making it magazine - issue 7: governing a globalized world (unido - 2011)

7/30/2019 Making It Magazine - Issue 7: Governing a globalized world (UNIDO - 2011)

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MakingIt Industry for Development

3rd quarter 2011

Governing

globalizedworld

nDani Rodrik

n Indonesia: Clup the river

n Solar Sister

nMark MallochBrown

nBangladesh



A quarterly magazine. Stimulating, critical andconstructive. A forum for discussion and exchangeabout the intersection of industry and development.

NUMBER 1, DECEMBER 2009lWe must let nature inspire us– Gunter Pauli presents analternative business model thatis environmentally friendly andsustainablelHot Topic: Is itpossible to have prosperitywithout growth? Is ‘greengrowth’ really possible?

NUMBER 2, APRIL 2010lThe International EnergyAgency’s Nobuo Tanaka looks atenergy transitions for industrylEnergy for all – Kandeh Yumkella and Leena Srivastavaon what needs to be done toimprove energy access

NUMBER 3, JULY 2010

lChina’s stunning economicrise: interview with minister of commerce, Chen DeminglTowards a more productivedebate – Ha-Joon Chang callsfor an acceptance that industrialpolicy can work

NUMBER 4, NOVEMBER 2010lStrengthening productivecapacity – Cheick Sidi Diarraargues that the LDCs should –and can – produce more, andbetter quality, goodslPatriciaFrancis on climate change andtradelHot topic: The relevanceof entrepreneurship

NUMBER 5, FEBRUARY 2011

lA window of opportunity for world trade? – Peter Sutherlandassesses the prospects for theconclusion of a multilateraltrade agreementlA path tomutual prosperity –Xiao Ye ontrade between sub-SaharanAfrica and China

NUMBER 6, APRIL 2011lFeeding a crowded world –IFAD’s Kanayo Nwanze arguesthat smallholder farmers musthave opportunities to beentrepreneurslNestlé CEOPaul Bulcke on ‘Creating Shared Value’lHot Topic: Does energyefficiency lead to increasedenergy consumption?



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Never has the world been more interdependent, never has it been more sh by technological, economic and social progress – and never has it been m vulnerable to economic and environmental shocks and political failure. O

global economic, social and political systems have been under great pressfor a while, and the future appears uncertain. As the financial crisis evolvefrom a credit crunch affecting mortgages in certain developed countries tworldwide calamity encompassing financial, manufacturing and serviceactivities, we have taken a turn towards a situation of even greater globalfragility and risk.

Popular perceptions of globalization are getting more and more polar between those who see it as a source of freedom and new opportunities, athose who associate it with rising inequality and injustice.

We clearly live in a multi-polar world. It is no longer possible to isol

the complex risks and fragilities that we face, nor is it possible to findnational solutions to global challenges. They require a diversified andmulti-polar response.

As we stand at a crossroads of global policy and governance, this issue oMaking It: Industry for Development offers a selection of some of the bestcontributions to the growing debate. These include the keynote article byProfessor Dani Rodrik, in which he embarks on a fascinating journey into

globalization paradox, and a candid interview with formUN Deputy Secretary-General, Mark Malloch Brown, in

which he gives his views on how to stay “one sahead of failure’’ during “a century of continuo

change and likely drastic upheaval”.Aside from articles addressing the mai

theme, there are also discursive contributhat question mainstream economists’

approaches, debate the pros and cons onuclear power, and look at theeconomic progress of Banglades

P h o t o : i s t o c k

Editorial



Editor: Charles [email protected] committee: Ralf Bredel,Tillmann Günther, Sarwar Hobohm,Kazuki Kitaoka, Wilfried Lütkenhorst(chair), Cormac O’Reilly and Jo Roetzer-SweetlandWebsite and outreach:Lauren [email protected] illustration: Maya ZankoulDesign: Smith+Bell, UK –www.smithplusbell.comThanks for assistance toDonna ColemanPrinted byGutenberg PressLtd, Malta –www.gutenberg.com.mton FSC certified paperTo view this publication online and toparticipate in discussions aboutindustry for development, please visitwww.makingitmagazine.netTo subscribe and receive future issuesof Making It , please send an emailwith your name and address [email protected] It: Industry for Development is published by the United NationsIndustrial Development Organization(UNIDO),Vienna International Centre,P.O. Box 300, 1400 Vienna, AustriaTelephone: (+43-1) 26026-0,Fax: (+43-1) 26926-69E-mail:[email protected] © 2011 The UnitedNations Industrial DevelopmentOrganizationNo part of this publication can beused or reproduced without priorpermission from the editorISSN 2076-8508

GLOBAL FORUM6 Letters8 The barefoot economistInterview with acclaimedChilean economist,Manfred Max-Neef 10Hot Topic: Is nuclear power necessary for a carbon-free

future? Environmentalists ChrisGoodall and José Etcheverry debate

16Business matters – news and trends

FEATURES16Fairer, greener and moresustainable – Hedda Oehlberger-Femundsenden argues that UNIDO’s

Green Industry initiative can build

on the successes of globalization,while helping to rectify itsshortcomings18 Interview: The unfinishedglobal revolution – MarkMalloch Brown on thechallenges and opportunities of globalization in the 21st century

KEYNOTE FEATURE

22 The globalization paradox –Dani Rodrik argues thatglobalization works best when it isnot pushed too far

30 Unfair share –Thomas Pogge looksat the statistics of world poverty andexposes a series of broken promisesand rigged initiatives

MakingIt IndustryforDevelopment

The designations employed and thepresentation of the material in this magazinedo not imply the expression of any opinionwhatsoever on the part of the Secretariat of theUnited Nations Industrial DevelopmentOrganization (UNIDO) concerning the legalstatus of any country, territory, city or area or of its authorities, or concerning the delimitation

of its frontiers or boundaries, or its economicsystem or degree of development. Designationssuch as “developed”, “industrialized” and“developing” are intended for statisticalconvenience and do not necessarily express a judgment about the stage reached by aparticular country or area in the developmentprocess. Mention of firm names or commercialproducts does not constitute an endorsement by UNIDO.The opinions, statistical data and estimatescontained in signed articles are theresponsibility of the author(s), including thosewho are UNIDO members of staff, and shouldnot be considered as reflecting the views or bearing the endorsement of UNIDO.This document has been produced withoutformal United Nations editing.

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Contents



Number 7, 3rd quarter 20

34 Globalization, governance and G20 – Jan Wouters and Dylan Geargue that network governance nto be transparent, inclusive, andresponsive36 Country feature: Bangladesh –Manufacturing, the garment induand women workers bring progrto one of the world’s most populo

countries, plus an interview withDilip Barua, Minister of Industri40 Cleaning up the river –Goldman Environmental Prizewinner, Prigi Arisandi, explains ha local movement is helping to stoindustries from polluting the riveflowing through the Indonesian cof Surabaya

POLICY BRIEF42Beyond the ‘resource curse’44Drivers of development

46Endpiece – Katherine Lucey onSolar Sister, a social enterprise thprovides women with training ansupport to create solar micro- businesses

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LETTERS

MakingIt 6

On energyefficiencyWhile I commend Ms.Moscoso-Osterkorn on hereffective defence of energyefficiency (Making It , issue 6),I have to note that the original

claims by Jenkins andSaunders (Hot Topic) stillremain, at least from my pointof view. Their focus was on theclimate change effects of energy efficiency – no doubtthat they would also agree thatthere are other economic andsocial benefits toimplementing energyefficiency.

Their “rebound effect” theoryalso focused on the developing

nations and their thirst fordevelopment and more energy.The reply gave excellentcounter-examples but mainlyfrom the US and Japan. Wheredeveloping nations werementioned, the examples areskewed – for example, howmany Ghanaians will continuepurchasing and using compactfluorescent lights (CFLs), oncethe original supply needsreplacement? And if Thailand

really saved 1,725 MW of peakpower (or is that 1.725 MW?),did this offset the need for newelectricity generation or didthis just shift consumption toother uses as the reboundeffect claims?

Don’t get me wrong – I agreewith Moscoso-Osterkorn’swider claims on energy

efficiency and am a bigproponent of the same – I am just wondering if her responsemissed the point in this case.lPeter Bartlett, websitecomment

I fully agree with Mr Bartlett’ssentiment, but I believe thatthe impact of the reboundeffect is fundamentally

different between developedand developing countries.There is no doubt that therebound effect exists and that itcan affect climate change in anegative way. In countrieswhere energy access is not anissue – like developedcountries – rebound canindeed lead to increase in useand carbon emissions. Indeveloping countries, energyefficiency will not only

facilitate energy access for thepoor, it will also act as analternative to fossil fuel energyproduction. If a farmer savesenergy by using an efficient bulb, he can light his second bulb with the energy he issaving instead of starting uphis diesel generator or burningmore wood.

Positive examples from Japanand California highlight thatpolicy intervention and public

support can change consumerpatterns, and these successstories should serve asguidelines for others. InGhana, nobody can forcepeople to buy compactfluorescent lights (CFLs) oncethey need replacement. But thehuge market created throughthis governmental programme,

lowers the price of CFLswhich makes them affordableto everybody.lMarianne Moscoso-Osterkorn, REEEP, Vienna,Austria

Women and theArab Spring

Re: “An Arab Spring forwomen?” (Making It , issue 6),meanwhile, in Lebanon, a newcabinet has been formed. It iscomposed of 35 men, and nota single solitary woman.lMM, website comment

MM, you shouldn’t expectchange to come from the top.It never has and it never will.It is only by organizing at thegrassroots that women (and

men) will be able to forcethrough progressive change.lCharlene, website comment

Lebanon is a democracy. Themajority of voters voted forthe government. If the electedrepresentatives endorse acabinet that does not includeany women, that is democracyin action. PresumablyLebanese women (and men) voted for the members of

parliament who endorse thenew cabinet…lKnox, website comment

Indeed, there is a strongglobal and MENA backlash inrelation to women’s positionand women’s rights which istaking various forms andshapes. Turkey has just

dismantled the Ministry foWomen and replaced it wit

Ministry for Family AffairsThis is an indication of agrowing conservative view women’s role being in thefamily rather than them beindependent citizens endowith rights.

It would be wise to rethinthe common definition of democracy. It is widely heldthat free elections are thecornerstone of democracy. time to challenge this idea.

While free elections are a mthey do not necessary lead tinclusion, full participationnon-discrimination andequality…l Lina Abou-Habib, websitecomment

It seems it would also be wito rethink the common(media) definition of revolution. Somecommentators would have

believe that what has beenhappening in several countin the Arab world arerevolutions, but, as womenfinding out, nothing verymuch has really changed, athere certainly has not beenprocess of one class takingpower from another….lRed, website comment

The Global Forum section of Making It is a space for interaction anddiscussion, and we welcome reactions and responses from readers aboutany of the issues raised in the magazine. Letters for publication inMaking It should be marked ‘For publication’, and sent either by email to:[email protected] or by post to: The Editor, Making It ,Room D2142, UNIDO, PO Box 300, 1400 Wien, Austria. (Letters/emailsmay be edited for reasons of space).

GLOBAL FORUM



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Rice powerI think this article (A revolutionin electricity, Making It , issue 6) isinteresting as it illustrates a realpossibility in places that producehigh volumes of rice. It’s also anice read because it shows thepower, literally, of entrepreneursin developing countries.

From a people side, it makes

you wonder how manyentrepreneurs in developingcountries already have theknow-how to producealternative and renewableenergy processes to providetheir own villages withelectricity, such as this featuredcompany.

Another thing the articleraises is a concern about riceproduction, and therefore aboutavailability of bio resources to

gasify and therefore to createenergy with. I could see thismethod working well wheremass quantities of rice aregrown –namely in India andother Southeast Asiancountries – but the videoproduced by the company’sfounder seems to hint at theirdesired to expand to a globalmarket, and this just doesn’t

seem feasible where rice husksaren’t readily available in suchlarge quantities.

Can this method be extendedto other organic byproducts, oris it limited to rice husks? And,are there many moreentrepreneurs out there indeveloping countries who haveother ideas for energy resourcesand production?l Sara Patalone, websitecomment

Breast is bestInteresting to see Nestlé gettingspace in your magazine,“Creating Shared Value forsociety and shareholders”(issue 6, Making It ). This is thecompany that, according tonutrition campaign groups andUNICEF, the UN Children’sFund, violates a global code on

the marketing of breast-milksubstitutes.

The International Baby FoodAction Network, which links200 groups in 100 countries, backs a boycott of Nestlé products because, it says, the companyskirts restrictions on promotinginfant formula contained in theWorld Health Organization-endorsed International Code of Marketing of Breast-milkSubstitutes.

In developing nations, theuse of infant formulaincreases the odds of an infantcontracting food-borneillness, and increases infantmortality rates. UNICEFestimates that a formula-fedchild, living in unhygienicconditions, is between six and25 times more likely to die of diarrhoea, and four times

more likely to die of pneumonia, than a breastfedchild.

But Nestlé continues topromote its new formulaproducts, calling them a“comprehensive nutritionsystem.” As someone hasalready remarked, the realcomprehensive nutritionsystem is a pair of lactating breasts.lMary Gland, by email

For further discussion of theissues raised in Making It , pleasevisit the magazine website atwww.makingitmagazine.net andthe social networking Facebook site. Readers are encouraged tosurf on over to these sites to joinin the online discussion anddebate about industry for development.



GLOBAL FORUM

MakingIt 8

Could you explain ‘barefoot economics’?Well, it’s a metaphor, but a metaphor thatoriginated in a concrete experience. Iworked for about ten years of my life inareas of extreme poverty in the sierras, inthe jungle, in urban areas, in differentparts of Latin America. At the beginning of that period, one day I was in an indigenous village in the sierra in Peru. It was an ugly

day. It had been raining all the time, and Iwas standing in the slum. And, across fromme, another guy was also standing in themud. Well, we looked at each other, andthis was a short guy, thin, hungry, jobless,five kids, a wife, and a grandmother, and Iwas the fine economist from Berkeley,teaching in Berkeley, and so on. And we

were looking at each other, and thensuddenly I realized that I had nothingcoherent to say to that man in thosecircumstances, that my whole language asan economist was absolutely useless.Should I tell him that he should be happy because the GDP had grown five percent orsomething? Everything was absurd.

