Dr. Carol Graham, Fellow at Brookings Institution (on happiness)
McKay Interview
Friday, July 9th, 2021 – 35 minutes
On this edition of the McKay Interview, Michael speaks to Dr Carol Graham. She’s the Leo Pasvolsky Senior Fellow at the renowned Brookings Institution. She is also College Park Professor at the University of Maryland, and a Senior Scientist at Gallup, the well-known, American analytics and advisory company.Carol studies the issue of happiness. She’s written several books on the subject, and it’s far harder to determine what makes us happy.
Transnational governance of natural resources for the 21st century
Natural resources—whether they are water, land, underground, or in the air—should be seen as common goods, meant to be shared by all. That means their governance arrangements—to be tailored according to the specific property of each resource—should be in harmony at the local, national, regional, and global levels to ensure they are used sustainably and in a way that protects the environment and the people who depend on them. This has proven to be very complex.
Throughout history, harmonious sharing of common goods has seldom been achieved. Today’s scramble for natural resources by major powers is far from new. It stems from a long-standing and fundamental asymmetry between advanced and less-advanced economies—not only in terms of access to and demand for natural resources, but in terms of advances in technology, military might, and state and private sector capabilities in general.
The race for natural resources to power the simultaneous energy and digital transitions the world is experiencing rages among the major powers.
A good example is the competition among 19th century European empires for natural resources such as copper, tin, rubber, timber, diamonds, and gold. The advance of steam engine navigation made access to and transport of these resources much easier for these empires. The resources were essential to powering industrial revolutions. People in the colonies where the resources were located, benefited little, if at all. As a result, former colonies have a complex history with which a number of countries, including many in Africa, continue to grapple.
Fast forward to today. The race for natural resources to power the simultaneous energy and digital transitions the world is experiencing rages among the major powers. Both transitions rely heavily on technologies that require such resources as rare earth metals for semiconductors, cobalt for batteries, and uranium for nuclear power. But the transitions also mean that historically valuable natural resources and their associated investments—prominently oil and other fossil fuels—will eventually become stranded, with severe consequences for countries almost totally reliant on those assets, especially those with weak state capacity. The last oil price super-cycle might already be underway, the end of which could herald an increase in the number of failed states.
That race for natural resources has become more acute as major powers have entered into strategic rivalries—especially between the United States and China, but also between China and Europe. This time an appropriate transnational governance of natural resources is essential to achieving an orderly, sustainable, and inclusive exploitation of natural resources so these transitions do not leave people, especially those in developing countries, behind.
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Developing countries have had difficulties managing their natural resources—so much so that the term “resource curse” was coined describing the paradox of countries rich in natural resources performing worse than countries that are resource poor. Volatility, loss of competitiveness, excessive indebtedness, and internal and external conflicts are behind the poorer performance of resource-rich countries. Research has shown that good institutions, unsurprisingly, moderate that curse. But which ones? There are two key areas:
The policies and institutions that govern the opening of the resource sector to attract investment and hence generate revenues for the state.
The quality of redistributive institutions that govern how the proceeds from the exploitation of these resources are used and benefit people, including in terms of human capital.
Moreover, regulation at the national level has often failed to address issues of overexploitation of natural resources as well as displacement, environment degradation, and risk to biodiversity, which are often best managed by local communities. The work of the late Elinor Ostrom has shed important light on the design of self-organized user communities to achieve sustainability in the exploitation of natural resources.
An appropriate transnational governance of natural resources is essential to achieving an orderly, sustainable, and inclusive exploitation of natural resources.
