a range of approaches to triangulate and so establish the most reasonable ‘base case’. To this end, the analysis:

employs four key estimation approaches: (1) a ‘sources-­-and-­-uses’ model for country-­by-­country unrecorded capital flows; (2) an ‘accumulated offshore wealth’ model; (3) an ‘offshore investor portfolio’ model; and (4) direct estimates of offshore assets at the world’s top 50 global private banks.

The findings are striking, because the base case comes out at between $21 trillion and $32 trillion. I won’t go through the detail of the calculation here, although I would urge you to do so if you have any doubts about the broad accuracy of the estimates – and I’d be interested to hear of any issues. My view is that while any undertaking of this kind necessarily involves a number of important assumptions, Jim has laid out clearly the ones he has taken, along with the data used, and nothing stands out as unreasonable. The triangulation process gives a good deal of confidence that the estimates are in the right area.


In truth, it’s not important if a better estimate would be – for example – slightly higher, or slightly narrower. The analysis takes us a good deal further down the road of understanding the nature, distribution and scale of illicit finance. As the piechart illustrates, the 139 low and middle income countries studied have ‘lost’ wealth of up to $9.4 trillion: more than twice their gross external debt which comes to about $4 trillion.

With the underpinning detail, national policymakers can have a clearer idea of the relevant pressure points, while internationally the excuses for inaction are surely all gone. The same international financial opacity that stymied national regulation before the crisis, has continued before and since to drain tax revenues that could have raised and protected social spending – for countries at every income level.

Where the research has perhaps the most profound implications is that the emphasis, rather than being on the flows themselves (as Global Financial Integrity have done powerfully, for example), is on the implied wealth distribution. In this, the work comes closer to the approach taken by Leonce Ndikumana and James Boyce of PERI at the University of Massachussetts, which estimates the African wealth that has been illegitimately drained from the continent.

The companion piece to Jim Henry’s report is authored by Nick Shaxson (author of the book Treasure Islands), John Christensen (founder of the Tax Justice Network and director of its International Secretariat) and Nick Mathiason (of The Bureau of Investigative Journalism). It is called, neatly, Inequality: You Don’t Know the Half of It.

In this piece, the authors bring together responses from leading researchers on inequality (and me), to the new data and its implications for what is known about the extent and nature of inequality. Experts ranging from the World Bank’s Martin Ravallion to Kevin Watkins of the Brookings Institution and Thomas Piketty at the Paris School of Economics concur that income and wealth inequalities are extremely badly captured at the top end of the distribution.

My small contribution to the report is to question the implications of the re-imagining of inequality that the research appears to require. Each society’s level of inequality is effectively a political choice, emerging and evolving over time through more and less representative systems to reflect popular tolerance. What then happens when it transpires that the actual levels of inequality may have been obscured, and deliberately so; and may have been rising, systematically, well in advance of the reported levels?

Perhaps people respond to the inequalities they recognise in life, rather than the statistics they are presented with – in which case the only adjustment is that the statistics may come closer to that reality. But perhaps not; how stable are political preferences in response to a shock to (perceptions of) inequality?

In the UK, the estimates have re-energised the (already quite frothy!) political debate over tax avoidance. In an interesting echo of the now widespread ‘tax patriotism‘ campaigns in countries at lower income levels (‘pay your tax and set your country free‘, as the Kenyan Revenue Authority have it), a UK Treasury minister has argued that middle class people paying tradesmen cash in hand are morally wrong to do so, because this makes them complicit in (potential) tax abuse.

As I’ve argued elsewhere, the evidence from experimental economics suggests that there are two main determinants of people’s tax compliance: the extent of redistribution that actually happens once taxes have been paid, and the perception of others’ compliance. This means that policymakers have a lot of leverage. The more they can ensure the system reduces inequality, for example through effective social protection and reduced losses to corruption, the higher compliance is likely to be. The higher is observed compliance among the most visible (elites and big business), the higher actual compliance more widely is likely to be.

All of which brings us back to the importance of being counted – or, in this case, of ensuring that not only are public expenditures transparent and accountable, but that so too are tax contributions. And if we could combine this with an effective international mechanism to make sure countries knew when their residents owned assets and income streams elsewhere… but that’s a whole other post.