I discovered that I had no language in

that environment, and that we had toinvent a new language. And that’s theorigin of the metaphor of barefooteconomics, which is the economics that aneconomist who dares to step into the mudmust practice. The point is that economistsstudy and analyze poverty in their niceoffices, have all the statistics, make all the

models, and are convinced that they kneverything that you can know aboutpoverty, but they don’t understand povThat’s the big problem, and that’s whypoverty is still there. And that changed life as an economist completely. I invena language that is coherent with thosesituations and conditions.And what is that language?The thing is much deeper. I mean, it’s nlike a recipe with 15 lessons or ‘satisfact

guaranteed or your money back’. That’sthe point. The point is much deeper. Leme put it this way. We have reached a pin our evolution where we know a lot. Wknow a hell of a lot, but we understandlittle. Never in human history has there been such an accumulation of knowledlike in the last 100 years. But look how ware. What was that knowledge for? Whadid we do with it? The point is thatknowledge alone is not enough. We lacunderstanding.

The difference between knowledge a

understanding? I can give an example. us assume that you have studiedeverything that you can study, from atheological, sociological, anthropologi biological, and even biochemical point view, about a human phenomenon calllove. The result is that you will knoweverything that you can know about lov

The barefooteconomist

Democracy Now’s Amy Goodmanspeaks with the acclaimed Chileaneconomist, Manfred Max-Neef

P h o t o : P o s t e r B o y MANFRED MAX-NEEF is a Chilean economist and founder of the

Centro de Estudio y Promoción de Asuntos Urbanos (CEPAUR).In 1981 he wrote the book for which he is best known, From the Outside Looking in: Experiences in Barefoot Economics , which describes hisexperiences practising economics among the poor in South America.In 1983, Max-Neef won the Right Livelihood Award for his work inpoverty-stricken areas of developing countries. In 1993, he wasappointed rector of the Universidad Austral de Chile in Valdivia.His latest book, Economics Unmasked: From Power and Greed to Compassion and the Common Good was published in 2011.



Makin

GLOBAL FORUM

but sooner or later you will realize that you will never understand love unless youfall in love. What does that mean? That youcan only attempt to understand that of which you become a part. If we fall in love,as the Latin song says, we are much morethan two. When you belong, youunderstand. When you’re separated, youcan accumulate knowledge. And that’s been the function of science. Science isdivided into parts but understanding is

holistic.And that happens with poverty. I

understood poverty because I was there. Ilived with them, I ate with them, I sleptwith them, and so on. And then you beginto learn that in that environment there aredifferent values, different principlescompared to those from where you arecoming, and that you can learn anenormous amount of fantastic thingsamong poverty. What I have learned fromthe poor is much more than I learned inthe universities. But very few people have

that experience, you see? They look at itfrom the outside, instead of living it fromthe inside.

The first thing you learn is that inpoverty there is an enormous creativity. If you want to survive, you cannot be anidiot. Every minute you have to bethinking, “what next?” What do I know?What trick can I do here? What’s this andthat, that, and that? Your creativity isconstant. In addition, this is combinedwith networks of cooperation, mutual aid,and all sorts of extraordinary things which

you’ll no longer find in our dominantsociety, which is individualistic, greedy,and egoistical. It’s just the opposite of what you find there. And it’s sometimes soshocking that you may find people muchhappier in poverty than what you wouldfind in your own environment, which alsomeans that poverty is not just a questionof money. It’s a much more complexthing.

So, to avoid another catastrophe, collision, if you were in charge, what would you say hasto happen?For me, the problem begins in theuniversity. The university today has becomean accomplice of maintaining a worldwhich we don’t want, because if you don’tteach something different to theeconomists, well, how the hell are you goingto change it when they are professionals?It’s impossible. When I started economics

in the early 1950s, it was totally different. Wehad some fundamental courses likeeconomic history and history of economicthought. Those courses don’t exist in thecurricula anymore. You don’t have to knowthe history. It’s not necessary. It’s notnecessary that you know what previouseconomists ever thought. That’s notnecessary. You don’t need it. I mean, that’sstupid arrogance. No, now we know for surethis is it forever, you know? Then it ceases to be a discipline, it ceases to be a science, andit becomes a religion. And that is what

economics, neo-liberal economics, is today.So, first of all, we need cultured

economists again, who know the history,where they come from, how the ideasoriginated, who did what, and so on and soon. Second, we need an economics now thatunderstands itself very clearly as asubsystem of a larger system that is finite,

the biosphere. Hence economic growth isan impossibility. And third, a system thatunderstands that it cannot function withouthe seriousness of ecosystems. Andeconomists know nothing aboutecosystems. They don’t know anythingabout thermodynamics, anything about biodiversity. They are totally ignorant inthat respect. And I don’t see what harm itwould do to an economist to know that if the beasts would disappear, he would

disappear as well, because there wouldn’t befood anymore. But he doesn’t know that wedepend absolutely on nature. For theseeconomists, nature is a subsystem of theeconomy. It’s absolutely crazy.

In addition, we must bring consumptioncloser to production. I live in the south of Chile, in the ‘deep south’, and that area is afantastic area for milk products. A fewmonths ago, I was in a hotel, and there inthe south, for breakfast, I was given a littlepacket of butter. I get one, and it is butterfrom New Zealand! I mean, if that isn’t

crazy! And why? It’s because economistsdon’t know how to calculate real costs. To bring butter 20,000 kilometres to a placewhere they make the best butter, arguingthat it is cheaper, is a colossal stupidity.They don’t take into consideration theimpact of 20,000 kilometres of transport.What is the impact on the environment of that transportation, and all those things? Inaddition, it’s cheaper because it’ssubsidized. So, it’s clearly a case in whichprices never tell the truth. It’s all tricks, andthose tricks do colossal harm. If you bring

consumption closer to production, you willeat better, and you will have better food. Youwill know where it comes from. You mayeven know the person who produces it. Youhumanize this thing. But the way theeconomists practice today is totallydehumanized.lThis is edited version of an interview thatfirst appeared on Democracy Now –www.democracynow.org

“Economists study andanalyze poverty in their niceoffices, have all the statistics,make all the models, and areconvinced that they knoweverything that you can knowabout poverty, but they don’tunderstand poverty.”



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GLOBAL FORUM

Is nuclear power necessaryfor a carbon-free future?

HOT TOPIC

P h o t o : G e o f f r e y G i l s o n



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The recent devastatingearthquake and tsunami in Japanhave confirmed the worst fears of nuclear power critics.Governments everywhere are re-evaluating their nuclear plans, butare fears of nukes misplaced?CHRIS GOODALLand JOSÉETCHEVERRY are bothenvironmentalists – but standdivided on the nuclear debate.Goodall – I am looking at a website thattells me how much electricity is comingfrom various sources around Britain.After a decade of financial incentives,wind turbines are currently producingabout two per cent of our electricity.Excluding a small amount of hydro, allour electricity is coming from fossil fuelsand nuclear. Britain’s 10 nuclear powerstations are now producing 10 times asmuch energy as comes from 3,000

turbines.I would love it if we powered our entire

economy from renewables but I see nopolitical will to achieve this aim. Wewould need to invest billions now inrenewable technologies. Without nuclear,reducing carbon emissions at high speedis impossible. We might end up keepingold coal power stations open for the next 30 years.

People say that we simply need to workharder to persuade a largely indifferentpublic to accept huge numbers of

turbines and to invest billions in otherrenewable technologies. Such idealism isirresponsible: if we truly believe thatclimate change is the greatest threat theworld has ever faced, we cannot riskfailing to achieve the growth in low-carbon energy sources. However much wemay regret this, nuclear is the onlytechnology capable of delivering largeamounts of power within the next decade.

“If we truly believe that climatechange is the greatest threatthe world has ever faced, wecannot risk failing to achievethe growth in low-carbonenergy sources. Nuclear is theonly technology capable of delivering large amounts of

power within the next decade.”

CHRIS GOODALL is a British businessmanand green activist. He is the author of How to Live a Low-Carbon Life, andTen Technologies to Fix Energy and Climate .Dr. JOSÉ ETCHEVERRY is AssistantProfessor at York University, Toronto,Canada, and is chairperson of the WorldCouncil for Renewable Energy.

We in the environmental movement havefailed to get the United Kingdom (UK) toinvest in renewables, and we now have noalternative but to welcome nuclear power.

Etcheverry – Nuclear plants need to bephased out because they are dangerous,toxic, and impede the adoption of thethree key options needed to build acarbon-free energy future: conservation,efficiency, and renewable energy.

Conservation and efficiency (i.e. doingmore with less) represent two of the threemost profitable opportunities to createnew jobs and address climate change. To visualize the potential: Canada and theUS use electricity at embarrassinglygreater per capita rates than leadingindustrialized nations like Denmark andGermany.

Those two nations have not onlyminimized the way their citizens usepower, they’re also constantly innovatingefficient design and they’ve become world

leaders in the development of renewableenergy sources.

Their success is based on developingpragmatic renewable-energy policies,such as feed-in tariffs, which quicklyenable entrepreneurs to innovate in vibrant markets that guarantee easyinterconnection, fair long-term prices forall types of renewable energy, andinvestment stability.

Germany’s renewable-energy policies inthe last 10 years have become the mostimportant climate mitigation strategy in

Europe, and are a strong engine of industrial innovation and employmentcreation.

Germans and Danes have understoodthat nuclear plants cannot complementrenewable energy sources, as they cannot be turned on or off easily. Furthermore,they also understand that building nukesforces you to sell vast amounts of electricity, which acts as a clear ‰



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GLOBAL FORUM

(Fukushima is now a level 7 catastrophthe same as Chernobyl).lNukes take at least a decade to buildand are highly context-dependent desprojects (i.e. a nuke design from Canadcannot be cut and pasted in seismicallactive places without major designmodifications, which by definitioninvolve higher costs, longer timelines,and trial/error experimentation).lNukes are not cheap, and uranium i

finite, non-renewable toxic mineral.lNukes can easily be diverted foratomic weapons – one reason thetechnology has ‘strong’ fans.

Renewable sources on the other hanlAre much safer, have vastly smallerecological footprints, and representstrategic assets for current and futuregenerations.lMost renewable energy systems aremanufactured today in assembly linesand can therefore be deployed andimplemented very quickly anywhere

suitable.lMost renewable energy systems benefit from economies of scale;therefore the more money we invest inthem the cheaper they become. Plus, thuse fuels that are plentiful and cheap lsun and wind or that can be locallyproduced at stable prices like biogas an biofuels.lRenewables can promote localresilience and energy autonomy, sodefusing sources of conflict instead of becoming weapons.

Goodall – Fukushima is a horribledisaster, but we can reasonably expectthat no one will die as a result of theradiation leaks. Yes, nuclear power is vexpensive, but so are all low-carbontechnologies. Most studies show nuclecosting less than offshore wind. What more, nuclear will deliver power reliaband throughout the year.

contradiction to efforts at conservationand efficiency.

These lessons are starting to beunderstood by 148 other nations that haveformed the International RenewableEnergy Agency (IRENA) to develop rapidlya new paradigm of energy security andclimate protection.

Goodall – Almost all of us welcome therapid growth in renewables but even inGermany only 17% of electricity comesfrom these sources. The key question iswhether renewables have any prospect of growing fast enough to replace fossil fuelsources completely. In the UK andalmost everywhere else, I don’t thinkanybody pretends that low-carbonsources are increasing at anywhere closeto a fast enough rate. That is why nuclearis vital – not because we don’t want

renewables.The second illusion is to believe that

energy efficiency measures cansignificantly reduce demand forelectricity. All independent sourcespredict a rise in electricity use because of home heating and the need to switch toelectric vehicles. Conservation efforts are barely denting the demand for power.Environmentalists can bemoan the lackof interest in efficiency, but we need todeal with the world as it is, not how wewant it to be. We may not like today’s

consumerist, high-energy use lifestyles, but we cannot change the world’spriorities overnight. Nuclear power isnecessary to meet people’s demands forelectricity.

Etcheverry – I’d like to set the recordstraight on nukes:lNukes are toxic and pose great dangersto present and future generations

HOT TOPIC‰

“Nuclear plants need to bephased out because they aredangerous, toxic, and impedethe adoption of the three keyoptions needed to build acarbon-free energy future:conservation, efficiency, andrenewable energy.”



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GLOBAL FORUM

People who live and work near nuclearreactors seem happy to have them asneighbours. By contrast, in Britain at least,onshore wind is widely detested.

I cannot accept that other technologieshave ‘vastly smaller ecological footprints’.A new nuclear station will generate the

same amount of electricity as about 3,000wind turbines covering hundreds of square kilometres and requiring far moresteel, concrete and disruption to wildlife.

We come back to the core argument.There is no political will anywhere in theworld to make renewable electricityhappen in sufficient amounts. I deeplyregret this. Environmentalists watchingthe world sleepwalk into multiple

ecological disasters have to actresponsibly, and accept that nuclearpower is one of the few ways we have of maintaining standards of living, whilereducing the CO2 production fromelectricity generation.

Etcheverry – So, what do we need toglobalize a sustainable energy path?Massive creativity, courage and politicalwill – plus we need to design global

deployment strategies for renewableenergy that have tangible local social benefits.

For example, farmers who can own or atleast benefit directly from wind turbinessee them as a desirable cash crop. Schoolswith solar roofs see them as versatileteaching tools. Hospitals that can havelower fuel bills and cheap hot water viadistrict energy see biomass CHP(combined heat and power) technology asa smart investment.

Our biggest obstacle to solving climate

change with renewable energy,conservation and efficiency is the limitedexperience that most people have withthese options. For all of us, the mostcrucial strategy is to get directly involvedin ‘learning by doing’ – and to fully useour creativity, which is itself a renewableand unlimited resource.lThis discussion was originallypublished in New Internationalist magazine, and is licensed underCreative Commons.

I m a g e : S e v e n r e s i s t



MakingIt 14

nThe global economy isexperiencing a synchronizedslowdown, as high energy andcommodity prices take a toll.The disaster in Japan, a

slowdown in US job creation andrenewed concerns about thefuture of the euro zone alsoovershadow growth prospects.

Asia is embarking on a benignslowdown as Western demandweakens and policymakers try to

to slow from 6% in 2010 to 4.in 2011.