Several international initiatives have focused mainly on transparency. They include the Extractive Industry Transparency Initiative and the Natural Resource Charter. A number of NGOs have been very active in the space. Legislation in the United States and the European Union (EU) strive to hold accountable their multinational corporations by mandating that those companies disclose their payments in countries in which they operate. It is more difficult to hold state-owned enterprises accountable because of a lack of transparency and a complex web of interests and cross-subsidies. The development of environment, social, and corporate governance norms (ESG)—with roots in the socially responsible investing movement that began in the 1970s—are means by which investors and others can gauge how responsibly a corporation behaves environmentally. But it is unclear whether ESG assessments are sufficient to force firms to internalize the complex sets of externalities at different levels required to achieve sustainable behavior. It is also unclear whether and how these norms could be enforced. One encouraging sign is that consumers in advanced economies appear to be changing their behavior concerning the environment. But investor behavior, especially in developing countries, may not be so amenable to change. The challenge with all these initiatives is the difficulty in translating them into the right context and fostering ownership, especially at the local and national levels. More needs to be done to integrate local, national, regional, and global actors to achieve better outcomes.
For example, the EU’s relationship with regions such as Africa and the Middle East—and especially with China—will be crucial to shaping the transnational governance of natural resources. Transnational governance should account for the interdependencies related to peace and stability, global health, and climate issues in a world increasingly organized into blocs. If externalities are to be internalized, it will require:
Technology transfers from advanced to developing economies to provide the tools to address the threat of climate change and meet climate goals.
Access to international capital markets through, for example, green, nature, or blue bonds instead of opaque resource-backed loans with nontraditional creditors such as China.
Ways to ensure that foreign direct investment (FDI) delivers on local contentment and jobs to address rising discontent in communities where mining or other extractive industries operate.
More generally, advanced economies such as the EU should acknowledge the shift in the development paradigm from one exclusively centered around extraction and exports of natural resources to that of promoting domestic productive capabilities locally and hence good jobs. Specifically, the process of deepening the African continental free trade agreement should be accompanied by coherent arrangements at the regional level on tax, trade, competition, and financial policies. The integration of the EU carries valuable lessons in that regard that could be shared and learned. Focusing on energy, agriculture, and mineral resource sectors as foundational elements of that integration and partnership will ensure the sustainability of these investments for all parties.
Designing for scale: A worksheet for developing a scaling strategy in education
Suddenly talk of scaling and systems change in education seems to be popping up everywhere—and for good reason. Progress toward key educational goals has stalled or even regressed, and education systems have been slow to adopt and integrate disruptive change. As it becomes increasingly clear that planning for scale differs in important ways from typical project planning and from the common five-year education sector plans, it begs the question of what a “scaling strategy” looks like and how best to go about creating one.
The starting point for delivering and sustaining an initiative at large scale is a realistic assessment of the prospects and parameters for scaling, and the challenges that stand in the way, operationally, politically, and financially. This kind of planning also requires careful consideration of exactly what is being scaled, for whom, and by whom.
Not every initiative should be delivered at large scale, but if the aim is to expand and deepen the impact of a particular project, program, innovation, or approach, then designing with scale in mind from the start is a must.
Painful experience makes clear that the prototype-test-rollout model doesn’t work. Scaling cannot be an afterthought to be considered only once results are shown. Instead, designing for scale needs to be considered alongside designing for impact. As Kevin Starr argues, large-scale change requires unwavering attention to who will be the “doers” and who will be the “payers” at scale—right from the start. This is not to say that every initiative should be delivered at large scale, but if the aim is to expand and deepen the impact of a particular project, program, innovation, or approach, then designing with scale in mind from the start is a must.
So, how does one design for scale from the start? In an effort to address this need and drawing on three decades of change management processes in 40 countries, we have identified a set of key planning considerations that are elaborated in the Center for Universal Education’s just-launched “Scaling Strategy Worksheet.”
This worksheet was developed to support an education initiative—or elements of one— as it moves to larger scale. The worksheet guidelines are based on a version originally developed by Management Systems International (MSI)—a Tetra Tech company—which CUE adapted to education and were informed by early work by ExpandNet.
The guidelines are designed to help implementers, policymakers, and funders formulate a concrete, action-oriented scaling strategy that includes:
Articulating a clear, measurable, and timebound scaling vision that summarizes the need (size and scope), individuals or communities of focus, scaling goal(s), and expected results of delivering the proposed initiative at scale.
