Progress fit for a millennium

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The Millennium Development Goals are often overlooked as a key global yardstick of development – yet Latin America is having concrete success in achieving them

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Public Policies for Human Development: Achieving the Millennium Development Goals in Latin America
Edited by Marco V. Sánchez,
Rob Vos, Enrique Ganuza, Hans Lofgren
and Carolina Díaz-Bonilla
2010, Palgrave Macmillan/UNDP, UN-DESA, World Bank
406 pages

Reviewed by Gavin O’Toole

HIDDEN beneath the technical level of discussion in this important overview of Latin America’s progress towards achieving the Millennium Development Goals (MDGs) are some remarkable insights.

For the uninitiated, the MDGs are among the most important benchmarks of progress in what has become known as “development economics” – eight key objectives signed up to in 2001 by all 192 UN member states and 23 international organisations as part of a global development partnership.

These goals provide targets for the reduction by 2015 of poverty, high mortality rates and disease and – if under-recognised in much of the western world – provide concrete evidence of the benefits to humanity of closer development co-operation and multilateralism of the kind embodied by bodies such as the UN and World Bank.

As the editors point out, the aim of the MDGs is to edge us closer towards “a world with less poverty, hunger and disease, with better-educated children, more gender equality, greater survival prospects for infants and mothers, and a healthier environment.”

The MDGs

Public Policies for Human Development edited by Marco V. Sánchez, Rob Vos, Enrique Ganuza, Hans Lofgren and Carolina Díaz-Bonilla examines several of these MDGs in the context of Latin America:

– MDG1: eradicating extreme poverty and hunger, by halving between 1990 and 2015 the proportion of people whose income is less than one dollar day;
– MDG2: achieving universal primary education, by ensuring that by 2015 children everywhere will be able to complete a full course of primary schooling;
– MDG3: promoting gender equality, by eliminating gender disparity in primary and secondary education by 2005 and in all levels of education by 2015;
– MDG4: reducing child mortality, by cutting by two-thirds between 1990 and 2015 the under-five mortality rate;
– MDG5: improving maternal health, by reducing by three-quarters between 1990 and 2015 the maternal mortality rate;
– MDG7: ensuring environmental sustainability, by halving by 2015 the proportion of people without sustainable access to safe drinking water and basic sanitation.

The editors, all senior economists with the UN and World Bank, apply complex economic modelling to 18 countries of Latin America and the Caribbean to assess progress to date, what policy mix or fix might best enhance the likelihood that countries can achieve these ambitious targets, and the impact on this progress of unpredictable factors, that compromise a linear approach of “business as usual”, such as the global financial crisis of 2008.

Public Policies for Human Development examines the region in comparative perspective, and then looks at the policy possibilities in individual countries. It recognises the stark fact that – at a global level – progress has been tragically uneven. Gains in declining income poverty have been concentrated heavily in Asia, while sub-Saharan Africa has lagged on just about every indicator.

In Latin America and the Caribbean, poverty indicators have tended to be lower on average than in most of the developing world, and the region scores relatively well in health and education, even if it continues to fall behind the rates of progress achieved in much of Asia.

In their overview, the editors point out that the MDG poverty reduction target is within reach in six countries of the region, including the most populous ones, Mexico and Brazil; for 12 of the 18 countries output and employment growth would not suffice to meet MDG1.

The region is also making good improvement in improving primary school enrolment and all countries have made significant progress in reducing child mortality.

Like the rest of the world, however, there are important intra-regional disparities – and it is here that some of the striking observations of what is otherwise an impartial overview are made.

Only Chile – which was in the vanguard of the neoliberal revolution in the 1970s and has established the most effective social market economy in Latin America – and Cuba, its radical opposite as the region’s only communist state, are on track to reduce early childhood deaths by two thirds by 2015. Similarly, only Chile and Cuba seem to be on track to achieve MDG5 on maternal health. This provides further evidence that Cuba’s economic system – if dysfunctional in the favoured market terms of its US and European critics – has been highly successful in delivering developmental gains.

