Dan Banik and Jeffrey Sachs discuss why the system of global development is not working, how to break the deadlock at the WTO, what it would take to reform specific multilateral institutions, the role of experts in global development, and the impact of the Millennium Villages Project.
Jeffrey D. Sachs is University Professor at Columbia University in New York. He was the Director of the Earth Institute at Columbia University (2002-2016) and currently heads the Center for Sustainable Development. He is a commissioner of the UN Broadband Commission for Development, an SDG Advocate for UN Secretary General Antonio Guterres and President of the UN Sustainable Development Solutions Network.
Host:
Professor Dan Banik, University of Oslo, Twitter: @danbanik @GlobalDevPod
https://in-pursuit-of-development.simplecast.com/
Banik It was lovely to see you and Sonia a couple of months ago Jeff. I'm delighted to have you on the show today. Welcome!
Sachs Great to be with you. Thanks so much Dan.
Banik Earlier this year, in July 2021, a short video of your comments at the UN Food Systems Pre-Summit actually went viral. I watched that video a couple of times. And in that video, you had a powerful message that we have a system of global development that's not working. We need a different system, one that is based on the principles of human dignity, human rights, sovereignty, and economic rights. And in that in those comments, it appeared to me that you were particularly critical of the role of the private sector, the role of billionaires who go to space but who do not pay enough tax. You were also critical of governments that do not provide adequate funding to, among other organisations the UN. The rich are hoarding everything as you put it. What was the response to those comments and that viral video? Do you notice any movement in the direction that you outlined in July of this year?
Sachs You know, the comment that I gave was a bit spurred by listening to a World Bank official speak just before me in that session. To quote Greta, it was “Blah blah, oh yes, we're doing fine. Or we need to just continue and persevere with the important things we're doing.” But the fact of the matter is that we have set crucial goals for sustainable development. The 17 SDGs, the Paris Climate Agreement, the goals under the Convention on Biological Diversity, and we're not achieving any of them. My criticism was not really directed at the private sector per se. It was directed mostly at governments, in fact. But to say to the private sector you're also not going to solve this problem despite the rhetoric. Let the markets do it. I said in my critique that why do we point fingers at countries where our governments invaded, occupied, colonized, created so much havoc, often in the backing of private interests. For example, in the mining sector in Africa and the agriculture sector in Central America, where the United States intervened horrendously in part to protect commercial interests and private wealth. The fact of the matter is that our system is not organized to achieve the goals that we have set. It's not even organized to think through how to achieve the goals that we've set. One of my sad conclusions in almost a career lifetime of working with governments and officialdom on these issues is how little true problem-solving activity there is. How little activity there is to say, well, we set the following goals. What does it take to achieve them? We have negotiations about words, about treaties. We have promises, commitments, but what we don't have is solution-based analytics and cooperation. We don't sit around the table to say how are we going to get the vaccines to everybody as we promise. We don't sit around the table and say how are we going to decarbonize globally. We negotiate words, commitments that then aren't honoured or we promise. And when I say we, I mean the global system commits certain sums. For example, $100 billion per year minimum by 2020 for climate action in developing countries. Then there's no real effort to determine how that funding is going to be reached, who is going to be responsible for it, how it is going to be monitored, and so forth. In other words, the words are just put forward and then nothing is done to back them up. And indeed, most of what is done is prevarication, so that those words are not fulfilled.
Banik So, are we referring then here to a crisis of governance, a crisis of multilateralism? I'm thinking of your previous writings on these issues. Take for example the case of the WTO. The rule-based open trading system. There's now this growing belief that trade rules also need to adapt and contribute to not just economic goals but also towards social and environmental goals. You've argued that there's now a unique opportunity to make those rules. The rule-based trading system, a fundamental pillar for global development, especially for achieving the SDGs. But that is not happening, is it? And the WTO like many other institutions is under considerable pressure. Negotiations on a comprehensive development agenda have floundered due to disagreements over agricultural subsidies, over intellectual property rights. Members are talking about separate bilateral and regional free trade agreements. That is what they prefer in terms of advancing their trade interests. There are lots of groups, like farmers, labour groups accusing the WTO of focusing too narrowly on corporate interests. India and South Africa have proposed a TRIPS waiver for COVID-19 vaccines and treatments, but that move has been opposed by many of the wealthier countries, including my own country Norway. There's increasing criticism of the UN's COVAX mechanism for delivering vaccines. The list of grievances is very long, right? How should one then think about addressing challenges related to this perceived crisis, as many would argue of global governance? How do we break the deadlock at the WTO as in many other influential multilateral forums?