Assessing the credibility and feasibility of the proposed initiative being delivered sustainably at scale, including reviewing the evidence as to whether the initiative represents a feasible and effective approach to solving the targeted problem and is credible to the key stakeholders.
Ensuring there is recognition of the problem and support for the change by local communities, policymakers, and coalitions.
Demonstrating relative advantage, including presenting evidence showing that the proposed initiative is more effective and/or efficient than alternative approaches or maintaining the status quo.
Identifying enabling conditions and partnerships required for sustainable scale, as well as obstacles or potential opposition to consider.
Determining ease of transferring and applying the initiative at scale, including how it can be adapted to meet the needs of different or expanded populations, as well as what is core to its impact and must be maintained.
Assessing organizational capacity required to implement at large scale, including identifying where capacity will need to be strengthened and how this will be achieved.
Articulating financial sustainability plans that describe how resources will be mobilized, budgets considered, and existing systems and structures leveraged at various stages of scale.
Detailing how the initiative will be monitored as it scales, which requires different methodological approaches than monitoring a pilot or assessing performance at smaller scale. This includes gathering data on the scaling process—whether the initiative is maintaining its effect at larger scale and putting into place a continuous improvement process to determine changes needed along the way.
These scaling guidelines—as well as MSI’s and earlier versions—have been used in more than 30 countries by a wide-variety of actors and have been adopted by a range of donors, including the MacArthur Foundation’s 100&Change competition.
Scaling strategies having a material impact
In Côte d’Ivoire, colleagues at the Ministry of National Education and Literacy facilitated a process bringing together key ministry officials, NGO and funding partners, teachers, and private-sector representatives to develop a strategy for scaling an early grade reading and math intervention. While originally some government officials considered such an exercise unnecessary given existing policy and planning activities, the group found that going through a structured process of responding to specific questions surfaced issues that hadn’t previously been considered and informed plans going forward. In Tanzania, a similar group of diverse stakeholders regularly coming together to learn from and support the process of scaling a life-skills program co-developed a high-level scaling strategy. Through the strategy, they identified that an immediate next step was the need for cost projections for different scaling scenarios and an approach to engage national budgetary officials.
These are but a few examples where intentionally going through a structured process of developing a written scaling strategy can have a significant impact. The idea is not to walk away with a static how-to plan to scale, but rather to catalyze collective thinking among diverse actors involved in scaling an education initiative. What should emerge from these collaborative discussions is a high-level scaling strategy that serves both as a “north star” to guide scaling efforts and as a dynamic planning tool to periodically revisit and update based on new insights, data, and changes in the environment. While developing such a strategy does not guarantee successful and sustainable large-scale change, it is a critical step.
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Putting scaling principles into practice: Resources to expand and sustain impact in education
Deep-rooted, global education challenges that the COVID-19 pandemic has exacerbated—learning inequalities between and within countries, youths dropping out of school, and students in school but not learning—require transforming education systems at large scale to meet all children’s needs. While innovative solutions are being tested in every corner of the world, too many of them remain small. The key question is how to identify, adopt, and adapt what works and bring that to more communities with lasting impact. How can these efforts be effectively, equitably, and sustainably scaled to ensure more children are learning?
In response to these questions, the Millions Learning project at the Center for Universal Education (CUE) launched a series of Real-time Scaling Labs (RTSLs) with local institutions in several countries to generate more evidence and practical guidance for policymakers, practitioners, and funders on how to scale evidence-based education initiatives.
To provide concrete guidance based on key scaling principles and respond to gaps identified through the RTSLs, CUE has developed the following scaling-related tools1 in collaboration with lab partners and other colleagues. Based on empirical research, these resources are designed to foster an iterative, reflective, and data-driven scaling process, with each tool supporting different phases of the scaling journey.
The resources
See also this infographic for an overview of the Millions Learning scaling tools and how they work together.