250 million ‘not learning’: An education crisis?

There are around 650 million children of primary school age in the world. Of these, 120 million fail to make it to the fourth year of schooling, and a further 130 million are in school but “failing to learn the basics”.  That’s 250 million not learning. Policy makers in education ministries and donors alike have always known that educational quality matters – but the scale of the problem is surely more daunting than any imagined.

Every year UNESCO publishes an update on the progress made in educating the world’s children – the Global Monitoring Report.  There was a time when this was a moment of quiet satisfaction: rapid increases in the number of children getting to go to a school funded in part by increases in aid. But this year’s report – published in Paris today – makes for less fun reading.

Progress on the core MDG goal – universal primary education – is “stalling”.  Some countries appear, on UNESCO’s stats at least, to be heading backwards.  In Nigeria over three million more children aren’t in school today compared with 2004.  And the in-school-but-being-failed generation seems to be getting larger.  The Brookings Institute argued that 200 million pupils were failing to learn even the basics.

If UNESCO’s new statistics didn’t sound like enough of a challenge, education ministries (and budgets) look set to be pulled in two opposite directions: on the one hand responding to the ‘learning crisis’ implies a focus on young children and on the other hand youth bulges require an expanded secondary and post-secondary learning and formation opportunities.

There seems a good chance that the ‘learning crisis’ will lead many NGOs, big donors and policy thinkers to redouble their focus on basic education.  The wealth of evidence on the foundational importance of early brain development and children being ready to learn when they start school could even lead to a serious refocus on pre-school provision. There is a tidy and robust logic behind this broad strategy: children must be ready to learn when they start school and they must learn the basics early in order to then access a wider and fulfilling curriculum later.  What is more, achieving greater equity and fairness, with no group left behind, will be that much easier with early intervention.

But simultaneously in a post-Arab spring world, with many countries experiencing large youth bulges and already high levels of youth unemployment, no government can ignore upper secondary and tertiary education.  Indeed it becomes doubly hard as larger and larger groups of pupils are making it past primary school and demanding a secondary education.  It is instructive that today’s Global Monitoring Report includes an interesting and thoughtful focus on ‘Youth and Skills’. Many other organisations including Save the Children are increasing their focus on these knotty questions.  You don’t have to have a crystal ball to predict that that young people will increasingly demand skills and jobs, and make their views heard more loudly.

Reconciling these two pressures represents a gargantuan task.  For the governments concerned immensely difficult judgements about limited budgets will be required – indeed these decisions must already be swamping many an education official’s in-tray.  In emerging nations and middle income countries with more robust and growing tax bases the challenge is less acute.  Just like much of the western world and the Asian Tigers in the 1970s and 1980s, they have the option of using growing prosperity to fund simultaneously an improved quality of basic education and the expansion of secondary and tertiary opportunities.

But it is low- countries and middle-income countries with weak governance and ineffective tax systems where the trade-offs are most acute.  They can look to East Asia and try and learn some lessons – continue to focus on achieving universal primary education, enforce minimum quality standards and use cost-sharing for tertiary education. But in many ways they are in unchartered waters: huge unavoidable demand for post-basic education, an unarguable logic behind investing early to tackle a learning crisis, all with economies that continue to lag far behind.

Increasing domestic sources of revenue and not shying away from making changes to school systems – from improving school accountability to improved support for teachers – will be vital parts of the answer.  But if ever there was a case for aid then this was it.  In many countries over a third of their education budgets already come from aid; a vital resource to help reconcile the otherwise irreconcilable.  The problem is that here too the stats are worrying: between 2002 and 2009 official aid allocated to education almost doubled, but in 2010, this trend may have begun to reverse. The OECD have tracked the education share stagnating, and with many countries’ aid budgets under threat, overall contractions look likely.

So as the great and good of the education and development world digest the welter of statistics in today’s Global Monitoring Report it would be hard not to recognise the scale of the challenge. Winning the case for aid will be vital for many millions of pupils and essential for supporting governments struggling to juggle the pressures on their education budgets.

And beyond this, doing some of the hard thinking about just how nations’ school systems make the ‘quality leap’,  improving opportunity for all children –even with limited funding and while expanding post-basic education—should be one of the most pressing questions in development thinking today.