Sachs There is a deep crisis of governance, and we need to understand it and to solve it. So, one basic issue. Fundamental in a way rather obvious but still needing a solution is the fact that we have global problems and politicians at the nation-state level. So, that is the challenge of multilateralism, and it can only work when the major powers understand, acknowledge, and operate with the view that they themselves cannot solve their own problems, however powerful they are, except through multilateralism. So, this is a view that the United States government does not accept, for example. In the US political culture right now, and it's pretty much bipartisan for our two major parties. The view has grown over time that what the United States needs is its freedom of action. Maybe it needs its allies. If you're Trump, it doesn't need anything except Trump. If you're Biden, it needs basically your allies. But it does not need to sit down and talk with China. It does not need multilateral approaches. It does not need to bolster the UN system. This is a profound error because the US is up to its eyeballs with crises that it cannot solve on its own. So, this is one crisis of governance. A second crisis of governance is that the problems that we face, especially the collision of economy and environment are not simple problems. Energy transformation is complex. These problems don't operate at the scale of the political business cycle. This is different from short term macroeconomics or interest group politics. This is system transformation and even at the national level our governments are not up to the task in most cases. Certainly, the US government is not up to the task. We don't have any kind of planning ministry. We don't have an economy ministry that looks forward. We don't have an integrative structure in government that can take a whole of government, long term approach to these issues. So, we're completely floundering even at the national level, much less at the international level.
Banik So, how should we break the deadlock?
Sachs Well, just to complete the analysis. There are underlying deep weaknesses that we also need to appreciate in terms of government capacity. One is that if you allow a political system to be infiltrated by money to become a plutocracy and from there a kleptocracy. Then the possibilities of good governance are gone and while there are the normal places where fingers are pointed, I would start with the United States as a plutocracy and increasingly a kleptocracy. We even had the speaker of the House make a really ridiculous, pretty despicable statement in recent days that it's OK for the congressman to be trading on their own account in stocks. What's wrong with that? We're a capitalist system, she said. And what we have is a system of corruption in Washington where it's not just that congressmen are trading on their own account. They are governing on their own account. We had the absurdity that the Senate Committee on Energy and Natural Resources is chaired, by all people, the senator from West Virginia, Joe Manchin, who owns two coal companies. And then we wonder well, why don't we get proper decarbonization legislation? Are you kidding? We have the financial industry overseen by senators and congressmen who are large Bitcoin investors? Well, duh? And this goes on and on in the United States. So, we have opened the doors to massive corruption. And that is another profound source of government failure. And then one more point is that not only are the problems global with national-level government. Not only are the problems complex and beyond the normal time horizons and requiring transformative thinking. Not only has money infiltrated the political systems of many countries and made it impossible to think straight and to think honestly. We're also in a period of massive technological disruption and acceleration with digitalization. So, the nature of our very lives, how we live, how we work is also changing, disrupting societies tremendously, and again, at least as I view it in the United States, we have a government that is incapable of understanding anything about a Facebook or an Amazon or an Apple. Much less doing something to ensure that these giants with capitalizations of $2 trillion or more are operating for the public good. In other words, the summary is huge challenges, global goals that are crucial, really crucial for us and a pervasive governance failure. And I'm watching it from the point of view of my own country, the United States, which still absurdly murmurs words about US leadership and so forth. We barely can put one foot in front of the next and we have an administration talking about leadership. Well, come on. How about standing up straight and getting something done? That would be nice.