Scaling Strategy Worksheet: Planning for scale
The Scaling Strategy Worksheet helps implementers, policymakers, and funders articulate a clear, measurable, and timebound scaling goal and high-level strategy.
How to use: This worksheet is intended to support organizations or institutions planning for or in the process of scaling an education initiative. Developing and refining a scaling strategy is an ongoing process that is best done collaboratively and tailored to local context.
When to use: This dynamic planning resource should be used throughout a scaling process, revisited and updated periodically based on new insights, data, and changes in the environment. While it is never too late to use the tool, the earlier the better to start planning for scale.
Download the worksheet in English > > | French > >
Read the accompanying blog > >
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Institutionalization Tracker: Assessing the integration of an education initiative into a system
The Institutionalization Tracker helps implementers, policymakers, and funders measure the progress of integrating an initiative into an education system and identify areas that require additional attention for further integration.
How to use: This tool is designed to track progress toward institutionalization. It is organized by education system building blocks, each of which is broken down into specific elements. For each element, there is a set of criteria to consider when assigning a score ranging from “low institutionalization” to “high institutionalization,” and a column for providing an explanation for the score selected.
When to use: The tool should be used when the vision for scaling includes government adoption or mainstreaming of an initiative into a formal education system. It should ideally be used at regular intervals (approximately every six months) to assess progress and determine actions to strengthen and advance institutionalization efforts.
Download the tracker in English > > | French > >
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Adaptation Tracker: Learning from changes throughout a scaling process
The Adaptation Tracker supports implementers, policymakers, and funders to plan for, document, reflect on, and learn from adaptations made to the model and/or the scaling approach during implementation.
How to use: This tracker should be used in conjunction with a broader scaling strategy to:
Identify key challenges or opportunities as they arise during the scaling process and develop a plan to test adaptations in response.
Implement those adaptations and collect related data.
Document spontaneous or unplanned changes taking place.
Reflect on the results and make decisions accordingly.
When to use: This tool can be used to document and learn from adaptations throughout a scaling process.
Download the tracker in English > > | French > >
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Real-time Scaling Lab Guidelines: Implementing a participatory, adaptive learning approach to scaling
The Real-time Scaling Lab Guidelines help implementers, policymakers, and funders adapt and implement an RTSL process—a participatory, action research approach to collaboratively document, learn from, and support ongoing scaling efforts.
How to use: An RTSL combines ongoing documentation and analysis of the scaling journey with a series of in-person and virtual convenings and workshops that bring together a diverse group of key stakeholders to collectively plan for sustainable scale; discuss and reflect on data, key challenges, and opportunities faced as they arise; and develop and test adaptations and course corrections to scaling strategies through an iterative learning process. The lab offers concrete opportunities for peer learning and exchange, while also generating knowledge on the “how” of scaling impact.
When to use: An RTSL can support and learn from a scaling process in multiple ways and at various points in time, including:
When beginning to plan for scale, launching a scaling process, or entering a new phase of scaling.
When looking to expand and deepen the impact of an effective initiative and create sustainable change within a system, rather than implement a multiyear project and then move on.
When looking to learn more about the scaling process, build capacity for scaling and systems change, and document the “how” of the scaling process—not just the end results.
When the scaling process for an initiative involves multiple stakeholders from diverse sectors, each of whom may have different scaling-related goals or incentives.
Download the guidelines in English > > | French > >
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Infographic: Millions Learning scaling tools overview
This infographic depicts the four scaling tools at a glance and how they complement one another.
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3 ways the international community can make gender equality work more transparent
The COVID-19 pandemic has underlined that granular and intersectional data is key to “leaving no one behind” and meeting the Sustainable Development Goals. In 2020, world leaders reignited the vision of the Beijing Platform for Action and committed to accelerate the realization of gender equality. This year, the G-7 leaders and countless others at the Generation Equality Forum emphasized that to “build back better” we must prioritize gender-disaggregated data and analyses to ensure that efforts are evidence-based and decisionmakers are accountable.