The wave of political unressweeping the Middle East anNorth Africa (MENA) may leapositive changes in the longterm, but civil instability isdepressing short-term econoprospects. (EconomistIntelligence Unit)

n 2010 may have been the yewhen developing countriespulled away from the developworld’s fossil-fuel fouled pastoward a future powered by crenewables. And despite the f

Making the body of a Toyola stove.

trends

New technologies needed toavoid ecological destruction

BUSINESS MATTERS

get inflation under control. Foodand energy prices are still risingrapidly, potentially necessitatinga policy response that wouldslow growth sharply. Still, the

region’s fundamentals arehealthy.

The Economist IntelligenceUnit (EIU) expects China’seconomy to prove resilient to thetightening of monetary andcredit policy and to expand by

9% in 2011. Indian GDP growthwill come in at 8.6%. South-eastAsia’s rate of economicexpansion will slow markedlythis year from nearly 8% in 2010,

albeit to the still-healthy rate of 5.2%.

Latin American economies aredecelerating after a stellarperformance in 2010. As policytightens in response to rapidinflation, regional growth is set

A fundamental technologicaloverhaul of productionprocesses is requiredworldwide to end poverty andavert the likely catastrophicimpacts of climate change andenvironmental degradation.

“Business as usual is not anoption,” said Rob Vos, Director

of the Development Policy andAnalysis Division at theDepartment of Economicand Social Affairs of theUnited NationsSecretariat (UN/DESA)and lead author of thereport The World

Economic and Social

Survey 2011: The Great

Green Technological

Transformation,

published in July.

“Without drasticimprovements in anddiffusion of greentechnologies, we will notreverse the ongoing ecologicaldestruction and secure adecent livelihood for all of humankind, now and in thefuture,” Vos continued.

The global environment’s

Toyola Energy Ltd. from Ghanais the 2011 international GoldWinner of the Ashden Award forSustainable Energy. Thecompan y was selected for the

coveted Gold Award (£40,000) forits success in making over150,000 efficient charcoal stovesaccessible to low-incomefamilies.

Sarah Butler-Sloss, FounderDirector of the Ashden Awardsand chair of the judging panelsaid, “Toyola Energy Ltd. hastaken a simple stove technology,

Toyola wins awardadapted it to make it more robustand efficient, and then focusedits efforts on making this stovetechnology accessible to the poorso that they can save money and

have cleaner, healthierenvironments to cook in. In themeantime, Ghana’s forests areprotected and greenhouseemissions reduced. This is aperfect example of how muchcan be achieved through the useof simple, clean energytechnologies and clever, pro-poor marketing strategies.”

capacity to cope with humanactivity has reached its limitsAbout half of the earth’sforests are gone, groundwateresources are being depletedand contaminated, enormoulosses in biodiversity havealready occurred, and climatchange threatens the stabilit

of all ecosystems.



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that much of that investmentwas state-subsidized, we are stillat a turning point whenrenewables such as solar,geothermal and wind (those oldwhipping posts for criticsarguing they won’t competewith subsidized oil and coal) began to stand on their own twofeet, especially in parts of the

world where they are often theonly source of power available.

According to a new report byUN Environment Programme,collaborating with the FrankfurtSchool of Finance & Management and Bloomberg

New Energy Finance, investorspoured a record US$211 billioninto renewable energy in 2010,accounting for one-third of allnew generating capacity. That’s a540% rise since 2004, and duringa global financial crisis.

A big chunk of this investmentwas for massive wind farms inChina and small-scale solar

rooftops in Germany. Both arerecipients of largess fromgovernments through feed-intariffs and subsidies. Yet the farmore interesting story is theexplosion of alternative energyin places that can’t afford such

schemes, where the naturalresource base (wind, sun andgeothermal) is vast and the costof generating clean energy is ator near competitive prices:Egypt, Morocco, Kenya,Argentina, Mexico and others.Even Pakistan took inUS$1.5 billion investment to boost its wind capacity.

“In many parts of the world,we could expect something like aleapfrog [of energytechnologies],” writes Ulf Moslener of the FrankfurtSchool of Finance & Management in the report.

“The strong message is grFossil fuel investment is sdominant around the worthe gap is shrinking fast. Ilook at the deals being mamuch of the [conventionainvestment is to replace ofossil plants, but renewabfinance is for new capacity

Renewables may still pr

more expensive for some come. But economics chafast. If today’s trends are pthe future (the price of PVper megawatt has droppesince mid-2008), then therturning back. (Fast Comp

Appearing at UNIDO’s ViennaEnergy Forum in June, former

Governor of California ArnoldSchwarzenegger told participantsthat universal energy access isn’t“just about lighting a dark room,or cooking on a better stove. It’sabout the freedom that energy –and especially renewable energy –gives us.”

“We don’t have to be slaves tofaulty grids. We don’t have to

watch our citizens get sick anddie from pollution,”

Schwarzenegger said. “We don’thave to worry about a corruptdictator waking up on the wrongside of the bed and deciding toshut off power to our country.”

The Austrian-born movie starcontinued, “We need to say,‘We’ve had enough of the oldenergy order. We are mad as helland we are not going to take it

any more!’ It’s time for enfreedom.”

Schwarzenegger’s attendat the Forum marks hiscontinued commitment towith the United Nations, afengaging with UN SecretarGeneral Ban Ki-moon last at the launch of a project tocreate new green jobs andreduce greenhouse gases athe world.

Time for energy freedom

Over the next 40 years,

US$1.9 trillion per year will be needed for incrementalinvestments in greentechnologies. At least one-half, or US$1.1 trillion per year, are needed indeveloping countries to meettheir rapidly increasing foodand energy demands throughthe application of greentechnologies.

The report recommendsthat policies be guided by

four key goals:l improving energyefficiency without expandingconsumption where energy-use levels are high;l supporting a broad globalenergy technologydevelopment portfolio whilescaling up the use of knowngreen technologies inspecific places;l supporting greaterexperimentation and longer

discovery times; andl applying superiorgovernance andaccountability strategies inenergy-related technologicaldevelopment than at present.



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At the United Nations Millennium Summit inSeptember 2000, the largest-ever gathering of world leaders agreed that “the central challengewe face today is to ensure that globalizationbecomes a positive force for all the world'speople. For while globalization offers greatopportunities, at present its benefits are veryunevenly shared, while its costs are unevenlydistributed”. More than a decade later, growinginequality continues to threaten the sustainabil-

ity of economic and social development, andpoverty is still widespread, with almost half theworld – over three billion people – surviving onless than US$2.50 a day.

Who gains, who loses?On average, globalization has generated undeni-able benefits in terms of higher economic growthand incomes, better living standards, povertyreduction and access to essential services. Thesuccess of countries such as Germany, Japan,Republic of Korea, Singapore, Malaysia, China,Brazil and India would have been inconceivable

in the absence of globalization. It is no longerpossible to think of a country’s economic growthas a purely internal process. Open trade and theinternationalization of capital have enabledcountries to benefit from global demand for theirproducts and from new sources of funding.

Increased competition and technology transferhave led to enhanced efficiency and productivitygains. Countries able to exploit these factors havemanaged to leap-frog several stages of thenormal development process.

On the downside, in a globalized and inte-grated world, almost all problems can and dospill over borders. The painful consequences of social, economic and environmental shocksspreading from one country to another have

been starkly demonstrated by the recent finan-cial, food and fuel crises. Developing countriesare especially vulnerable to the effects of theseexternal shocks, with the world’s poorest andmost marginalized people bearing the brunt of crises they did not cause.

Similarly, developing countries as a groupcontribute relatively little to global warmingcompared to developed countries, but many aredisproportionally affected by changing climateconditions because of their geographic position.This injustice is worsened by the fact that thewealth accrued in most developed countries can

be largely attributed to past and present indus-trial activities, at the same time as the industrialsector is responsible for a considerable share of developed countries’ greenhouse gas emissions.

Globalization was supposed to promoteeconomic growth throughout the world and

to level the playing field so that everyone c benefit from increased development rising incomes. Instead, by far the greadownside to globalization has been the (utended) exacerbation of inequality, in mforms and at all levels, both within between countries. These rising inequalcoupled with greater awareness of them, stsocial cohesion, deepen the divides betwgroups and countries, and increase unrest

the potential for conflict.

Governance in the era of globalizationGlobal governance in the last decades has bdominated by a small group of powerful cotries that tried to minimize the rolgovernment in wealth generation and redi bution. However, the global financial economic crisis has laid bare the inadequathis approach. Likewise, laissez-faire policienot proving particularly helpful in tacklingeffects of climate change or uncertainties athe future supply of energy. Again, we stand

crossroads of policy and governance. Tprovides us with a unique opportunity to deour shared future. As the main institutioinclusive multilateralism, the United Natcan play an important role in facilitating systemic change.

Hedda Oehlberger-Femundsenden argues that UNIDO’s Green Industry initiative canbuild on the successes of globalization, while helping to rectify its shortcomings.

Fairer, greener and

more sustainable



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A fairer, greener and more sustainableglobalization: can industry help?What is at stake is a fundamental rethinkingof the whole process of globalization that builds on its successes while rectifying itsshortcomings. The UN believes that at theheart of these efforts lies the need to insert thenotion of a fairer, greener and sustainableglobalization into the centre of the currentglobal debate. This notion is closely linked to

the concept of sustainable development andits economic, environmental and social pillarsfirst articulated by the Brundtland Commis-sion, formally the World Commission onEnvironment and Development, in 1987.

The sustainable development agenda is acase in point on how the UN can use its role asa facilitator for systemic change. The Brundt-land Report came up with the classicdefinition of sustainable development:"Sustainable development is development thatmeets the needs of the present withoutcompromising the ability of future genera-

tions to meet their own needs". Acceptance of the report by the United Nations GeneralAssembly gave the term political prominenceand laid the basis for the groundbreakingEarth Summit in Rio de Janeiro five years later.This UN conference represented a major stepforward for sustainable development, withinternational agreements made on climatechange, forests, and biodiversity. The summitalso led to the establishment of the UNCommission on Sustainable Development.Over the past 20 years, sustainable develop-ment has become a development paradigm,

with governments, businesses, and civil societyaccepting it as a guiding principle.

Yet the concept of sustainable developmentremains somewhat elusive, and operational-ization has proven difficult. Globalization haschanged the challenges for sustainable devel-opment by relocating production, so thatresource- and energy-intensive productionprocesses are increasingly concentrated indeveloping countries, with consumption stillhighly concentrated in the developed coun-tries. Thus, on a global scale, there has been very little de-linking of the economy from the

environment. Progress is further hampered by the incorrect, but common, belief thatthere is a negative trade-off between economicgrowth and prosperity on the one hand, andsocial and environmental protection on theother.

As the United Nations’ specialized agencyfor sustainable industrial development,UNIDO has concentrated its activities acrossthree closely related thematic priorities that

are all linked to sustainable developmachieving a fairer, greener and sustprocess of globalization: poverty rethrough productive activities; trade building; and environment and energrecently elaborated mission statUNIDO continues to underline its cment to these priorities by emphasiaspiration to support member states iing a flourishing productive sector, to

their participation in international trato safeguard their environment.

Green Economy and Green(ing) IndusThe concept of a Green Economy, launthe United Nations Environment Prog(UNEP), also incorporates manyelements of a fairer, greener, more susglobalization. The Green Economy dreplace sustainable development, butnow a growing recognition that acsustainability rests almost entirely onthe economy right. UNIDO’s Green I

initiative is a concrete sectoral approperationalizing Green Economy amodel for economic growth and develo

The Green Industry vision grasps thtial for industries to decouple economicand revenues from excessive and incresource use and pollution. A newUNIDO Green Industry: Policies for Su

Green Industry, foresees a world in whichtrial sectors minimize waste in everutilize renewable resources as input mand fuels, and take every possible precaavoid harming workers, communities

environment. Green Industries will beand innovative, and constantly developways of improving their economic, emental and social performance. Tstimulate green investments, and cregreen jobs and businesses.

Twenty years after the historicSummit, the forthcoming UN ConferSustainable Development (UNCSDalso referred to as ‘Rio+20’ – is a majortunity for the United Nations to come specific answers and solutions to tchallenges of sustainability and globa

What is needed is a concrete action-oagenda to realize the vision of a fairer,and sustainable process of globalAdopting a sectoral approach such aIndustry as a way of operationalizGreen Economy concept will contrimaking this vision a reality.l Hedda Oehlberger-Femundsenden is a

planning officer at the United Nations In

Development Organization (UNIDO)

Stills from UNIDO’sGreen Industrypublic serviceannouncementscreened on CNNin late 2010.

“There is now a growing

recognition that achievingsustainability rests almost entirely on getting theeconomy right.”



MakingIt 22

DANI RODRIK argues that theultimate paradox of globalizationis that it works best when it is notpushed too far. This paradoxmust be reflected in new globaleconomic arrangements that are based on democratic deliberationwhere it really occurs – withinnational states.

GLOBALIZPARADOX

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Let me begin by framing my argument with three key ideas. One is the idea that

markets need to be coterminous with institutions of governance and regulationthat underlie them. This is a corollary to Adam Smith’s notion that the divisionof labour is limited by the extent of the market. My corollary is the idea that theextent of the market is, in turn, limited by the scope of workable, and I empha-size workable, regulation and governance. A lesson that we keep learning is thatmarkets are institutions that require the support of other non-market institu-tions. Any kind of long-distance market requires non-market institutions to createit. Markets are not self-creating, they’re not self-regulating, they’re not self-stabi-lizing, and they’re not, fundamentally, self-legitimizing.

That is why well-functioning domestic markets always operate amidst analphabet soup of regulatory institutions that deal with market failure, with infor-mational asymmetries, and with incentive problems. The requisite rules areembedded in macroeconomic institutions – institutions of monetary and fiscal

stabilization – and in broader governance, in political institutions that also providesafety nets, social protection, the welfare state, and ultimately, of course, in polit-ical democracy, in terms of ensuring that markets operate within a set of rules thatoperate through legitimate modes of public choice. So, the first key idea is that werun into problems when markets go beyond the limits of the governance insti-tutions that we need to support them.

GovernanceThe second idea is that the main locus of legitimate governance today remains thenation state. There is a lot of creative new thinking about mechanisms of gover-nance that go beyond the nation state: various mechanisms of global governance,whether those are the traditional multilateral or international organizations, alongthe lines of the International Monetary Fund and the World Trade Organization

(WTO), or the newer forms of ‘network’ governance around networks of regula-tors; or the various forms of cross-border, non-governmental organizations; or theCorporate Social Responsibility movement. However, even though all of theseare very interesting, important, and innovative methods of transnational gover-nance that are trying to deal with some of the consequences of the fact thatmarkets go beyond national governments, these structures are weak, and they’relikely to remain weak. On their own, they’re unlikely to support anything but arelatively limited version of globalization because the focus of democratic delib-eration still resides largely with the nation state.