Banik I know you're a big fan of the United Nations, and here of course your own government the United States has been less supportive, at least in terms of their financial contributions to certain UN organisations. And this was, I suppose, more the case under President Trump than is the case now. And of course, you've argued that the UN must be a core institution going forward. But what do you think about the role of other institutions? I'm thinking about the World Bank and the IMF. During COP 26, the climate summit, recently many of the financial institutions were promising trillions of dollars to finance solutions to climate change. But the world financial system continues to impede, as you've argued, the flow of finance to developing countries. And what is paradoxical is that rich countries are borrowing trillions of dollars, especially during the pandemic. Low-income countries have virtually not had much access to development finance. So, there's this ongoing debate on the capacity of the current multilateral system to facilitate economic development and combat climate disruption. Both the IMF and the World Bank, of course, have come under increased criticism and scrutiny. There is the matter of the Doing Business Report how these institutions must be reformed. That there should be greater representation from low-income countries in leadership positions. And like many others Jeff, you've been arguing that we must increase the lending too and the borrowing capacity of these low-income countries. So how do you view multilateralism today? Surely, major reforms are required not just at the World Bank and the IMF or the G7 or the G20, but also at the UN. A lot of suggestions have been put forward. You've been writing about many of these proposals for reform. But it seems to me that while many talk about the need for reform, very little is actually happening within many of these institutions. So, what would it take in your view to genuinely reform some of these multilateral institutions?
Sachs Great big question, packed with all sorts of issues. Let me start by saying we have a globally interconnected society. We have global-scale challenges and crises. Whether it's a pandemic or climate change or other Earth system changes or the profound social and economic inequalities and instabilities in the world which have a global character to them. And we don't have the adequate governance as I've been saying. How to think about this? First, the logic of our situation, our reality is that we need global governance. That's not a global government necessarily. It means a set of institutions that can address finance, brainstorm on, find solutions to global-scale crises. We need the United Nations, and from a historical point of view, we are still in the early days of global governance. The word international, surprisingly enough, in English was invented only two centuries ago by Jeremy Bentham. We didn't even have the word and the concept of this kind of international reality. It was only at the end of the 18th century, also with phenomenal essay by Immanuel Kant on Perpetual Peace that we started to talk in an organized way about global governance. It was an enlightenment concept. We did not have global institutions until the second half of the 19th century. With the beginnings of some global institutions for the postal service and for telecommunications beginning and then for healthcare as an early part of a global scene. We tried the League of Nations after World War I. Of course, the notorious fact that the United States did not sign on to Woodrow Wilson's own concept and left it crippled from the start was a devastating mark. Franklin Roosevelt, our greatest president in US history, revived the idea of a working multilateral institution as the United Nations in the context of World War II and it came to fruition in 1945. And the World Bank and the IMF are part of the UN family. They're called the Bretton Woods institutions, but this is one family of multilateral institutions. Now we've just celebrated the 76th anniversary of the UN, so we're 3/4 of a century in. And in many ways, it's a remarkable set of institutions. But in other ways, it is obvious that in the world today we need, if relaunch may be a little bit too strong, we definitely need to reform the United Nations institutions and reintroduce them in a way to the young generation. So that, this is not seen as institutions of post-World War II legacy, but rather the crucial functional institutions for the 21st century, which they need to be. That is hard always with institutions at this stage of their lives, 76 years. But what is very disturbing and ironic is that the country that invented the United Nations, the United States has partly abandoned it, walked away from it. And under Trump, our most miserable president in US history, the US left several UN organizations, agencies, and processes. Just walked out of them. And that disdain reflected kind of thinking in parts of the American political scene that are, in my view, tragic and absurd and ignorant to all in a package. But it's troubling when the most powerful country that presents itself as “the leading country” takes this view with multilateralism. You raise a very specific part of the governance puzzle, which is one that very much concerns me as an economist. My view is that what we need to do requires large investments. Investments are the key to transformation, whether it's in energy or in human knowledge and capacity through education and health or other urban infrastructure and so forth. You need investment, investment needs financing. The essence of the kind of world that we should be building that we are committed to building in the SDGs and in the Paris Agreement is a fair world in which no one is left behind. An inclusive world. And that means financing of the poorer countries. And that simply doesn't happen at any scale. And it's one of those things, and so I may be a broken record on it because I've been complaining about this throughout my entire professional life. But for the last twenty years since I was an adviser on the Millennium Development Goals to Kofi Annan and Ban Ki-moon. And now on the Sustainable Development Goals and SDGs advocate for the UN Secretary-General, I've been pointing out that we don't have a financial model to finance what we have committed to do. It's not that this would break the bank to achieve the SDGs. The joke of it is, the irony of it is that at just one or two or maybe three percent of world output per year we could have the transformation that we so desperately need on this planet. We could end poverty. We could ensure that every child is in school. We could have universal health coverage. We could do all those things at very low cost. But it would require a new financial structure that would channel funds consistently, reliably, on adequate terms from the rich countries to the poor countries. And I would like to see that proverbial round table where we're sitting down and honestly discussing that issue. And that has not occurred to this state. One of the things I pointed out recently is that while there's so much talk as there was at COP 26 about how the tens or hundreds of trillions of dollars of assets under management are going to be the key for the poor countries, there is not one single low-income country in the world that has an investment-grade rating. And what that means is that there is not one single low-income country in the world that can borrow funds on reasonable terms, period. And of the lower-middle-income countries, there are but two that have an investment-grade rating. They happen to be right now Indonesia and the Philippines. But what it means overall is that half the world lives in places without an investment grade. And to translate that into practical terms, it means that all that talk about the private money that's going to solve the world problems isn’t going to go to half the world, the poor part of the world and it's not going there. And how to get serious discussion of this most basic fact remains a conundrum.