What the past 1 1/2 years has taught us
When we began our work in 2019, we already knew that tracking funding for gender equality efforts was a difficult task—and this was just funding from bilateral and multilateral sources of official development assistance (ODA). What was even harder to find were the other sources of funding for gender-related efforts, including from humanitarian, philanthropic, and development finance institutions. How are we to move forward to effectively meet the SDGs and COVID-19 inequalities with a fuzzy and incomplete picture of what is being funded, for what purpose, and with what results?
Our research started in Kenya, Nepal, and Guatemala. We wanted to understand the needs of a variety of gender stakeholders, particularly at the country level. Although there is a demand by national and local stakeholders for financial and programmatic data on gender equality issues—for programming, for coordination with other stakeholders, and for advocacy—there are many barriers to using this information. Most stakeholders are dissatisfied with the available data and information. Thus, while donors have spent considerable resources collecting and publishing gender equality data, the blockers to a robust uptake need to be addressed.
Our research, consultations, surveys, and discussions have led us to conceptualize that the road to better transparency requires attention to three interrelated but distinct concepts: data capacity, data engagement, and data quality.
Source: Making Gender Financing More Transparent.
It’s not enough, for example, to publish high-quality information if it is not accessible, in the wrong format, or costs too much to acquire. It is simply not enough to publish and believe that the job is done. Engaging with a range of gender equality stakeholders—especially women’s rights organizations and NGOs—is essential. Data is power and local gender equality stakeholders need to be empowered to use it for a variety of reasons and at different times in the program cycle.
Our report contains detailed recommendations to improve the transparency of gender financing and programmatic data. We have included a checklist at the end of the report that sorts these recommendations by both donors and by data platforms, which we hope is a helpful tool.
3 takeaways
1. High-quality data alone is not going to move the gender equality needle. Making data more accessible will.
We recognize that many donors have put significant effort into publishing gender-related data in several open data sources, most notably the Organization for Economic Cooperation and Development’s (OECD) Creditor Reporting System and the International Aid Transparency Initiative (IATI). But the uptake of this data by national and local stakeholders has been minimal due to a few important restraints. For one, most stakeholders don’t have the resources and/or data literacy to utilize the often complicated datasets and formats. Core funding for building data capacity is rare. As a result, either the data goes unused or local stakeholders depend on hiring outside—and often more expensive—staff.
2. Publication is just the first step. Engagement can shift power to local actors.
Data is the beginning of a conversation with relevant stakeholders—gender advocates, local and national governments, and international donors. If development is truly to be locally led, data is a means to shift the power and decisionmaking to those who should be at the heart of the work. That means involving gender equality stakeholders at all stages of the program cycle—from priority setting, program design, and implementation to evaluation. This will have a positive effect not only on data quality but should also increase trust in and use of the data. Ultimately, proactive engagement and coordination with gender equality stakeholders will lead to the most important goal: better gender equality outcomes.
3. Donors should do more than utilize the gender marker—they should tell us why.
Many international donors utilize the OECD’s Development Assistance Committee (OECD-DAC) gender marker, which indicates the extent to which a particular project is intended to support gender equality. As our report finds, not all donors apply the marker in the same way, and they don’t always apply it consistently across different platforms. We think the latter is something that can be fixed relatively easily. What would be a real step forward, however, is for donors to explain the analysis behind the specific use of the gender marker. OECD’s guidance for use of the marker outlines the gender analysis donors must conduct to determine which minimum criteria projects must meet before assigning any gender marker score. This underlying analysis, however, is not published, so there is no way for other stakeholders to understand why a particular score is published, who the intended target gender group(s) are, which of the project objective(s) aim to advance gender equality, and what indicators will measure progress. Publishing this information could have several benefits, including better coordination among donors, as well as a better push for gender-disaggregated results data.