Extra efforts

Nonetheless, the editors suggest that extra efforts have to be made to achieve the MDGs for education, health and drinking water and basic sanitation. Again, only Chile and Cuba are the countries that should be able to achieve the goals under “business-as-usual” policies without additional costs in the form of extra public spending.

The editors also warn that although much of Latin America appears to be “on track” towards achieving some of the key MDGs on a linear projection based on progress to date, this can be highly misleading. Some of the assumptions drawn from a linear progression stem from a baseline scenario that would reflect continued good economic performance from around 2003, the beginning of a period of robust growth in Latin America as a result of the commodity boom. Yet the path towards reaching the goals may not follow a linear pattern, not least because of such factors beyond the region’s control as the global financial crisis of 2008, but also because of that old saw, politics. Indeed, one the great weaknesses of such technical modelling is that it cannot account for political change, and it is from such change that divergences that are both positive and negative inevitably occur.

The editors predict a substantial slowdown in progress towards achieveing the MDGs as a consequence of the crisis that began in 2008: rising unemployment and underemployment, a fall in per capita incomes and declining government revenues are likely to affect both public and private spending, and will inevitably set back progress.

A study referred to in the book points out that distortions caused by the crisis mean countries such as Bolivia, Honduras and Nicaragua would need between 2010-15 to spend a largely unattainable extra 1.5–2 per cent of GDP per year on education, health and basic services – on top of large projected increases in social spending anyway – to achieve the MDGs as compared with the pre-crisis scenario.

Although achieving the MDGs is within reach of much of Latin America and the Caribbean, the editors point out that business as usual is simply not likely to be adequate in itself and, notwithstanding that, in all cases, careful macroeconomic management is essential.

As their significant contribution to the achievement of the goals, the editors explore a range of alternative policy scenarios that deviate from the baseline of linear progress based on business as usual, and envisage increased public spending – financed either through foreign grant aid, foreign borrowing, domestic borrowing or direct taxation.

This is a highly complex area, because increases in funding can bring with them increases in costs, and increased borrowing has to take into account sustainability over time. The broad findings of this study were that in most cases – except, for example, in Bolivia and Honduras, where id funding is proposed, and Jamaica, where foreign borrowing is proposed – financing the MDG strategy through increased taxation is recommended. Latin America probably has more room for improvement in extending its tax base and revenue generating potential than any other developing region.

Tax financing

Yet while tax financing appears the favoured option, in all cases external borrowing or aid financing is cheaper in terms of the required additional public spending on MDG-related services. External borrowing can lift public debt beyond a critical level of sustainability and may imply trade offs such as a decline in export competitiveness.

Nowhere do the editors recommend a strategy exclusively based on domestic government borrowing, which would be costly and also raise public debt to unsustainable levels. Even in countries where such a strategy might be cheaper than raising taxes, the bond markets are weak.

In an important section in Chapter 2, Rob Vos, Marco Sánchez and Cornelia Kaldewei explore the inevitable trade offs that come with each of these approaches: tax financing may raise the required additional social spending, but it can also push down private spending and can bring governments into conflict with powerful social sectors that may have to bear the brunt of extra taxation. Tax reforms also take time to become effective, and is not possible in every country: some simply do not have a sufficiently large potential tax base to make a meaningful contribution towards the MDGs.

Yet overall the contributors to this valuable study have drawn a broadly optimistic conclusion that would seem to belie much of the doom and gloom about Latin America’s prospects only a decade ago. Vos, Sánchez and Kaldewei write:

“… achieving the MDGs is within reach and clearly affordable for all LAC countries in the study. It is clearly more than a matter of priority-setting or finding the additional resources, however; it also entails carefully managing and integrating macroeconomic and social-sector policies. It is also clear that enhanced spending on MDG-related services and the progress towards the education, health, and water and sanitation goals do not guarantee strong income redistribution and poverty reduction results in the short-to-medium run.” [p. 57]

As the economists point out, further economic reforms will be needed to respond to the changes implied by progress in reaching the MDGs themselves, and while upholding the promise of achieving these, policymakers will need to stretch their horizons beyond them.

Gavin O’Toole is Editor of the Latin American Review of Books

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