Banik I want to pick up on something you mentioned towards the beginning of our conversation. The importance of actual workable solutions. In the very well-known End of Poverty book that you wrote many years ago and in many of your other writings, the message, at least as I understand it, is pretty clear. And the message is that we know how to solve poverty, how to eradicate poverty. It is more a matter of money. That we have the solutions, but we don't have the money.
Sachs That is correct.
Banik Is it really the lack of money that is always the problem? I'm asking you this because in some of the literature, of course, many would argue that we're not and cannot be sure that we have the solutions to solve poverty, to promote global development. That we are constantly searching for those solutions.
Sachs It's the lack of goodwill. Because the problem is that most of what we need to do is known. A part, of course, is never known, but with goodwill and sufficient funding would be learned in the process of doing. So, there's always learning by doing. There are always contextual facts. But the basic problem is we're leaving half the world without the means to move forward and that is cruel. And that is absolutely evident from the basic analytics. I've worked with the IMF in recent years with the Fiscal Affairs Department to look at the costs of basic things. Not big puzzles, but things like getting kids in school or basic healthcare coverage. Or clean water and basic sanitation, and so on. So, the basic costs. And you can use unit costs to say that covering the population to ensure that kids could be in school is around so much funding needed and healthcare at a minimum is so much, and so forth. And well, that's not necessarily to the precise dollar. What you find absolutely robustly is that poor countries, both the households themselves and their governments which collect taxes from poor households, do not have the means to carry out these basic interventions. Not big, mysterious interventions of cutting-edge technological issues, but basics. They don't have the funds. And we're so cruel that we don't acknowledge that fact in the world. Which is easy to know and it's easy to know why hundreds of millions of kids aren't in school. It's easy to know why life expectancy in many low-income countries is thirty years below or twenty years below that of the rich countries. It's not a mystery. This is what a vast body of knowledge demonstrates and is actually rather straightforward to synthesize. What gets me is that it isn't viewed as an operational need. So, just to give the point its specificity, after the IMF showed with a lot of talented sophistication that there are hundreds of billions of dollars needed for the low-income and lower-middle-income countries to achieve the sustainable development goals, and after those reports were sent to the board of the IMF, precisely nothing happened.
Banik So that's the $400 million gap.
Sachs $400 billion per year gap. You know, what happened? In a normal world, in an ethical world, one would say “Wow, that's a big gap. What do we do about it?” I'm still waiting for some G7 ministers to say “Oh, that's a big gap, what do we do about it?” I could write op-eds from morning till night, and you don't get the finance ministers in the rich country economies to say what do we do about it? Because after all, we promised that we would make this financing. And as a macroeconomist, I make the basic point that what is $400 billion a year among friends? After all, that is 0.4 of one percent of world output per year. Hardly a crushing number. It just happens to be very large if you're impoverished, but it's not large if you're rich. And so, a modicum of moral seriousness would lead to a different response.