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Upcoming Event
Making progress on gender equality: It’s time for more transparency
10:00 AM –
11:15 AM EDT
Online only
As the global efforts to build back better hopefully take hold, especially for gender equality, let’s not underestimate the ability of good-quality gender financing and programmatic data to underpin these goals. To accomplish that, however, local gender stakeholders need a central place in that discussion, armed with accessible, useable, and comprehensive data.
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How can education be the antidote to a world prone to fracture along environmental, social, and economic fault lines?
Since 1960, the world’s population has more than doubled. Average life expectancy increased by 50 percent and income per person tripled. The share of people living in extreme poverty declined from 54 percent to 10 percent (data are available through 2018, pre-pandemic). Technology revolutionized how we communicate, how we travel, and even what we eat. For people in China and India, the changes have been especially dramatic.
This progress didn’t result from miracle—it was through investment in education, research, and development. It came because most governments dedicated themselves to the idea—framed in the Universal Declaration of Human Rights—that “everyone has a right to education.” So, even as the world’s population grew quickly, so did educational attainment, and people’s capacity to produce, build institutions, invent, and adapt (Figure 1).
Figure 1. World population (in millions) by level of education, 1960-2020
1960
1990
2020
Source: Wittgenstein Centre Human Capital Data Explorer Version 2.0, Wittgenstein Centre for Demography and Global Human Capital.
At the same time, we have been living hard on the planet. In 1960 about 60 percent of the earth’s surface was wilderness, and today it’s only 35 percent. The rate at which biodiversity is being lost due to human activity rivals the five mass extinctions in the earth’s history. Annual C02 emissions have quadrupled. Inequality has reached intolerable levels. And tragically, the number of armed conflicts has risen, many of which are driven by extreme ideologies or competition for resources.
Can education be the antidote to a world prone to fracture along environmental, social, and economic fault lines? Can education systems incorporate new insights into how children learn, cultivate scientific thinking, and become more inclusive of people pushed to the margins?
In considering these questions, it is important to note that investments in education have a delayed effect. Children entering school today will be fully functioning adults only 15-20 years from now. To shape the world of 2050, we need to act now.
The stakes are high. As challenges of sustainability become obvious, so does the need for better education. An increasingly large fraction of the decisions people will need to make involve science and technology. They need to “think like experts,” as Stanford University Professor Carl Wieman says, on the day-to-day issues raised by global warming, public health, and technology. Education is the first best way for people and societies to thrive.
It’s also important to note that the majority of the next generation is growing up in the most resource-constrained countries in the world. By 2050, 57 percent of the world’s youth will be in sub-Saharan Africa and South Asia. Many countries in these regions are struggling to build a qualified and motivated teaching force, create a rich learning environment in schools, and develop the infrastructure for technologies that could enhance learning.
Achieving a “rapid development scenario” for the next generation
With startling effect, Wolfgang Lutz and Claudia Reiter at the Wittgenstein Centre for Demography and Global Human Capital simulate what the world’s population might look like in 2050 under various scenarios in a human capital data explorer. In a “stalled development scenario,” where there would be very limited new investment in education and health in the poorest parts of world and high barriers to migration, world population would likely top 10 billion by 2050 (Figure 2). A substantial number of people would have no education or only a primary school education—insufficient to sustain growth and development. In a “rapid development scenario” where countries make substantial progress to meeting the Sustainable Development Goals on education and health by 2030, world population would likely be 8.6 billion by 2050. And perhaps more significantly, younger adults would be substantially better educated and prepared to face the challenges of their time. It would be a different world—one with more opportunities for people to thrive and potentially less pressure on the planet.
Figure 2. World population by level of education in 2050
Stalled development
Rapid development
Source: Wittgenstein Centre Human Capital Data Explorer Version 2.0, Wittgenstein Centre for Demography and Global Human Capital.
How do we increase the chances of achieving the rapid development scenario? A new report by the Wittgenstein Centre, commissioned by the Yidan Prize Foundation, suggests a few priorities:
Recognize that education begins before schooling. Focusing on the learning experience of early childhood can have profound and lasting impact on a child’s physical and intellectual development.