The third idea is that different nation states have different preferences over theshape that these institutions of governance ought to take. Because they differ intheir historical trajectories, because of their cultural background, because of theirlevels of income and development, they have different preferences, and they have

different needs. So, when we’re talking about the shape of a social protectionmechanisms, or the shape that financial regulation ought to take, or the shape thatlabour-market institutions ought to take, or the form that consumer health andsafety standards ought to take, there is going to be much variation across differ-ent parts of the world in terms of what is a locally desired form for theseinstitutions. This diversity is natural. There is nothing in either theory or prac-tice that suggests that capitalism, or a market-based system more generally, mapsinto a unique form of governance, into a unique set of regulations that ought to

be globally harmonized, or that, necessarily, different countries will have similarpreferences for the shape that these different regulatory institutions ought to take.

G20 d i v e r s i t y

Dani Rodrik is the Rafiq Hariri Professor of International Political Economyat the John F. Kennedy School of Government, Harvard University, USA.He has published widely in the areas of international economics,economic development and political economy. His research focuses onwhat constitutes good economic policy, and why some governments arebetter than others in adopting it. His latest book is The Globalization Paradox: Democracy and the Future of the World Economy . He was bornand grew up in Istanbul, Turkey.

l a b o

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A patchworkWhen you put these three ideas together, you end up with the conclusion that wehave to contend with a world economy that is, and is likely to remain, a patchworkin terms of governance. We need to internalize the idea that the world economyis always going to be divided into different polities, and that jurisdictional bound-aries will be there. This conclusion really puts a damper on how far we can go interms of envisaging a truly global market, in terms of how far we can strive forwhat I call ‘hyper-globalization’, which refers to this ideal of a world economywhere national borders don’t matter in the sense that they don’t impose any trans-action costs on economic exchange.

When we get the balance between the reach of the market, and the reach of the‘workable’ regulation wrong, then we tend to run into one of two kinds of problems:1) We run into problems of legitimacy when we try to push the global rules too far,and try to harmonize institutional arrangements beyond what domestic politicalconsiderations would allow. I think the best example of this is the difficulty inwhich the current world trade regime finds itself. In fact, the WTO is one of theleast popular institutions in the world. To a large extent, the reason for this isthat we have overreached in terms of rule-making in the world trade regime.2) On the other hand, when we don’t have these rules, when the global governanceregime remains weak, or when the rules are highly country specific, then we getinto problems of inefficiency and instability, and that has been the curse of finan-cial globalization. I think that our experience with financial crises and problemsof contagion and financial volatility globally, reflect, in part, the fact that we have

a world in which financial markets are increasingly global, while the regulatoryarrangements and the stabilizing arrangements are still based within nation states.We don’t have anything like a global regulator, or a global lender of last resort, orglobal fiscal policies.

mechanismsfinancialcrises

protectionism

economic growth

onal sovereigntyopentrade

etworks

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WT O

The nation stateComing full circle, my argument is not just that we have to rein in our ambitions

because of the continuing power of the nation state, but also that it’s not neces-sarily a bad thing if we recognize the centrality of nation states in the worldeconomy. We’re more likely to contribute to a healthy global economy when werecognize the validity of the constraints than when we try to eviscerate them.Weakening domestic governance arrangements ultimately benefits no one.

Whether or not you buy my argument about the inherent desirability of a worldeconomy that’s divided across different national polities, we’re likely to move intoa world where the balance of political forces is becoming significantly morecentrifugal. This is, in part, because of the declining role of the United States inthe global economy, and also because the European Union will likely remainhighly preoccupied with its own financial crisis and its own unification process.

Rising powersAs for the rising powers, led of course by China, but also others like Brazil, India,Turkey, South Africa and Russia – even though they differ on a lot of different ‰



MakingIt 26

dimensions – there is one thing that is common to all of them, which is thatall these rising powers tend to put a huge weight on the value of national sover-eignty. So, these new powers are going to be standing for a world where in fact thenation state does matter, and there’s going to be much less willingness to trans-fer sovereignty to transnational or global governance mechanisms. The supplyof global leadership is likely to be in short supply in any case.

Now, this might be a very pessimistic prospect if you think that, in order tomaintain a healthy world economy, we require a lot of global cooperation, a lot of global governance, and a lot of global rule-making. It might suggest that we’relooking toward a somewhat bleak future. But I don’t think that’s that right way to

look at it, because to maintain a healthy global economy, you basically need toensure that countries do whatever is good for themselves. They need to look outfor their own interests, not those of the global economy. This is a point that is not

very well understood.

Semi-private goodsWe often think of the global economy using the analogy of a global commons –we think that the world economy is like a global ecosystem. This is the wrongway to think about trade and financial policies, in the sense that trade and financepolicies are what we would call ‘semi-private goods’ from the perspective of eachindividual nation. When we economists teach the benefits of trade, and the virtueof comparative advantage, we teach it from the perspective that this is good for

each country in and of itself. We don’t teach that trade is good because this is how you provide benefits for the rest of the world. We say instead that trade is good because it enables you to allocate your own resources more efficiently. This is verydifferent from a true global commons, for example, in the area of climate change,where in a world where each nation is doing whatever is good just for themselves,we would collectively all go to hell because nobody would have any incentive toinvest in climate control. Trade and financial policies aren’t like that, becausethese are semi-private goods, and if countries adopt policies that are good for

themselves, they will have open economic policies.So, fundamentally, subject to a couple of caveats, an open economy is in fact in

each individual country’s own interest. There are spillovers of course. There arespillovers in terms-of-trade effects, and potentially mercantilist effects, and thisis why I call open trade and financial policy, semi-private goods, not purely privategoods from the standpoint of individual countries. When a country, let’s say,follows protectionist policies, and if it is true that it is following these in order to‘protect’ itself for economically inappropriate reasons, most of the bulk of thecosts are actually borne not by the rest of the world, but by particular groupswithin that country.

transparency

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stabilizing arrangementsbusinessgovernan

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The corollary of that is that when nation states in fact do have the manoeuvringroom to select their own trade and financial policies and their own institutionalarrangements that might potentially impose transaction costs on cross-bordertrade and financial relationships, the outcome need not be the slippery slope toprotectionism.

Agricultural subsidiesI’m not making a claim that democratic politics are always going to result in thekind of economics with desirable outcomes, but the point is that when democraticpolitics do malfunction, the costs in the world economy are paid mostly by the

locals, and not by the rest of the world. Of course, agricultural subsidies are agreat example of that, because we say “here is a fundamental failure of the worldeconomy or world governance arrangements” with respect to trade rules, and thatcountries like the United States, or those in Europe, or Japan, or Korea, with highrates of subsidies or agricultural protection, generate adverse consequences forcountries that are agricultural exporters. But, of course, the fundamentaleconomic logic of this is that when countries are subsidizing their agriculturalproducts, if anything they’re providing a benefit to the rest of the world, becauseof the terms-of-trade gains that the rest of the world derives. But even leavingthat aside, the answer to the question, “Who pays the cost of those policies?” is thatthe costs are paid for by domestic consumers and domestic tax payers. So, theultimate failure here is not failure of global rules per se. It’s a failure of domesticdeliberation, of domestic democracy. These are very costly policies from the stand-

point of each individual country, and if a democracy ends up saying that despitethose costs, we want these policies nonetheless, it is not because they want toimpose costs on others, it’s because democracies are entitled to make their ownmistakes.

Bigger gainsThe point is that since the costs of ‘bad’ trade and financial policies are bornemostly at home, improved deliberation (and improved mechanisms of decision-making in these areas) is likely to be a much more powerful discipline, a muchmore powerful stick, than external constraints. After all, the bulk of the costs fallnot abroad, but at home. And in any case, the mechanisms of governance withinwhich we can sensibly address these issues are mostly national to begin with. So,this way of thinking about where we’re going has implications for how we think

about the design of global institutions, how we think about where we should focusour energies. In other words, where are the bigger gains for international coop-eration and rule-making?

One of the policy areas where one can apply some of these broader principlesis with respect to what, in some sense, is the burning macroeconomic issue of theday which is, how do you deal with global macroeconomic imbalances?

ChinaNow this is an area where cross-border spillovers are large because you can argue,quite reasonably, that China’s mercantilist policies have costs for others. What Imean by China’s mercantilist policies is its currency and other policies that createa large trade surplus. These have costs elsewhere in the world economy, becausethey aggravate unemployment in the United States and elsewhere, and also have

costs for economic growth in developing and emerging market economies because of the relationship between exchange-rates and economic growth.However, I think that what this debate has not taken on board sufficiently is thatChina also has valid concerns about the potential employment and social conse-quences of a rapid currency appreciation. So, for the last ten years, China’s growthmodel has relied extensively on an undervalued currency, and what one might callexchange-rate protection, which has increasingly replaced the kind of trade andindustrial policies that China used to rely on, prior to joining the WTO in 2001.In fact, it’s quite striking that both the external imbalance and the exchange-rateundervaluation started to rise in 2001, just as China joined the WTO.

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MakingIt 28MakingIt 28

So, I think that one way of squaring the circle is to accept that if the rest of the world – the United States in particular – is going to come down hard on Chinato do something on the exchange rate front, it’s also incumbent on us to thinkwhether China needs any insurance policy against the potential downside of lossof employment and significant reduction in economic growth that could besocially costly. And the kind of insurance policy that economic logic suggests weought to provide China with is much greater freedom to employ sectoral policiesin case particular sectors, or particular sets of firms, are adversely affected by arapid appreciation of the Renminbi, potentially causing unemployment prob-lems. The suggestion here is that greater discipline on macroeconomic and

exchange-rate policies imposed on China is really viable only if is matched bysignificantly relaxed discipline on sectoral, or microeconomic, or industrial poli-cies. In a way, the quid-pro-quo here is to look the other way if China is going to

violate the agreement on subsidies of the WTO, and use sectoral policies in orderto potentially pre-empt the employment costs of a rapid appreciation of theRenminbi. In exchange, the rest of the world can ask for greater global disciplineover macroeconomic and currency policies.

Labour mobilityThe second area is one area where globalization has advanced way too little. Ininternational trade and international finance, we need to ask how we can mitigatethe consequences of globalization having gone too far. But with respect to theworld labour regime, we’re in a world where globalization has not gone far

enough. The world labour regime today is roughly where the trade regime stoodin the 1950s. We live in a world in which there are very high barriers to labourmobility, very inconsistent policies – quantitative restrictions all over. Now, whatthis means economically is that because we’re starting from a position where thesize of barriers is so large, the relative balance between the total global efficiencygains and potentially adverse distributional effects of relaxing those barriers ishighly skewed on the positive side. It is skewed in the direction of the net effi-ciency gains. For any dollar of redistribution we get from relaxing these temporaryworker mobility barriers, the surplus we generate for the world economy, theextent by which we would increase the global pie, is much greater than fromalmost any other area of reform. Even a relatively small increase in the temporarywork visa allocations of rich countries would produce net gains that are severaltimes those produced by the removal of trade barriers, or anything else that’s

currently under discussion regarding the world trade regime.This is really the unexplored frontier of globalization, and I suggest that if the

trade negotiators, who are wasting their time with Doha, really want to do some-thing useful, and really expand the size of the global pie, this – and not the existingagenda – would be the area that they should be targeting.

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Global rulesWith respect to the nature of the global rules, I suggest that the main contribu-tion that global rules can make is through their effect on improving the qualityof domestic deliberation. If there is a shift in emphasis in places like the WTO orthe G20, instead of trying to enact global rules that try to harmonize on substancein pursuit of the objective of minimizing transaction costs across borders, theseglobal rules should instead focus on procedural safeguards that ensure that thedomestic deliberation on regulatory matters affecting trade and finance benefitfrom some key qualitative improvements. The key principle here would be toensure things like transparency, accountability, representativeness, and the use of

scientific or economic evidence in domestic deliberations with respect to tradeand industrial and financial policies. And international rules could set proce-dural standards, require the application of these principles, and, through such amechanism, could actually make a contribution to the quality of domestic delib-eration. The idea here is that there is much to be gained by legitimizing nationaldifferences and regulatory structures, but doing that subject to procedural safe-guards that can potentially improve the quality of such deliberation.

To sum up, I believe that democratic deliberation is still largely organizedaround nation states, and I believe in the right of countries to protect their ownregulatory arrangements and institutions, but I distinguish this very sharply fromthe right to impose those arrangements on others. The right to have your owninstitutions doesn’t give you a right to impose them on others. I think we shouldstrive for as much economic globalization as we can get that is consistent with

maintaining this space for diversity in domestic international arrangements.

Policy spaceMy emphasis here on creating policy space is based on the argument that all kindsof countries need that policy space; the rich nations need it to provide social safetynets and social insurance programmes, to address concerns about the labour,environmental or health and safety consequences of trade, and ultimately toshorten the chain of delegation whereby decisions are made by a group of judgesin Geneva. And I think developing countries need the policy space, because therecord shows us that it’s those countries that use the policy space to restructuretheir economies, and to diversify their economies, that ultimately benefit fromglobalization the most, and can leverage globalization the most.

Providing countries of both the North and the South – both rich and poor

countries – with this kind of policy space, and understanding that this policyspace is needed to maintain the integrity of domestic institutions, is somethingthat is not just desirable from the narrow perspective of national economicmanagement. It will actually produce a global economy that is workable and thatis healthier.n

l This is an editversion of a talk the Peterson InsInternational EcoWashington, DC4 May 2011.

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You argue that the central global predicament of the 21st century is that, in becoming moreintegrated, we have also become less gov-erned. When did this shift start taking place,and where are we today along the continuumof this “unfinished global revolution”?In the last twenty or so years, two great trendsthat are inherently in conflict with each other

have been playing out. By chance, I have livedat their intersection. The first trend is thedemand of people everywhere to have moresay over their own lives. This has led to the as-tonishing people power revolutions from thePhilippines and Latin America to EasternEurope and Africa, and now, recently, in Egypt.Steadily, one man rule has been rolled back,and politburos and generals have been sentpacking, as people have demanded demo-

cratic control over their societies and liveI was present at many of these rev

tions. In the early days, as a political advto insurgent candidates like Cory Aquinthe Philippines and her counterpartLatin America and Eastern Europe, and I saw a later round of these changes, andin the midst of more than my fair shar

them as a senior international official,then government minister. I saw enougI describe in the book, to understand most, if not all, of these democratic pourings have fallen short of the antiction of those who filled the streetcelebrate democracy’s victory. The old ocorruption, inequality, a lack of real freedtoo often has hung on, despite the new docratic trappings.

