Who Foots the Bill for Ending Extreme Poverty?
The United Nations just unveiled an ambitious plan to help the world's poorest people. But paying for it will require more than just rich-country aid.
On Friday, the 193 member countries of the United Nations adopted an ambitious plan to end extreme poverty and hunger, improve the health of the world’s poorest, protect the planet, and address climate change — all with a target date of 2030.
Breathtaking in its scope, this plan — known as the Sustainable Development Goals, or SDGs — builds on the success of the Millennium Development Goals (MDGs), which were adopted unanimously by the U.N. 15 years ago. The MDGs included concrete targets for large reductions in poverty, hunger, child mortality, maternal mortality, and infectious diseases such as HIV, tuberculosis, and malaria, as well as putting all boys and girls in primary school. I worked at the U.N. at the time, and I remember well the skepticism the MDGs engendered in some quarters. Doubters believed they were too ambitious and that the global community simply wasn’t capable of coalescing around specific targets to dramatically reduce human suffering.
But here we are, 15 years later, and the results are in.
Compared to 1990, extreme poverty and child mortality have been halved — while 12.7 million children were dying before their fifth birthday then, just under 6 million do now. Maternal mortality and under-nutrition in the developing world have dropped by almost the same percentage. More children than ever are attending primary school — enrollment is at 91 percent — and, for the first time, as many girls as boys are getting an education. The tide has turned in the battle against AIDS, which, though it still infects 2.1 million people every year, no longer means certain death: 13.6 million infected people are now receiving antiretroviral therapy for AIDS as opposed to 800,000 in 2003. Deaths from malaria have been cut by over 50 percent, and more effective tactics in the battle against tuberculosis have saved 37 million lives.
Not every MDG target was actually achieved: For example, the child mortality target was to reduce global under-five deaths by two-thirds, but the actual reduction has been by a little over half. Despite that, progress is undeniable and has also accelerated since the goals were set: Sub-Saharan Africa’s rate of progress on child mortality, for example, is now five times what it was in the 1990s, and many of the poorest countries — like Ethiopia, Tanzania, and Malawi — met the two-thirds target.
Notwithstanding the very real tragedies of events like the Syrian war and refugee crisis, overall, that means the world is a much better place today than it was at the turn of the century, particularly for people living in the poorest parts of the world. It’s cause for celebration. But that doesn’t mean it’s time to stop. As much as these statistics are proof of the good that has been done, they are an equally powerful reminder that we are only part way to the goal of eliminating extreme poverty in all its manifestations. Finishing the job is going to be infinitely more challenging because it will require helping the people who are the hardest to reach.
While the MDGs were ambitious, they were also limited in scope: There were eight poverty-focused goals and 21 targets. The SDGs have 17 goals and 169 targets and tackle not just poverty but also climate change and environmental protection, inclusive economic growth, peace and justice, and reducing inequality. While not a legally binding document, it carries the weight of three years of negotiated consensus and agreement among all 193 member states, which the MDGs have shown can be very effective at galvanizing progress.
This broad agenda reflects a more comprehensive set of aspirations and the multidimensional nature of the world we live in today. At the same time, a broader agenda carries the risk of a diminished focus on the highest-priority challenges. Wisely, the U.N. has officially recognized within the SDG plan of action that “eradicating poverty in all its forms and dimensions, including extreme poverty, is the greatest global challenge and an indispensable requirement for sustainable development.” The question now is how this part of the sustainable development agenda can be advanced to finish the job the MDGs started.
One idea that was agreed upon at the Financing for Development conference in Addis Ababa in July, which was convened to start thinking through the financing of the SDGs, is that of a basic social compact. This means that governments commit to providing a minimum necessary level of healthcare, nutrition, family planning services, education, and agricultural development support to every person worldwide. Estimates for the cost of this model vary from about $300 per person in low-income countries to about $500 per person in a middle-income country.
Although these targets significantly exceed current investment rates, they are quite achievable. There are three primary sources for funding this poverty agenda: domestic funding by developing countries, aid from developed countries, and private sector finance.
Under the plan adopted by the U.N. last week, the largest source of funding comes from developing countries themselves, as they are primarily responsible for delivering basic services, such as healthcare and education, to their citizens — a notable change from the MDG agenda, which was largely seen as aid-driven. Although developing country governments often don’t have the capacity or infrastructure needed to increase domestic revenues through — for example — effective tax collection, they have recently shown a commitment and willingness to build it. The Addis Tax Initiative, which came about in July during the Financing for Development conference — and is backed by the United States, Britain, Germany, and the Netherlands — includes a plan to double those nations’ technical support to developing countries to raise domestic revenues.
Even with positive steps such as these, however, many of the poorest countries will not be able to completely self-finance the programs necessary to eliminate poverty and build a cycle of sustainable development.
This is why development aid from wealthy countries — which totaled $135.2 billion in 2014, according to the Organization for Economic Cooperation and Development — remains crucially important. However, aid in most developed countries is well below the 0.7 percent of gross national income that they themselves have committed to a number of times over the last 35 years. What’s more, trends show that aid to the poorest countries — known as “least-developed countries” — is actually declining, dropping 0.5 percent from 2013 to 2014. Although aid comprises just a small fraction of the national budgets of developed countries, it remains enormously helpful to poor countries in delivering the basic services so essential to eliminating poverty.
Private investment will be another essential source of financing for anti-poverty efforts. The innovative financing mechanisms created to support the global vaccination efforts of the Gavi vaccine alliance, a public-private global health initiative working in 77 countries, are a great example of how we can tap the capacity and expertise of the private sector. By pooling demand and funding for vaccines, Gavi, which was created the same year the MDGs were adopted, raised the interest of manufacturers, which in turn spurred them to offer vaccines at significantly lower prices to the poorest countries.
Private sector engagement in food fortification of staple foods is another case in point. A global effort that brought together salt producers, international agencies, and governments to add iodine to salt has dramatically increased its availability: Iodized salt is now found in 140 countries and 70 percent of developing world households — up from 20 percent in 1990 — significantly improving children’s cognitive development and giving millions a better future.
But there’s still a long way to go.
Historically, most private investment in developing countries has been directed toward development of infrastructure, such as roads and dams, but not in the delivery of basic services, such as healthcare, where revenue streams have seemed less certain and the poorest have very little ability to pay. That is starting to change, slowly, as some forward-looking companies see the potential of investing in large, and largely untapped, markets for these services. The Abraaj Group, for example, is investing $900 million in healthcare services to serve low- and middle-income communities in Asia, Africa, and Latin America as of June 2015.
It is essential to continue to build private investment in this area. Overall, there are simply too few efforts that seek to address the systemic funding constraints that prevent the sustainable growth of organizations that provide basic services and job opportunities to those at the base of the pyramid. Developing countries also need help growing domestic bond markets and strengthening the capacity of local financial industries to create investment opportunities tailored to the needs of domestic and international investors — while still remaining poverty-focused.
Eliminating extreme poverty by 2030 will require financial investments from each of these three critical funding sources, with the private sector as the newest player in the space. It is a tall order, but we know from the success of the MDGs that huge improvements are possible if it is done right.
The SDGs have kept what worked about the MDGs: providing a framework for action, with specific targets to measure progress so that all stakeholders — governments, donors, the private sector, and civil society — can hold themselves accountable. It is an exciting moment in history, looking back at the success of the MDGs and looking ahead to a more prosperous and equitable world as envisioned in the SDGs. I absolutely believe that it is possible in our lifetimes — indeed in the next 15 years — to eliminate extreme poverty altogether. Wouldn’t that be something to tell our grandchildren about?
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