Provide at least 10-12 years of schooling for all. Primary education alone is not enough to bring a poor country out of poverty.
Employ more and better trained teachers. No other factor will increase the learning success of children more than good, motivated, and motivating teachers.
Make use of technological innovations that can help teachers provide good education almost for free, even in the most remote corners of the earth.
Encourage lifelong learning. Recognize that education does not only happen during school and job training, but that it is a lifelong necessity to help people remain physically, mentally, and economically active as they live longer lives.
In an increasingly complex and globalized world, the education of the next generation in all corners of the globe needs to be everyone’s concern. We should support education like our lives depend on it.
How to balance debt and development
The COVID-19 pandemic is, we hope, only a temporary shock to economies everywhere. The appropriate policy response to such a disruption is to borrow to cushion the impact on consumption and investment. But for many emerging markets and developing countries, borrowing could result in debt-servicing difficulties that require years of austerity to overcome. Yet, if they do not borrow, they will have to cut public spending, which could mean major health crises, children out of school, job losses, and prolonged recession.
What to do? Borrow and risk a debt crisis, or choose austerity and risk a development crisis?
In 2020, countries took very different approaches, largely linked to their income. Governments in advanced economies provided trillions of dollars of direct and indirect fiscal support, equivalent to 24 percent of GDP, while those in emerging and developing economies provided just 6 percent and 2 percent of GDP, respectively.
Because private capital markets are procyclical, the risks of debt distress are large and growing. Global foreign direct investment fell by 40 percent in 2020 and is expected to decline by another $100 billion in 2021. Greenfield investment projects and cross-border mergers and acquisitions were likewise down 50 percent last year.
What to do? Borrow and risk a debt crisis, or choose austerity and risk a development crisis?
Half of all low-income countries were in debt distress or at high risk before the pandemic, according to the International Monetary Fund, and six have defaulted in the past year. In addition, 36 developing countries have had their sovereign credit rating downgraded by one of the three major ratings agencies, and 28 others have had their outlook downgraded. While many middle-income countries have returned to international bond markets since the pandemic began, only two Sub-Saharan African countries (Ivory Coast and Benin) have accessed the market.
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The risks of widespread development distress are also growing. The IMF estimates that low-income countries need $450 billion through 2025 to respond to the pandemic and accelerate sustainable investments. Total investment in developing countries (excluding China) fell by 10 percent in 2020, and is likely to remain below 2019 levels this year and next. And if growth slows, creditworthiness will deteriorate, making debt distress even more likely.
The debt dimension
Preventing this vicious circle will require policymakers to address two collective-action problems that markets cannot resolve on their own. First, they must ensure that private creditors’ procyclical behavior does not trigger liquidity problems and debt crises. Most developing countries, especially middle-income countries, were growing fairly well before the pandemic, with stable long-term debt dynamics. If they can refinance their debt on reasonable terms, they should be able to avoid default. This will require additional financing from official and private creditors.
In May 2020, the G-20 paused bilateral debt-service payments by World Bank International Development Association (IDA) countries under the Debt Service Suspension Initiative (DSSI), which has been extended until the end of 2021. The DSSI has so far deferred $6 billion in debt-service payments—resources that developing countries have used to advance economic recovery and procure COVID-19 vaccines and personal protective equipment.
But given the pandemic’s ongoing nature, and the time needed to roll out mass vaccination campaigns in developing countries, this is not enough. The G-20 should expand DSSI eligibility to all vulnerable countries, including small island developing states and tourism-dependent economies. Middle-income countries account for the bulk of developing-country debt service due in 2021-22, but have had access to only limited fiscal support until now.
Because debt crises typically reflect poor government spending decisions, debt programs are often accompanied by a temporary lending pause. But this time is different, because most countries are suffering from a short-term liquidity squeeze rather than a long-term solvency problem. The World Bank and the IMF need to ensure that the macro framework and their own lending to DSSI countries supports strong increases in public investment in the near term.