Rahim Kanani speaks to Mark Malloch Brown about hisnew book, The Unfinished Global Revolution: The Pursuit of a New International Politics, which explores the challengesand opportunities of globalization in the 21st century.

MARK MALLOCH BROWN is a former Minister of State in the Foreign and Commonwealth Office of theBritish government with responsibility for Africa, Asia,and the United Nations. Prior to that, he served asDeputy Secretary-General of the United Nations(2006) and chef de cabinet for UN Secretary-GeneralKofi Annan (2005), and as administrator of the UnitedNations Development Programme (1999-2005). Earlier in his career, he served at the World Bank as vice-president for external affairs, and vice-president for United Nations affairs.

P h o t o : S t e f a n M a g d a l i n s k

P h o t o : W o

r l d E c o n o m i c F o r u m / Y o u s s e f M e f t a h

global

The

revolution

unfinished

Interview



Makin

But there is no doubting the depth of the yearning for control over our lives and thefreedom to make our own choices within ademocratic framework, where we have theprotection of the land for ourselves and ourfamilies. From being a minority, luxury, aspi-ration for the few in the West, democracy has become a nearly worldwide demand.

This political tidal wave of our lifetimessmashes into the rocks of the other great trendof recent decades: the impact of globalization.While it has blown change through our lives,and through its mass communications tech-nologies even enabled many of the nationaldemocratic changes – witness the role of Face- book and Twitter in Egypt, it has also hijackedour democracy, in unanticipated ways.

What I mean is that as our lives have

become integrated on a global level: from theglobally sourced finance that underpins na-tional economies, to the far-flung locationsfrom where our food and consumer goodscome, to where the services from bank backoffices to the staff in our hospitals originate.We live our lives with an ever greater depend-ence on international travel for work and

pleasure. All of this has consequences for na-tional democracy. Regulating finance, trade,public health, security, and all the other di-mensions of a global economy are beyond thepower of individual countries – even the mostpowerful. A country only controls one or twolinks in the chain of finance, or the spread of an infectious disease.

That is the dilemma I try to expose as ademocracy advocate and a champion of better

management of our global affairs. I dhow my thinking evolved, as I found hficult it is to carry that powerful momdemocratic revolution from the peoplof the streets to people power in the global places, where more and more ofcisions that shape our lives must be am able to describe these inaccessible

and their workings too, in these pages bmy own journey took me from democrtivist to senior international official, was privy to significant deliberations aresponsible for major managemenacross the system. Indeed, probably has been lucky enough to enjoy suchrange of experience across the top levemerging system of global governanc

So, this is the story of two unfini

“[On] the long jthat we have haembarked on, tglobal democra



MakingIt 20

revolutions: the imperfections and incom-pleteness of local and national democracy inthe face of the persistence of old powergroups and of poverty and marginalization;and of the long journey, that we have hardlyembarked on, to build a global democracy –partly because it is even more complicatedthan one man, one vote, or one country, onevote. We have hardly begun to work out how togovern ourselves at the global level. And

indeed there are jealous politicians every-where, defending their own prerogatives, inthe name of national sovereignty, who don’tthink we should even try.

In this changing international landscape,what is the obligation of this generation tothe next?Well, this generation is probably the last glob-ally unregulated generation. We can racethrough the world’s finite natural resourcesof energy, water, commodities, forests, soils,and oceans, as though there was no tomorrow!

We also have the freedom to move our wealtharound, shopping for low regulation locationswhere it is not taxed and oversight is lax.Indeed, many companies employ lots of lawyers and tax accountants to play this patch-work global system, where money is global,but regulation local.

At the very least we are going to have to ex-plain to the next generation why in a world of growing population, we did not have the fore-sight to think and act more clearly to addressthese issues. Why did we not understand thatin a globalized economy, letting politicians

continue in the self-indulgence that rules andregulations could still be set by them at thenational level was a recipe for incoherenceand abuse? What can we do about it? Act now,and get going on the kind of bargaining andglobal negotiating necessary to create properframeworks for handling these issues in a fair,globally inclusive way for the future.

In your book, you argue that as nationalpoliticians cede control to impersonal globalforces, they will be forced to become more ef-fective participants in international mecha-

nisms, such as the United Nations. What aresome examples of this trend, and what are thepotential consequences associated with an in-creased reliance on a system like the UN that still needs much reform in order to operateeffectively?

A: When one looks at a difficult and so farunsuccessful new trade round, the so-calledDoha round, one sees politicians weighing inbecause they think an agreement will bring

jobs home. So, for months at a time, trade ne-gotiations will be delegated to ambassadors inGeneva who often have no particular incen-

tive to arrive at an agreement, given the pleas-ant sinecure of Geneva life. Suddenly,politicians facing low growth and too few jobsat home wade in, and there are frantic phone-calls between leaders. The White House,Downing Street, and their Indian and Chineseequivalents are involved. In this case, withlittle result, but the point is clear: politiciansrecognize global trade matters.

Similarly, in 2008-9, when the world wasfaced with financial meltdown, leaders gotstuck in. From Bush to Brown, they recog-nized the survival of their national economies

depended on coordinated internationalaction.

A lot of these examples of coordinated po-litical action are, however, outside the UN.This is a sad commentary on its perceived in-effectiveness. It has got a fail grade from manyon its handling of climate change negotia-

tions. It has been largely missing in manthe major political confrontations of thefew years. The stark truth is it is going to to raise its game, if the new multilateralisnot to largely by-pass it.

Nevertheless, one should not overlookfact that the source of much of its weaknealso the source of its unique legitimacy: ecountry is a member. And while an inner of countries, with major interests in the i

may be able to agree an approach to finanregulation or climate change, unlesswhole global community of 192 suspicioften opposing, countries then endorse inot going to be applied universally. So, wthe dynamic part of negotiation may migfrom the UN to more purpose-built assotions of national and other stakeholders,seem likely to continue to need the UN afinal seal of approval.

That would be a reduced role for the but it may be its fate unless a new generaof leaders, like Kofi Annan, comes back

positions of prominence. As I argue in book, what distinguished Kofi, and other lers I worked with, was the ability, proactito sense where a creative progressive consus among governments might be foundto lead, bargain, and cajole nations tothere. Then, the UN can produce remarkresults.

If President Obama granted you an audito discuss the role of the United St

moving forward in strengthening the sysof international relations and global me

nisms such as the United Nations, wwould be your advice?Senator Obama visited the UN on a coupoccasions when I was Deputy Secretary-Geral. We spoke about Darfur and other trospots. I was left with a very clear respechis instinctive multilateralism as a meanmoving forward human rights and conissues he cared deeply about. He understhat the American ‘big stick’, wielded alrarely brought the results he desired arothe world. But his faith in multilateralisma progressive force, was even then laced

a discernable scepticism about whetherUN was always fit for purpose for the big tsuch as peacekeeping in Darfur. His two cerns seemed to be the chronic instituticonservatism brought about by obedienthe sovereign rights of even the mwretched governments such as Sudan. Hcould you save the people of Darfur, if evthing you did had to have the OK of theirsecutors in Khartoum? His second appa

“We have hardly begun towork out how to governourselves at the global

level. And indeed thereare jealous politicianseverywhere, defending

their own prerogatives, inthe name of nationalsovereignty, who don’t think we should even try.”

‰



Makin

ence of their actions. As British Prime Minis-ter Gordon Brown’s G20 envoy, I saw it was ahigh point, and indeed the pace of agreement

on common action fell away sharply after theLondon Summit in April 2009 as the crisisitself receded.

So, while there is a similarly compellingcase for global action on public health, povertyor climate change, the sense of crisis andmutual threat that drove action on finance ismissing. There have been moments – the con-certed action against HIV/Aids when it threat-ened to become a global scourge; anintermittent commitment to tackling poverty – but what we have not yet acquired is a globalpolitical consciousness that allows us to rec-

ognize that we must worry about the badneighbourhoods next door. Just as Americansor Britons, a hundred years ago, had begun torecognize the state must address poverty, andnot leave it to private charity alone, so we areon the cusp, I suspect, of a great leap of imag-ination in terms of our responsibilities as cit-

concern was that an organization with suchgovernments having a hand on the wheel wasunlikely to have the internal resourcefulness,morale, or risk taking culture, to deal robustlywith crises.

I was left believing President Obama wasan unconditional multilateralist but a condi-tional UN supporter. The way of course toconvince him otherwise is clear. The UN mustperform. That, in turn, means a risk-taking

leadership ready again to challenge the world,including the US, to do better.

If your audience was the leadership of China,India, or Brazil, and the topic was the futureof the international system, how would youradvice differ?I would presumptuously offer the leaders of China, India, and Brazil, a history lesson. Itwould dwell on events they may not be thatfamiliar with – how FDR came to commis-sion the design of the United Nations even asthe US entered the Second World War, and

that he did this not solely to export Americanliberal values round the world. Rather, it wasseen as a system of sharing out responsibilityfor global security. Roosevelt could see Amer-ica was going to be landed with the role of global policeman, but he equally recognizedAmericans would demand that the country fo-cused its resources on the home front. TheUN became the pragmatic vehicle for squar-ing the circle, to deflect global calls for Amer-ican leadership into a robust burden-sharedsystem of global leadership, covering securityand development matters.

Today, China, India, and Brazil face similardemands to step up to global leadership whentheir people want them to continue to tacklea huge unmet domestic agenda. The UNoffers their leaders, as it did the Americans in1945, a low-cost way of meeting the responsibilities thrust upon them. It requires them toplunge back into the organization which theyhave traditionally resented as too Westerndominated.

Reflecting on the 2008 financial crisis, what is the relationship between the necessity to

govern the global economy with global in-stitutions, and the necessity to empowerand enable similar institutions to addressissues of public health, poverty, or climatechange?The leap to an empowered G20 occurred in2008 because of a financial crisis that threat-ened the stability of governments and all ourlivelihoods. Briefly because of crisis leaderssurprised themselves by the force and coher-

izens, whether we believe in righmarket solutions to global poverty oleft-wing social interventions, we are cthe threshold where we will recognizis our business to worry about global peven if we still disagree about solution

As the ‘unfinished global revolution’ uand having served for many years in aof public, private and non-profit insti

around the world, what insights wouimpart on young and emerging leadersocial sector who may be disenchant

the ineffectiveness and bureaucracy oinstitutions and with their inability t21st century challenges?First, the canvas on which young leadact is wide: NGOs, the UN, business. every organization is moving towardsinternational model, and with that comopportunity of more career time spent So, choices do not need to be limited toficial part of an international system.

big enough and diverse enough to touus. So, seize the chance whatever yourendeavour. Recognize that new or old zations will need continuously to rethemselves during a century of contchange and likely drastic upheaval. Finderstand that new leadership requirethe domineering alpha male popularthe Hollywood model of governmencorporate leaders. We are likely to selantern-jawed heroic titans barking itions to deferential subordinates, and see a gentler consensus, with leaders w

seek the understanding and emotionalof the cross-cultural teams they worKofi Annan. Not George Bush.

What is it about the ‘unfinished glob

lution’ that worries you the most?That it’s unfinished and, with a wopanding at 200,000 people a day, whave long to sort ourselves out.

And what are you most optimistic aboThat, so far, innovation, social adaptatiremarkable individuals – not just so

traordinary world leaders, but civil socentrepreneurs, some working in mocult circumstances – have kept us oahead of failure.

l Rahim Kanani is founder and editor-in

W orld Affairs Commentary. For more in

with global leaders in international deve

ph il an th ropy, ed ucat io n, and mo r

www.RahimKanani.com.

“While the dynamic part of negotiation may migrate from the UN tomore purpose-built associations of nationaland other stakeholders,

they seem likely tocontinue to need the UNas the final seal of approval.”



MakingIt 30



Makin

Economists in developedcountries have constructedcomforting narrative aboutefforts to fight world pover but a closer look at the statexposes a series of brokenpromises and rigged initiatwrites Thomas Pogge

P h o t o : C h e r y l R a v e l o / R e u t e r s

shareUnfair

‰

THOMAS POGGEis Leitner Professor of Philosophy andInternational Affairsat Yale University,New Haven, USA.



MakingIt 32

Fairness of an economic system can be defined by two requirements.First, people must have minimally adequate starting positions, so thatthey can effectively participate. In our time, this requirement is unmetfor people who lack basic literacy and numeracy or live from child-hood on with undernutrition or endemic malaria. Such conditionspre-empt their capacity to explore and evaluate their options for buyingand selling, borrowing or employment. Second, those at the bottommust be able to share proportionately in economic growth. This re-quirement is unmet, for instance, in a feudal system where the gap be-tween the landowners and the landless widens relentlessly, no matter

how much harder the latter may work.Despite abundant rhetorical commitment to the ideal of a fair global

economic order, the world has actually moved in the opposite direc-tion. According to the UN Food and Agriculture Organization, thenumber of chronically undernourished people steadily increased fromthe early 1990s, before rising above a billion in 2009 for the first time inhuman history. Branko Milanovic reports that, in a mere 17 years of globalization (1988 to 2005), the share of global household income goingto the bottom quarter of the world’s population has fallen by a third(from 1.155% to 0.775%), with the gap between the average income of thetop 5% and that of the bottom quarter growing by 61%.

These bleak statistics disturb the rosy picture of valiant effort andpartial success that well-paid economists are feeding to the media and

public of affluent countries. But if we care about fairness, as opposedto the mere appearance of it, then we must be willing to face the facts,

as well as to look more closely at how that inaccurate narrative is duced. We must examine the World Bank’s unsound purchasing poadjustments, which count a person as non-poor even though hher entire income can buy only as much daily food as could be boin the US for 83 cents. We must recognize the mendacity of the Mlennium Development Goals (MDG) effort, which is illustrated by ing the emergence of the first and most prominent MDG: the promto halve extreme poverty by 2015.