Banik There are two aspects of this which I find particularly relevant for our discussion today. One has to do with how effective foreign aid is or can be. Because, as you know, there's this polarized political discourse in many parts of the world, including in some of our countries on aid effectiveness. On whether aid is actually working or can work in global development. And the other has to do with the role of experts, and there's been considerable pushback in recent years from many who point to the importance or the fact that we should be giving more importance to local knowledge. We should be thinking about who is articulating the interests of whom, on whose behalf. That we should not just be listening to experts flying in and telling us what to do. And of course, you've been involved in this debate for many years, with Bill Easterly on the role of planners, on the role of experts versus searchers. And I suppose one could say you're a bit of both. You are a planner; you are a searcher. But I'd like to hear your thoughts on this debate on aid effectiveness and the role of experts in global development.
Sachs Look, you know in Norway the government spends about 50% of national income it collects in revenues each year for a decent society. And if you look around your neighbourhood in Sweden, in Denmark, in Finland and Iceland, it's the same. And in Germany it's about 45% of GDP. We don't sit around except in crazy places like the United States and debate that you don't really need the money for health care, education, that doesn't work. You know you can't tax one person and give money to another person. That doesn't work. Because this was resolved a hundred years ago that the basic social democratic idea is that you have a society and people should contribute tothe common good. And the financing is needed because schools and hospitals and doctors and roads and environmental protection aren't free. And so, they should be financed. And there's no great angst about this. The only great angst is in rich countries saying we can't give to poor countries. Money isn't the issue. Now, this is, by the way, not only nonsense. It has deep historical roots in Anglo-Saxon libertarian philosophical ideas. The same ones that left the Indians to starve at the end of the 19th century in repeated El Nino waves and droughts and famine that accompanied that. It has the roots in racist ideologies, which said we are great in the rich world because the poor countries are deficient, backwards, inferior, whatever it is. Now we use a different language. They're corrupt, they can't do this, they can't do that. But somehow, it's all an ideology of libertarian idea which is distinctively originally British. Then American Protestants took it on. That the rich are rich because they're great and the poor are poor because they're miserable and there's nothing you can do with the poor except not have them be a burden. This is how all of the aid discussion is. It's absurd. It's absolutely possible to take some funding and provide some healthcare with it. Just like there is within Norwegian society. And I know it because I've helped to engineer that in the few cases where it's been possible to actually raise funds from rich countries. I helped doctor Brundtland to establish the global fund to fight AIDS, TB, and Malaria. It was an idea that I promoted. Money came in and AIDS was treated. Voila, it was not so complicated. I helped set up and design the original concepts around several funding streams for health in the United States, PEPFAR and the President's Malaria Initiative. These rare examples where money actually went into solving problems and those problems got addressed decisively and people said “I'm surprised that worked. What's the mystery?” It's not so hard to do any of this except in an ideology that was designed to exculpate the rich and the powerful. And one should learn some of the history of the moral thought from John Locke onward to understand that this is a kind of intellectual game, unfortunately. It is a game of the rich to say “Ah, we don't have a responsibility to anyone else. Their problems are obviously due to their deficiencies.” So, this is what I take this to be. And on the question of expertise and so forth. It's so unreal compared to the actual facts, which is there are so many talented people around. And the talented people in poor countries know that more funding is needed so that there can be more schools or clinics or clean water points or sewerage or other things. It is not a mystery. It is not this idea of someone flying in and saying do this, do that. It's not as if we don't have systems that are basic and well. We use electricity, but local indigenous knowledge will do something else. Come on, this is not so hard, but we have a thousand excuses in the rich countries to say don't do what we do ourselves within our own societies. So, what I would like to see is global social democracy. Social democracy that is not limited to our national borders. Why doesn't that happen? Because the politicians are elected nationally. That's it. That comes back to what we started with, the challenges of transboundary governance. If we had politicians elected internationally, believe me, these questions would not be asked. We would understand that money needs to flow to places where it's urgently needed and currently lacking.
Banik You are obviously an academic superstar. You hang out with rockstars and celebrities. You are an expert on global development. You're a macroeconomist. You've been advising many governments around the world for many decades. But you've also rolled up your sleeves and you started the Millennium Villages project, where there was considerable emphasis on promoting this integrated approach to rural development. And as I understand it, the Millennium Villages project selected certain villages in several African countries, and there were numerous goals of the project, such as the promotion of agriculture. It was about providing seed and fertilizer support, farmer training, crop diversification. But there was also an emphasis on health, a focus on mosquito nets and there was an emphasis in this project on education and infrastructure, sanitation, you name it. In hindsight, what has been the legacy of the Millennium Villages project? There's been some criticism, of course, about how the sites were chosen, the costs, and not least the actual impact. What do you think has actually worked and what do you think now of the idea of the big push as a solution more broadly to challenges of global development?