Some have called for larger-scale debt restructuring and relief efforts, including swaps of debt for investments related to achieving climate objectives or the Sustainable Development Goals. The G-20 has agreed to a common framework for debt treatment, with three countries (Chad, Ethiopia, and Zambia) requesting relief thus far. Such efforts must transparently link debt relief to incremental investments in health, climate, or SDG projects, in order to connect the debt crisis with larger development financing needs.
Investment imperatives
This points to the second collective-action challenge: providing developing countries with sufficient fiscal space to tackle the pandemic and embark on the sustainable investments needed to build green, resilient, and inclusive economies.
Even before COVID-19, the world was not on track to achieve the SDGs and meet the targets set by the 2015 Paris climate agreement. In 2021, the international community needs to devise a sound program of public investments, based on country-specific needs and current spending levels, in order to jump-start recovery efforts and enable longer-term progress on the 2030 Agenda for Sustainable Development.
Several financing proposals are on the table. Developing countries have received $150 billion in COVID-19-specific funding from the major multilateral development banks (MDBs), and another $100 billion in ongoing project financing. But much more is needed. G-20 finance ministers support an early conclusion of the World Bank’s IDA20 replenishment, as well as a new $650 billion allocation of special drawing rights (SDRs, the IMF’s reserve asset).
Because new SDRs would be distributed based on existing IMF quotas, which reflect countries’ relative economic importance, the bulk of them would go to advanced economies. There are thus concurrent proposals for a reallocation mechanism so that countries with excess SDRs can lend them to others in need of additional liquidity. The IMF’s Poverty Reduction and Growth Trust (PRGT), which has been used for this purpose before, is a potential vehicle. But because only low-income countries are eligible for PRGT funds, there would need to be other efforts to expand lending to middle-income countries.
Beyond one-off proposals designed to address immediate short-term financing difficulties, policymakers need to establish an international financing system that can support much higher levels of public investment in the medium term. MDBs are the natural vehicles for providing this finance, because they can offer better terms with longer maturities than other lenders, and they can combine loans with grants and technical assistance.
Moreover, the MDBs could increase lending by $750 billion to $1.3 trillion by making greater use of callable capital and tolerating more risk. They could also do more to mobilize private capital, both by using their guarantee authority and by developing platforms for blended financing in specific sectors. But these institutions need a strong push from major shareholders to be more ambitious.
Developing countries need financing for public-health spending, vaccine rollouts, and green investments. Much of it (except in the case of the poorest countries) will have to come in the form of debt, but this is getting more expensive for many. Given the need to avoid the debt-development trade-off, mobilizing additional development finance, especially for middle-income economies, and linking it transparently to sustainable investments are thus urgent challenges.
In 2020, policymakers focused on domestic recovery efforts. In 2021, they must invest in global collective action to avert a vicious cycle of debt and development distress.
City playbook for advancing the SDGs
This “City Playbook for Advancing the SDGs” compiles a series of how-to briefs and case studies on advancing sustainable development and social progress locally. These short, digestible, and practical briefs are written by city government officials for other city officials, based on their direct experience.
This playbook responds to significant appetite expressed by city leaders for capturing and sharing the “how” of innovations and practices to achieve the Sustainable Development Goals (SDGs) locally. These briefs come from cities participating in the Brookings SDG Leadership Cities community of practice and others to elevate innovations or processes with concrete positive outcomes for equity and sustainability. These best practices and tools help disseminate recommendations to a wider range of communities and stakeholders eager to play a pivotal role in achieving the 2030 Agenda.
Co-edited by Anthony F. Pipa and Max Bouchet, these briefs are published in collaboration with the global learning platform for government innovators apolitical.co. We intend to add content to this collection on a rolling basis throughout 2021 and 2022.
If you’re using this playbook to apply an innovation locally or have questions or suggestions, please fill out this short survey.
This playbook is part of the Local Leadership on the Sustainable Development Goals project.
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