The first version of this promise was made in the 1996 Rome Dlaration on World Food Security. It commits us to halve the numb

undernourished people between 1996 and 2015. The second versiothe promise was made by the UN General Assembly in its 2000 Mlennium Declaration. It commits us to halve, between 2000 and “the proportion of the world’s people whose income is less thandollar a day and the proportion of people who suffer from hunThe third version of the promise, supposedly based on the MillennDeclaration, is the official formulation of MDG-1 now used to tprogress. It commits us to halve, between 1990 and 2015, the proporof extremely poor people among the population of the develocountries.

Concealed by an unchanged catchphrase (“halve extreme pov by 2015”), the revisions cleverly dilute the promise. By basing the taon a proportion rather than a number, the later versions take advan

of population growth. This advantage is magnified by relatingnumber of poor to the faster-growing “population of the develo

‰

“We must recognize the mendacity of the MillenniumDevelopment Goals (MDG) effort, which is illustrated by

tracing the emergence of the first and most prominent MDG:the promise to halve extreme poverty by 2015.”



Makin

countries” rather than to “the world’s people”, and it is magnified again by the decision to backdate the baseline to 1990: if the population of thedeveloping countries grows until 2015 as expected, to 146% of what itwas in 1990, then the number of poor only needs to fall to 73% of whatit was in order to "halve poverty". This is obviously much less ambitiousthan reducing the number of poor to 50% of what it was. The back-dating to 1990 brings the further advantage that spectacular povertyreductions in China during the 1990s can now be counted toward theMillennium Development Goals.

The latest World Bank data on the evolution of extreme poverty and

the latest UN statistics on population growth, illustrate the significanceof the reformulations. The dilutions have added 484 million to thenumber of people whose extreme poverty in 2015 will be deemedmorally acceptable, or even celebrated as success. Yet an extra 484 mil-lion people in extreme poverty equates to about six million additionalpremature deaths from poverty-related causes each year.

Even more remarkable than the thoughtfulness expended on thesedeceitful reformulations is the fact that, despite their high visibility,they drew no protests or even comments from any of the politicians, bureaucrats and experts (including those from less developed coun-tries) who are supposedly engaged in the fight against poverty. None of them was willing to put his or her career at risk in order to try to pro-tect the poor by holding the global elite to their earlier promises.

The story of the past 20 years is not that, through deception, theglobal elite did less than it ought to lift people out of poverty. Hadthe poorest quarter of humanity merely kept up with the growth in theglobal average income, had they merely maintained their wretched1.155% share of global household income, they would have had 49%more in 2005 than they actually had. While this would still have beena less than fair basis for participation in the world economy, it wouldnonetheless have been a huge improvement on their actual condi-tion. The real story of the past 20 years is that, despite all the rhetoricand good and successful efforts by many NGOs and developmentagencies, the world’s poor have been slaughtered. If we don’t under-stand how this happened, we won’t be able to do better in the post-MDG era.

What went wrong?If acknowledged at all, the massive persistence of extreme poverty isusually explained by two factors: corrupt and oppressive regimes inmany poor countries, and the ‘leaky bucket’ of development assistance.Both these explanations have an element of truth. But the first fails toexplain the high prevalence of corrupt and oppressive regimes, andthe second why the income share of the poor is falling, and rapidly so.

My own explanation redeploys the metaphor: the assets of the poorare like a leaky bucket, continuously depleted by massive outflows thatoverwhelm the effects of development assistance, which, in any case, arepuny. We take great pride in our assistance, boasting of the roughlyUS$15bn that OECD countries spend annually on basic social services

in poor countries. Yet we ignore the vastly larger amounts that we extractfrom the poor without compensation. Let me count the ways.

First, affluent countries and their firms buy huge quantities of nat-ural resources from the rulers of developing countries without regardfor how such leaders came to – and how they exercise – power. In manycases, this amounts to collaboration in the theft of these resources fromtheir owners: the country’s people. It also enriches their oppressorsand thereby entrenches the oppression: tyrants sell us the natural re-sources of their victims and then use the proceeds to buy the weaponsthey need to keep themselves in power.

Second, affluent countries and their banks lend money trulers and compel the country’s people to repay it even after this gone. Many poor populations are still repaying debts inagainst their will, by dictators such as Suharto in Indonesia, Mothe Democratic Republic of the Congo, and Abacha in Nigeriawe are participating in theft: the unilateral imposition of debt bon impoverished populations.

Third, affluent countries facilitate the embezzlement of fupublic officials in less developed countries by allowing their baccept such funds. This complicity could easily be avoided: ba

already under strict reporting requirements with regard to funpected of being related to terrorism or drug trafficking. Yet banaccept and manage embezzled funds, with governments ensuritheir banks remain attractive for such illicit deposits. Global FiIntegrity (GFI) estimates that less developed countries have alost at least US$342bn in this way during the 2000–08 period.

Fourth, affluent countries facilitate tax evasion in the less devcountries through lax accounting standards for multinationalrations. Since they are not required to do country-by-country ing, such corporations can easily manipulate transfer prices their subsidiaries to concentrate their profits where they are taleast. As a result, they may report no profit in the countries inthey extract, manufacture or sell goods or services, having their

wide profits taxed instead in some tax haven where they onlypaper presence. GFI estimates that, during the 2002–06 periodmispricing has deprived less developed countries of US$98.4annum in tax revenues.

Fifth, affluent countries account for a disproportionate splanetary pollution. Their emissions are prime contributors ous health hazards, extreme weather events, rising sea levels amate change, to which poor populations are especially vulnerecent report by the Global Humanitarian Forum, led by Kofi estimates that climate change already seriously affects 325 mpeople and causes US$125bn worth of economic losses every also causes 300,000 deaths, of which 99% are in developing co

Finally, affluent countries have created a global trading regi

is supposed to release large collective gains through free anmarkets. The regime is rigged, however, by allowing rich statestinue to protect their markets through tariffs and anti-dumpinand to gain larger world market shares through export credits asidies (including about US$300bn annually in agriculture) thcountries cannot afford to match. Since production is muclabour-intensive in poor than in affluent countries, such protemeasures destroy many more jobs than they create.

Taken together, these factors generate a massive headwind the poor. This overwhelms the effects of public and private foremeaning that the poor remain excluded from effective particin the globalized economy and cannot benefit proportionateglobal economic growth.

This problem may be solvable through huge increases inopment aid, but such continuous compensation is neither cfective nor sustainable. It is far better to develop institutional rthat would reduce the headwind, and eventually turn it ofwould mean seeing the world poverty problem not as a spconcern at the margins of politics but as an important considin all decisions related to institutional design.lThis article first appeared in The RSA Journal and is reprinted h

permission of The Royal Society for the Encouragement of Arts, Manu

and Commerce (RSA).



MakingIt 34

Jan Wouters and Dylan Geraets argue that networkgovernance needs to be transparent, inclusive, and responsive.

Globalization,

governanceand the G20



Makin

How to govern globalization? In the past three years the world has witnessed the emergenceof a series of new actors in global governance.Increasingly, (informal) networks are used asforums to discuss new and pressing issues,alongside traditional international organiza-tions. These networks operate in fields asdiverse as food safety, standard setting, inter-national public health, and financialregulation. At the global level, one of the

prime examples of network governance is theGroup of 20. Through the G20 – in November2008 elevated to the rank of heads of state andgovernment – world leaders attempt toaddress the most pressing global problemsthat arise in our increasingly multi-polarworld. Although initially focused on dealingwith the effects of the world’s worst financialcrisis since the 1930s, the agenda of the G20has steadily broadened and now includesissues that range from the reform of interna-tional financial institutions and the effects of macro-economic imbalances to commodity

price volatility, development and the fightagainst corruption. In attempting to deal withthese issues, the G20 maintains a close rela-tionship with formal internationalorganizations, such as the InternationalMonetary Fund, the World Trade Organiza-tion and the World Bank.

After three years, we can make an initialassessment of this relatively new construct inglobal governance: has the combination of informal networks, like the G20, and formalinternational organizations, proven fruitful?Has effective and efficient cooperation

between them materialized? Does the G20provide political guidance to ‘ traditional’international organizations? At the same time,we need to ask whether the G20 itself deliversin terms of ‘democratic’ global governance.Does the inclusion of emerging countriesmake the G20 more legitimate? Has the G20lived up to its expectations in terms of governing globalization: can it function as anew steering committee for the world?

A broadening agenda – shifting prioritiesAs a network rather than a formal organiza-

tion, the G20 is not based on a formal charteror treaty. There are no voting procedures,there is no central secretariat, and it does notprovide legally binding outcomes. Throughits informal structure, the G20 has the free-dom to set its own agenda, coordinatepolicies, and distribute tasks across existinginstitutions. After the initial phase of crisismanagement in the face of the internationalfinancial crisis, this freedom has led to the

broadening of priorities of the G20. Thedownside of this broadening agenda can beseen with regard to the level of decisivenesswith which the G20 has been able to operate.The expediency with which the ‘sherpas’ (thefaceless diplomats who lay the groundworkfor high-profile international meetings suchas the G8 and the G20) crafted the bailoutpackage at the end of 2008 can no longer beseen. Far from turning into a central hub for

global governance, the G20 is turning into aforum where a variety of issues are discussed,and diverse opinions and policy preferencesare exchanged between new and emergingpowers, but firm policy conclusions are notnecessarily reached.

Vision and guidanceIn an earlier issue of Making It , Peter Suther-land warned against the growing economicnationalism of the mercantilist mindset andrising protectionism within G20 countries.More recently, WTO Director-General Pascal

Lamy urged G20 leaders “to renew the firmcommitment that they will not recourse toprotectionism in order to exit the crisis.” Inan earlier speech, Lamy also called upon G20leaders to provide the political guidanceneeded to complete the Doha Round of multilateral trade negotiations that has beenrunning since 2001. So far, unfortunately, suchrequests have remained unanswered. In spiteof their initial commitment to refrain fromprotectionism, in reality there has been anincrease in the number of protectionist meas-

ures in the last six months. This exampthe question to what extent the G20 icapable of providing the political visiguidance that it is asked for. Can we rcally expect this guidance (these decfrom a network that includes both Chthe United States: the prime example political tension at this very moment iIn terms of effectiveness and efficienrecent article in Foreign Affairs, the inf

economists Ian Bremmer and NRoubini argued that the G20 has turnea would-be concert of nations to a cacof competing voices.” In their view Zero era is more likely to produce proconflict than anything resembling a neton Woods”.

Legitimate and accountable globalgovernance?Until 2008, the Group of Eight (G8) exclusive club of the world’s leconomies. Its importance had, ho

waned over the past few years. A netwodoes not include major economies India, China and Brazil risks becoming vant. By inviting these countries to thethe G20 constellation, this legitimacyprevalent in the G8 was partially addThe emerging economies that are nowthe network have used this position tadvantage; although their positions arnot the same, they have been the majornents behind the proposals for the rethe international financial institutnumber of excluded countries, inc

Norway and most notably the couunified under the ‘Global Governance(3G), have expressed their concerns regthe legitimacy of the G20. Making themaking process more transpareexample, by publishing more documento the already openly available commuwould alleviate at least some of these co

Rather than looking at (new) interninstitutions as the panacea for all pedeficiencies of global governance thnetworks, it would be better to encour leaders to display the type of p

leadership and vision that has been for so long. If we accept that (infnetworks are indispensable to addrproblems posed by the process of glotion, we have to attempt to mitigate stheir negative features. Turning formal institutions might not be neif we ensure that the networks of todtomorrow are transparent, inclusiresponsive.n

JAN WOUTERS is Professor of International Lawand International Organizations, and Director of theLeuven Centre for Global Governance Studies andthe Institute for International Law at the Universityof Leuven, Belgium.

DYLAN GERAETS is an assistant at the Institute for International Law at the University of Leuven.



MakingIt 36

Garmentindustry

leadsthewayAt the United Nations Conference on the Least

Developed Countries (LDCs) held in Turkey in

May 2011, Bangladesh was singled out by UN

officials as one of the countries with real

potential to graduate from the LDC list.

This view was echoed by the eminent

economist, Debapriya Bhattacharya, who

told journalists, “I believe that Bangladesh

has the capabilities to come off the list of

LDCs very soon, as the country has madesignificant progress in different sectors,

including the economy.”

Despite political turbulence and frequent

natural disasters in recent years, Bangladesh

has sustained a surprisingly good record for

growth and development. The economy has

grown by an average of 5-6% each year since

1996, and this growth has been accompanied

by significant poverty reduction.

The country has made laudable progress on

many aspects of human development, most

notably the influx of girls into the education

system and of women into the labour force.Bangladesh is on track to meet Millennium

Development Goals for infant and child

mortality, and gender equality in education.

It is considered something of a paradox that

Bangladesh has made such relatively strong

progress on development, while experiencing a

challenging governance environment,

characterized by political instability, poor

infrastructure, corruption, and insufficient

power supplies. Analysts have been forced to

conclude that, despite these difficult

circumstances, successive governments have

managed to maintain macroeconomic stability,

have allowed the private sector to flourish, and

have facilitated the receipt of vast amounts of

remittances from Bangladeshis working abroad.

From a predominantly feudal agrarian base,

over the last four decades the economy of

Bangladesh has undergone a rapid structuraltransformation. Whereas in the early 1970s, the

agricultural sector contributed 50% of GDP,

today it accounts for less than 20%. Services and

manufacturing are now the main drivers of

economic growth, with services accounting for

around 50% of GDP, and industry contributing

around 30%.

Industrial growth has been driven by a

booming garment industry. This sector began

to take-off in the 1980s when foreign investors

took note of the country’s cheap labour costs,

but the real impact has been over the last

decade. In 2002, the garment industry exportedUS$5bn. worth of products but, by the fiscal

year 2009-10, this figure had increased to

US$12.6bn. Recently, the World Trade

Organization ranked Bangladesh as the fourth

largest clothing exporter in the world.

The garment industry today employs more

than three million workers, 90% of whom are

women. According to Nasreen Awal Mintoo,

president of the Women Entrepreneurs

Bangladesh

COUNTRYFEATURE



Makin

A Bangladeshi girl driescolourful handkerchiefsnear a handloom factoryat Kaliganj, 32 miles fromthe capital Dhaka.

P h o t o : R a f i q u a r R a h m a n / R e u t e r s

Association of Bangladesh, this dynamic part

of the economy sector is being driven by a

private sector in which women are playing a

significant role.