Sachs Well, I think the project showed that in every sector it's quite clear that there are huge areas of progress that can be made quickly and decisively. There can be huge reductions of malaria or AIDS or other infectious disease burdens. There can be big uptake of vaccinations. You can get children in school. You can have micro grids and mini grids. The basic point of that project was to show, look at all of these things that we know, and they are operational even in very poor rural settings. The conditions for those interventions are vastly better now in 2021 than they were when we started in 2005. When we started that project in 2005, there were flip phones and in some of the villages not a single phone anywhere. Now there is wireless broadband available pervasively. And of course, we know what that means in terms of every system for development, for telemedicine, for kids in school, for monitoring infrastructure, for electrification, for everything, for payment systems. So, the conditions for rapid progress in development are better now than ever actually. Aside from the fact that we're hunkering down from a pandemic ripping through the world for this tragic moment. But the ability to use digital technologies and many other really sound approaches means that the opportunity to move forward quickly is better than ever. Indeed, one can move to national scale faster than ever. Because you can train online, you could have teachers deployed very quickly, community health workers deployed very quickly. You can do things that could not be done before. So, in that context, what is a big push? A big push is investment to provide the infrastructure for what is needed for sustainable development. That means rapidly electrifying the economy. Some places still have only ten or even less of a percent of the population with access to electricity in rural areas. In many of the poor countries that could change within two, three, four years, if we put our minds to it and if we put the financing to it. We could have universal access to broadband within the next few years because physically broadband is within reach of probably 80 or 90% of the world right now. But many of those that have broadband within reach can't afford under the current structures to actually have devices and have access. That could change dramatically as it is in India, by the way, with the tremendous breakthroughs of Geo and now Geo Next and new innovative financing. So, there are huge breakthroughs that can be achieved in all of the basic infrastructures in healthcare, in training, in getting kids in school. And that's what it means to have a big push. It means let's not sit around and wonder whether electricity would be helpful. And that's how we treat it right now. Or we say OK, we'll give a certain amount for electrification. And then I say, yes, that would cover 1% of the gap. And everyone nods and moves on as if the other 99% doesn't therefore present a serious challenge, even in a front to the way the system is currently operating.
Banik You know, over the years I've been trying to promote a much more optimistic outlook on global development. And I've been devising academic courses, giving talks on what works, highlighting promising practices and success stories. Because the global development narrative, as you know, can be pretty depressing. That nothing works, that all our efforts are futile. But then there are all of these success stories such as rapid economic growth in many parts of the world. Major improvements in social protection such as the introduction of cash transfers and how that has helped many countries. Our ability to combat disease, the rise of China. There's a long list of success stories. But I'm also aware of all those challenges that remain, including many of the challenges that you've pointed to in our conversation today. How do we balance the discourse by keeping in mind all the challenges ahead while also appreciating the success stories? This is surely going to be crucial if we are to encourage greater action and increased commitment, not just from governments and the private sector. But also from citizens, civil society organizations, and academics like us.
Sachs I think there are enormous reasons for practical, realistic optimism. Assuming that a couple of things happen. One, that the United States does not provoke a major geopolitical crisis with China, or with Russia, or in some other way. And I put it in that provocative way, we don't have time to elaborate, but I think the responsibility lies principally with the United States. So, the first is global peace. Second is global cooperation to solve these problems. Let's achieve the goals that we have set out to achieve. That mindset change would have a profound effect. Third, practically, let's finance the transformative investments. Whether it is digital or electrification with green renewable energy, solutions for telemedicine, education, rapid training that we know works. And that are powerful, scalable, and key components of success. So, if we follow the basic logic. Stay peaceful, oriented towards problem-solving and put our finances in the service of our goals, we will be successful.
Banik It is always great fun chatting with you. Thank you so much for coming on my show today.
Sachs What a pleasure. Anytime. And happy New Year.