“The Bangladesh private sector is doing

really a lot. It’s because of the private sector

that Bangladesh is growing faster”, Mintoo

recently told IPS. “And women

entrepreneurship is growing fast, helping

Bangladesh to grow. A lot of womenentrepreneurs are coming up.”

Mintoo is another who sees the country

getting ready to step ahead, stating, “Soon

Bangladesh will come out of LDC status… and

women are really playing a big role in this.”

Sabera Ahmed, chief executive director of

Pentasoft Centre of Excellence, an information

technology education network, agrees that

women - both women workers and women

entrepreneurs – are having a big impact on the

country’s economic progress.

“We are a role model, inside the house,

outside. Outside the country even”, said Ahmed.“In the garments sector we have a revolution.

Like in the United States, there was a women’s

revolution in the sixties, in our country we have

seen a revolution in the eighties, in the nineties,

in the garments sector.”

As an example, she remarked, “Very often

we see the men taking care of the kids in the

house, and the wives are going to the

garments factory.”

The garment industry will remain the

largest contributor to growth in output

foreseeable future, especially since the r

change in European Union (EU) import

which gives Bangladesh (and other LDC

significant competitive advantage over

competitors. The change gives the

Bangladesh duty-free access to the EU f

clothes and other finished goods if imp

components of the finished product doexceed 70%. Clothes imported to the EU

China, India, Pakistan and Sri Lanka, w

are Bangladesh’s main competitors but

not LDCs, will be liable for duty.

In the first months of 2011, there has

a surge in the value of Bangladesh’s ga

exports as the new rule has taken effect

ramification of the new arrangement is

firms from China and India, amongst o

have begun setting up in Bangladesh in

effort to secure a foothold in the largel

domestically owned industry. Local

companies have already voiced theirconcerns about the new competition o

home soil.

In the longer term, there may be a dile

for Bangladesh’s policymakers: Banglad

garment exporters can prosper from du

access to the EU thanks to the country’s

status, but the economic success of this

may very well be helping to bring that st

to an end.n

“Soon Bangladesh willcome out of LDC status…and women are really playing a big role in this.”



MakingIt 38

What have been the main successes duringyour two and half years as Minister of In-dustries, and what are the main challengesyou are facing as you work to achieve sus-tainable industrial development?The main drive of the present government of Bangladesh, under the dynamic and visionaryleadership of the Prime Minister Her Excel-lency Sheikh Hasina, is to build a knowledge-

based society through hi-tech and sustainable,green industrialization. To the surprise of many, Bangladesh has shown a remarkable re-silience during the global economic slow-down by maintaining an almost unhinderedgrowth of around 6%. Bangladesh’s consistentgrowth in GDP, exports, and remittances,clearly illustrate substantive and pragmaticeconomic management. A favourable invest-ment climate has been created, and is show-

ing an upward trend. Many local and foreigninvestment projects are being implemented.Bangladesh has been listed by Goldman Sachsin its Next Eleven list of countries having ahigh potential of becoming the world's largesteconomies in the 21st century, and in JPMorgan’s Frontier Five .

The Ministry of Industries has been ableto play a very effective catalytic role in devel-

oping the industrialization process, both inthe public and private sectors. We are work-ing as a facilitator with appropriate policyand logistical support for the sustainable development of the private sector. Meanwhile,a public-private partnership effort has beenstrengthened, and the Ministry of Industriesis considered an important developmentpartner by the private sector.

The Ministry has formulated an inte-

grated National Industrial Policy (NIP)-that aims to transform Bangladesh intindustrially developed and middle-inccountry by 2021. The new industrial pohas been designed in the context ofglobal economic meltdown, socio-econorealities, and past experience.

We have not privatized any state owenterprises (SOEs). Rather, we have mthose concerns profitable by upgrading

pacity and improving management systWe are in the process of opening some oSOEs that have been kept shutdown flong time, with a view to creating new jobportunities, enhanced productivity growth, through better managementthese are undoubtedly good examples ofachievements.

Now we are facing some challenges wshortages of energy and power. The govment has put in place a comprehensive gramme to urgently set up power plantthat demand does not outstrip supply.

other challenge is technology. In this regour strategy is to look at building uptechnology base, where our own enginwill fashion new and sophisticated machwhich will produce more, at less cost. Atsame time, we invite foreign investmentwill help us with technology transfer, sdevelopment, and employment creationThe manufacture of textiles and clothin

an important component of industrial duction in Bangladesh. What are the pand cons of having such a large garmensembly sector?

The textile and clothing sector, especready-made garments (RMG), is the msource of our export earnings. At presBangladesh is the second largest exportRMG in the global market. Textile and cling exports brought in US$18.71bn out ototal US$22.93bn export earnings in the f year 2010-11 . Of the major export iteknitwear products were worth US$9.4and woven garments worth US$8.43bn, istering 46% and 40% growth respective

The rise in exports was helped by theropean Union’s decision to allow, from

uary 2011, clothes and other finished gomade in Bangladesh (and other least-deoped countries) duty-free access if impocomponents of the final product doexceed 70%. (Previously, duty-free accessgranted to goods with a maximum impocontent of 30%.) Bangladesh is also forming well in new markets such as JaSouth Africa, Australia, Canada, New Zealand some Latin American countries.

Playing a catalytic role: Dilip Barua, Bangladesh’sMinister of Industries, talks to Making It

BangladeshCOUNTRYFEATURE

“Bangladesh hasshown a remarkableresilience during theglobal economic

slowdown by maintaining an almost unhindered growthof around 6%.”



Makin

The historical evolution of Bangladesh’sRMG sector started in the early 1980s. Our big internal market, cheap labour force, andtraditional efficiency in stitching have con-tributed to the rapid expansion of the RMGsector. RMG industries have a tremendousscope for employment generation, especiallyfor women of Bangladesh. It helps the gov-ernment a lot in achieving the goal of women’s empowerment in general, and in

achieving some of the Millennium Develop-ment Goals. The national poverty level of Bangladesh has been reduced by 10%, and thetextile and clothing sector has played a majorrole in achieving this poverty reduction.Could you comment on the dynamic be-tween the need to keep wages low in orderto win orders, and low wages limiting thespending power of the working class andthereby impeding the development of local businesses?I firmly believe that lower rates of wages arenot an effective option for making an indus-

try economically sustainable and commer-cially viable in the present context of globalcompetitiveness. Rather, it reduces the pro-ductivity, durability, and sustainability of a venture. In order to attain the optimum levelof productivity and progress in any industrialsector, workers’ satisfaction and fulfillmentof their basic needs deserve proper consider-ation. Without ensuring the minimum re-muneration for workers, no industrial venture can be successful. We cannot expectmaximum productivity by investing mini-mum input. Man and machine are consid-

ered the dominant factors for production, butman and machine are not the same. We mustconsider the workers as human beings andmust fulfill their basic needs in order tomake a congenial atmosphere in the factoriesso that the workers can perform properly.That is why our government is a worker-friendly government, and why we are givingmore priority to workers’ right and needs.What is being done to try and diversify theindustrial sector in Bangladesh?The prime objective of the New IndustrialPolicy is to ensure the industrial sector con-

tributes 40% of the national income and 25%of new jobs by 2021. The government is work-ing to ensure necessary economic stimuluspackages, infrastructure facilities, and policysupport for achieving this objective. The NIPhas identified 32 thrust sectors and 31 indus-trial service sectors for augmenting rapid in-dustrial growth and economic development.

We are giving emphasis not only to thedevelopment of the textile and clothing

sector, but also to other industrial sectorsmaking products like jute and jute goods, ce-ramics, pharmaceuticals, electronics, leather,automobile parts, and plastic and agro prod-ucts. I am happy to say that Bangladesh’shigh-quality medicines are now being ex-ported to over 70 countries in the world, in-cluding the USA and those in the EU.Recently, the shipbuilding industry has ac-quired momentum and is becoming a booming industrial sector. We are exportingships to Denmark, Germany, the Nether-lands and Finland. We are also exporting au-

tomobile spare parts to developed countries,including the USA. So, at present, the diver-sification of industrial products is on theright track in line with our vision of 2021.What is being done to green the industrial

sector?In Bangladesh, we are making green industri-alization a top priority. We welcome knowl-edge based hi-tech industry with zeroenvironmental pollution. The government has

made it a mandatory provision for newtrial units to set up effluent treatmen(ETP), and has given a specific deadlineindustries to set up ETPs. We are not aany industry that may endanger humand the environment in our country.How is the energy situation impactindustry in Bangladesh?Our focus is shifting to the efficientrenewable energy, such as solar eneprovide poor people with access to eity. Bangladesh already has a renenergy policy in place with the obje

developing, disseminating, promotiextending renewable energy technorural areas to meet their energy neeachieve the objective, the governmenttargets for developing renewable enesources to provide 5% of total power d by 2015 and 10% by 2020. The goverhas also made solar energy equipmexempt in order to make the use oenergy more popular and cheaper.n

“We are not allowing any industry that may endanger human life and theenvironment in our country.”

P h o t o : G e r h

a r d F a l l y / U N I D O



MakingIt 40

When I was 10 years old, my father wouldthrow me in the river and he would swim withme. It was a very happy time in my life. I couldsee the stones and the sand, and there wereplenty of fish and wild animals. I started tonotice the pollution in the early 1980s, a fewyears after manufacturing facilities and facto-ries were built along the river. The riverstarted to accumulate a layer of pulp and sed-iment; there was a bad odour, and dead fish

would float on top.I discovered that there were more than 100

industries dumping waste in the river withoutany treatment. The biggest offenders were thepulp and paper companies, PT SurabayaAgung Kertas and PT Adiprima Suraprinta,which is owned by the biggest newspaper com-pany in East Java. There was cadmium, iron,and mercury in the river. Studies revealed thatthe concentration of mercury in the river was100 times the limit established by the WorldHealth Organization. I couldn’t even thinkabout swimming in it, as I had as a child. And

people drink this water – 96% of our region’swater comes from the Surabaya River.

While at university in the year 2000, to-gether with other activists, I established theEcological Observation and Wetlands Conser-vation (Ecoton), the first environmental edu-cation programme in the region to informlocal communities about biodiversity andwater pollution. It teaches school studentsabout the dangers and uses them to spread theword.

Children are especially vulnerable to thewater pollution since they are growing. A

huge number of kids who live near the riverare mentally disabled and have high rates of cancer as a result of the pollution. We teachthe children that they can protest to the gov-ernment and ask for the safety of their drink-ing water.

As for the more wealthy people from thecity of Surabaya, Indonesia’s second largestcity, they have purchasing power, so I encour-age them to boycott. I show them the list of

factories that pollute the river, and tell themthat if they buy the products made by thesefactories, they’re polluting the river as well.

While effective environmental laws exist inIndonesia, the East Java provincial govern-ment’s standard practice has been non-en-forcement. Industry – when caught dumpingindustrial effluent into the Surabaya – simplypaid the modest fines, without changing itspractices.

In 2007, Ecoton sued East Java’s governorand the province’s environmental manage-ment agency for failing to control water pol-

lution on the Surabaya River. In April 2008,the provincial court issued a precedent-set-ting environmental decision, ordering thegovernor to implement water-quality regula-tions targeted at industry operating along theSurabaya, establishing a maximum daily limitfor toxic releases into the river, as well as amonitoring system to ensure compliance. Thelawsuit represented the first time in East Javathat a governor had been taken to court tochange government policy.

In the beginning, the companies treatedme like their enemy and as a threat to their

business. I published my survey on industrialwastewater dumping activity in a newspaper,and they were really angry. I also made a legalreport to the police about some industriesthat were polluting the river, and those in-dustries had to go to court and were punished.

Some companies offered me money,asked me to withdraw the report and their cases from going through a legal prothat was costing them time and money. II didn't want their money. I asked them totheir money to install and to run wastewtreatment facilities in a proper way.

The legal case forced me to engage intense communication with the indupeople, and slowly we came to unders

each other. Then we tried to find better stions. Now, those industries that used t biggest offenders have realized that the benefits from improving their environmmanagement. A better relationship withlocal community and the media, a beimage, strengthen the development of t business.

I am working with industry to put in fthat will treat the water. One Surabaya sfactory, PT Gempol Krep, recently inveUS$220,000 in a wastewater treatment pIt is now one of the most environmentall

sponsible factories operating on the SurabThe water is recycled back to the indusprocess so that their water consumption icreasing and they can reduce their bill the water company. The wastewater dispof by the factory now always fulfils the wwater quality standard. Several other intrial facilities have followed suit, instapollution controls of their own, includintwo pulp and paper factories I named ab

The government now has weekly oweekly patrols, and the industry doesn’t kthe schedule. I still test the water mysel

the government now has an officer who mitors the water. I trust the government have to trust each other to work togetherquality of the water is getting better, anthe last two years there are no longer deadlike there used to be. n

Prigi Arisandi explains how a local movement that he initiated is helping tostop industrial pollution from flowing into a river that provides drinkingwater for three million people in and around the Indonesian city of Surabaya.

PRIGI ARISANDI is a 35-year-old environmentalactivist who was awarded the 2011 GoldmanEnvironmental Prize to honour his sustained effortsto protect the natural environment and hiscommunity.

CLEANINGUPTHE RIVER



Makin

Prigi Arisandi teachingchildren how to monitor thSurabaya River’s water quaand report their findings tothe government.



MakingIt 42

POLICY BRIEF

By Professor RAPHAEL KAPLINSKY

It is widely believed that industrialdevelopment in commodity-exportinglow- and middle-income economies ishampered as a direct consequence of theexploitation of natural resources. Variousreasons are given for this so-called‘resource curse’. One is that theseeconomies suffer from the ‘Dutch disease’in which large resource rents andappreciating exchange rates underminethe traded goods sectors such asmanufacturing. In addition, with respect tomanufactures, commodities have

undergone a long-term decline in theirterms of trade, as well as being subject tohigh price-volatility. Hence, they seldomprovide the regular and sustainablesurpluses required to promotedevelopment. It has also been argued that, by their nature, commodity-producingsectors are enclave activities and have fewexternal economies, and consequently thatthey involve few developmental spilloversto industry.

These conventional wisdoms must bechallenged. While there may be an

association between commodity intensityand relatively low growth rates, thisassociation is weak. Moreover, where itoccurs, it is often due less to a causalrelationship than to weak pre-existingindustrial structures and inappropriatepolicy responses in commodity-dependent economies. Indeed, a review of the historical experience of some high-income economies, such as the United

The possibilities for export-orientedindustrialization have similarly beenrestricted by intense competition fromemerging economies.

Second, the boom in commodity pricalready longer than any previous boomcommodity prices – is likely to besustained for some years to. Coupled wcontinued, and indeed heightened,competition in the global manufacturisector, it is likely that the historical dec

in commodities’ terms of trade in relatto manufactures will be arrested,providing sustained natural resourcerents.

And third, the evolution of global valchains has led to a change in corporatepolicies whereby leading commodity fihave an active interest not just inoutsourcing, but in near-sourcing thesupply of many of their inputs. Thissuggests that now there are corporatestrategic agendas which are diametricaopposed to the enclave mentality which

characterized their activities in the pasIn terms of how commodity-exportin

economies may take advantage of thesedevelopments, it is helpful to look at thpossible production linkages – backwain the supply of inputs, and forward in processing of commodities. There are number of reasons to believe that theresubstantial scope for the expansion of production linkages between industry commodities sectors. In part, this is because of the desire of leadingcommodity firms to increase their

outsourcing, and in part becausecommodity production is invariablyaffected by contextual factors – climatethe geology of individual deposits. Bynecessity therefore, they require uniquinputs and many of these can be used tpromote distinctive local industrial (anagricultural and service) capabilities.

In a context of increasing lead-firmoutsourcing, many of these linkages oc

States, Canada, Sweden and Australia,shows that these economies not only built

their industrial competences in part bydeveloping linkages from the commoditysectors, but also that these industrialcompetences fed back into theircommodities sectors, enhancingcommodity recovery rates and reducingcosts.

Whatever the historical experience mayhave been, recent decades have seen threesets of changes which suggest that a newapproach be adopted towards industrialdevelopment in commodity-exportinglow- and middle-income economies.

First, many of the policies which havedelivered industrial progress in the pastare now no longer as effective. Inward-oriented industrialization has been madeless attractive by the reduced capacity toprotect domestic industry, and byincreased competition from imports.

Beyond the‘resource curse’

“The function of effectivegovernment policy is to bothspeed-up and deepenproduction linkages betweenindustry and commoditiessectors.”



Makin

POLICY BRIE

Albert Hirschman’s words, “one thing leadsto another”;lThe sustained nature of commodityproduction may provide an arena for thedevelopment of dynamic capabilities

through the expansion of the NationalSystem of Innovation;lThe development of horizontal linkages – the provision of inputs into thecommodity sector and the processing of itsoutputs – will also offer complementary benefits to other industrial sectors;lDespite the fact that outsourcing is in theinterests of lead-firms, many firms could domore to enhance their supply chain

development capabilities, and requiresupport (as they do in the industriallyadvanced economies), and;lWith the growth of industrial capabilitiein emerging economies blocking other

paths to industrial development, there isnow a premium on the development of industrial capabilities which feed into theexploitation of the commodities sectors.

nThe above is a summary of a working paper,

Commodities for industrial development: making

linkages work , prepared for UNIDO’s

Development Policy, Statistics and Research

Branch.

as a natural consequence of market forces.The function of effective governmentpolicy is to both speed-up and deepenthese linkages. Disabling governmentpolicy, by contrast, slows down and

reduces the extent of these linkages.For a number of reasons, governments

have an important role to play inoptimizing the nature and pace of theselinkages:lThese linkages provide the potential for both employmentcreation and as acontributor to economic growth;lThey also provide a pointer to the pathof industrial development – in economist



By the Overseas Development Institute

According to new research by the OverseasDevelopment Institute (ODI), there are

four key drivers of progress indevelopment. The report, Mapping

Progress: Evidence for a new development

outlook , systematically analysesdevelopment progress in 24 countriesacross the global south and rankscountries according to performance.

Countries often better known as hubs of war and famine have made remarkableprogress across different sectors,including growth, education, healthcare,governance, and agriculture. The reportidentifies the crucial role of effective

leadership, smart policies, properinstitutional foundations, andinternational partnership, in drivingdevelopment progress.

Countries are categorized into fourcategories: stars, surprises, potentialperformers, and conundrums whereprogress in some areas has not deliveredexpected improvements in the lives of thepoor.

According to ODI Director, AlisonEvans, “Development is a highly complex business and people can get it wrong. But

quite often they get it right. The purposeof the Mapping Progress report is to showthat progress is not only possible, it’shappening.”

She continued, “The real question weneed to answer is ‘what works and why?’Why have some of these countries seensuch remarkable progress? What have been the most interesting innovations?”

“Looking across at the strongest

examples across the continent, we can seethat the most transformative andsustainable developments have occurredwhen the commitment to change has

come from within African countries andcommunities.”

The four driversSmart leadership: Transformation in Ghana,Rwanda, and Brazil would not havehappened without Presidents Rawlings,Kagame, and Lula.

Smart policies: Progress has involved achanging role for government, away fromcontrolling (markets and prices) tofacilitating and enabling (investment andproduction), and, in the best cases,

empowering citizens. Policies have been built on clear vision or national strategy,and have been evidence-based.

Smart institutions: In many countries,progress has been achieved throughgovernance reforms that havedecentralized and strengthened localinstitutions. Reforms have not only led toimproved service delivery but also enabledmore effective revenue collection andmanagement of public finances.

Smart friends: Effective internationalpartnerships can be important catalysfor progress. These partnerships can ta various forms beyond aid, including th

transfer of knowledge and technologyinternational trading relations, anddiplomatic interventions.

Development progress stories

Ghana – star performer

Government-led reforms of the domecocoa market have driven a tremendourecord of agricultural growth – averagiover 5% for the last 25 years. Ghana is otrack to meet Millennium DevelopmeGoal 1 – halving rates of poverty and

malnutrition by 2015. Having raised foproduction per capita by more than 80since the early 1980s, Ghana is largely ssufficient in staple foods.

Star performers, such as Ghana, haveshown sustained progress for more thtwo decades. By diversifying products services they have added considerable value to national performance. Starcountries display a more mature level development and are now beginning tface challenges more common todeveloped countries such as

environmental degradation, agingpopulations and non-communicablediseases. Other star performers includBhutan, Thailand, Brazil, and Uganda.

Ethiopia – surprise performer

Since emerging from civil war in 1991,Ethiopia has significantly improved acto education for its population. Primaschool enrolment rates have risen by m

“Why have some of thesecountries seen suchremarkable progress? Whathave been the mostinteresting innovations?”

Drivers of development

POLICY BRIEF

MakingIt 44



than 13 million since 2005. A sustainedGovernment commitment, matched byincreased spending, allowing the removalof school fees, has triggered thisastonishing rise. Other surpriseperformers are Rwanda, Cambodia, Laos,and Somaliland.

Surprise performers, such as Ethiopia,have delivered progress against the odds,often recovering from crisis and war ordealing with ongoing conflict, challenging

political situations and highlyinaccessible topography. The surpriseelements of progress in these countriesoften lie in the speed of recovery,sometimes allowing them to eclipseprevious levels of development.

Malawi – potential performer

Malawi has the potential to deliversignificant progress towards itsdevelopment over the next decade,

according to a newly published globalresearch project. The country’s recent

progress in providing economic stabilityhas begun to have a positive effect ondevelopment indicators placing Malawi inthe top twenty performers for several of theMillennium Development Goals. Growth of

over 7% per year for most of the last decade,and a steady fall in rates of inflation, suggesta bright future for the country.

Potential performers, such as Malawi,have shown recent examples of progress,often achieved over a limited period of time. Progress may be limited toindividual sectors or regions. Whilst these

countries have already producedimpressive results, they now need tosustain them into the future. Otherpotential performers include Benin andBurkina Faso.n

POLICY BRIE

Makin



MakingIt 46

ENDPIECE

The next issue of Making It will look at gender

equality and the economic empowerment of

women. One take on this subject is provided by

KATHERINE LUCEY, the founder and CEO of

Solar Sister, a social enterprise that provides

women with training and support to create solar

micro-businesses.

More than 125 years after Thomas Edisoninvented the light bulb, 1.6 billion people –

a quarter of the world’s population – stillrely on kerosene lanterns and candles forlight. They spend up to 40% of their familyincome on energy that is inefficient,

insufficient and hazardous. Widespreaduse of kerosene has an adverse impact onlocal air quality as well as on global climatechange. Poor lighting, smoke, andrudimentary lanterns are responsible forlarge number of infections and burninjuries.

Solar Sister is a social enterprise that istackling the problem of energy poverty

with an innovative market-based approachthat empowers rural women in Africa witheconomic opportunity. Using an Avon-style business model that deliberatelyreaches out through women’s social

networks, Solar Sister solves the problemof ‘last mile’ access to clean energy and brings solar technology right to thedoorstep of rural households.

Using a micro-consignment business

model, the women are provided with a‘business in a bag’ that includes inventsales training and marketing support. Twomen are empowered to bring access

portfolio of clean energy technologiesincluding solar lamps, solar cell-phonechargers and radios and clean cookstovClean energy provides light and powersaves lives, provides connectivity, imprpublic health, provides livelihoods and

combats climate change. The women become their own bosses and beacons light, hope and opportunity for theircommunities.

Solar Sister is a market-basedprogramme, with revenues from sales osolar lamps providing the engine foreconomic growth. Solar Sister is a socia

business, using the power of the markeachieve a social goal of distribution of clean energy technology. It is the emphon “opportunity” rather than “aid” thatattracts and rewards women who are

motivated to build successful businessthat benefit the whole community by

providing access to breakthroughtechnology. Today, even though portabsolar LED lighting technology is anaffordable solution; lack of access has kthe products from being adapted by ruhouseholds living in the dark. Ingenuoclean energy products for the base of

pyramid markets are not much good if

Solar Sister: empoweringwomen with light andopportunity

Katherine Lucey, founder and CEO of Solar Sister.

"Women become their ownbosses and beacons of light,hope and opportunity for theircommunities."



ENDPIECE

poor can’t use them. Solar Sister’s salesproposition is simple: at a starting costof about US$20 for a solar lamp,customers get a lighting source that iseight times brighter, cleaner and saferthan piecemeal kerosene – the cash

expense is paid back by the cost savingsof buying kerosene in two and a half months. This translates into brighterlight for families, and savings of morethan US$100 a year on fuel.

Solar Sister reaches out to the womenwho would otherwise not have an

opportunity to become entrepreneursand provides them with a holisticpackage of working capital, businesstraining and marketing support.Women represent 70% of the rural poormost affected by energy poverty. Butmore importantly, women are primarily

responsible for energy usage at thehousehold level. Clean energytechnology will not be adapted on awidespread basis if women are not part

of the solution. Solar energy can provideconnectivity as well as lighting, andsome of our best selling products are

solar lamps that also provide power tocharge mobile phones. The phenomenalsuccess of mobile phones in sub-Saharan Africa is possibly the mostimportant development story of thiscentury. Having access to the energy topower those phones is a correlating

opportunity that the Solar Sisterentrepreneurs are able to meet. Onecustomer not only charges her own

phone, but has set up a micro-businesscharging her neighbour’s phones as well,earning a steady daily income.

A founding story of Solar Sister is that

of Rebecca, a rural farmer in Mpigi,Uganda, who chose to put a solar light inher chicken room. Rebecca knew thatchickens only eat when they can see, and by increasing the hours of light, thechickens ate more, and were healthier.

They laid more eggs, improving the

economics of her operation andproviding income that allowed her to buy seeds, and eventually a goat, pigs,and even a cow.

From the simple improvement of asingle light, Rebecca built a farm andeventually a school where she teaches

children to read and write, and also howto do small plot farming. With a little bitof light and opportunity, women like

Rebecca have the power to improve theirown lives.

The strength of Solar Sister’senterprise solution comes from the

women themselves. It is their owningenuity and commitment that buildstheir business – we are just offeringthem the opportunity to helpthemselves. Even small amounts of electricity can dramatically improve thelives of women living with acute energy

poverty. Creating economicopportunities for women in turn has a

multiplier effect on social and economicprogress of their communities, and ourworld.n

Makin

Chang, Leslie – Factory Girls: From Village to CChanging China

Ferguson, Niall – Civilization: The West and theGhemawat, Pankaj – World 3.0: Global Prosper

How to Achieve ItGilding, Paul – The Great Disruption: How the Crisis Will Transform the Global Economy

Heinberg, Richard – The End of Growth: AdaptOur New Economic Reality

Heinberg, Richard and Lerch, Daniel (eds) – ThCarbon Reader. Managing the 21st CenturySustainability Crises.

Lovins, Amory – The Essential Amory LovinsMahbubani, Kishore – New Asian Hemisphere

Irresistible Shift of Global Power to the EastMoyo, Dambisa – How the West Was Lost. Fifty

Economic Folly – And the Stark Choices AheNye, Joseph – The Future of PowerPogge, Thomas – Politics as Usual: What Lies b

Pro-Poor RhetoricRivoli, Petra – The Travels of a T-Shirt in the Glo

Economy: An Economist Examines the MarPower, and Politics of World Trade

Stiglitz, Joseph – Making Globalization WorkZakaria, Fareed – The Post-American World: Re

www.attac.org – ATTAC is an international orgathat fights for the regulation of financial maclosure of tax havens, the introduction of glotaxes to finance global public goods, the canof the debt of developing countries, fair tradthe implementation of limits to free trade ancapital flows.

www.globaldashboard.org – Global Dashboardexplores global risks and international affairbringing together authors who work on fore

policy in think-tanks, governments, academthe media.

www.postcarbon.org – The Post Carbon Institupromotes the transition to a more resilient,equitable, and sustainable world.

www.postgrowth.org – The Post Growth Instituinspires and equips people to make global wbeing our most urgent priority, without relygrowth to make it happen.

www.somo.nl – SOMO is a research and netwoorganization working on social, ecological aeconomic issues related to sustainabledevelopment.

www.stwr.org – Share The World's Resources istank that advocates for natural resources sucand water to be sustainably managed in theof the global public, and for essential goodsservices to be made universally accessible.

www.sustainableenergyforall.org – 2012: TheInternational Year of Sustainable Energy for

www.triplecrisis.com – Global perspectives on fdevelopment, and the environment

www.un-energy.org – UN-Energy, the United Nmechanism for inter-agency collaboration ifield of energy.

www.wedo.org – The Women's Environment anDevelopment Organization envisions a justthat promotes and protects human rights, gequality, and the integrity of the environme

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