From protest to progress?

By Mario Pezzini, former Director of the OECD Development Centre & Special Advisor to the OECD Secretary General on Development and Alexander Pick, Head of Unit, New Development Policies and Institutions, OECD Development Centre

The COVID-19 crisis is an opportunity for humanity to chart a new course and for societies to build forward better. The pandemic has shown that there is a need for change. However, as the new edition of Perspectives on Global Development warns, relying on the same voices, the same institutions and the same mind-sets that prevailed prior to this crisis to answer these questions is unlikely to produce an equitable, inclusive and sustainable recovery. A surge in discontent prior to the pandemic demonstrated that these approaches were failing billions of people around the world, as well as generations not yet born.

Our report, From Protest to Progress?, argues that a long-lasting recovery from COVID-19 cannot be achieved without addressing this discontent, which it defines as collective feelings of frustrated expectations, injustice, vulnerability and powerlessness. A sharp increase in protests during the period between the global financial crisis of 2008-09 and the COVID-19 pandemic shown in Figure 1 attests to a global rise in discontent. However, not all forms of discontent are so obvious: the report also finds evidence of growing discontent amid marked declines in voter turnout, trust in government and support for democracy. And if these variables seem biased towards democratic countries, it’s worth noting that protests rose in authoritarian states too. Taken together, we see that discontent was neither marginal nor fleeting; indeed, it is likely to worsen as countries emerge from the pandemic.

Number of protests by region, 1991-2019

Source: Clark, D. and P. Regan (2021), “Mass Mobilization Protest Data”, Harvard Dataverse (database).
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A new social contract for a job-rich recovery

By Paola Simonetti, Deputy Director, Economic and Social Policy Department, ITUC

“People are no longer coming to the kiosk to buy tea since the pandemic outbreak started. I am the breadwinner of a family of nine. On many days I don’t earn a single shilling and return home empty handed”. This is the story of Jamila, a tea kiosk holder in Mogadishu, Somalia. Her story is also the story of around 2 billion informal workers worldwide who have been left to cope with the crisis on their own.  

The pre-existing labour market deficiencies have made those who were already vulnerable – low-skilled workers, migrant workers, informal workers, women, and young people – even more exposed to the impact of the crisis. In fact, the world entered the pandemic with a pre-existing “sustainability debt”.

The ITUC SDG8 composite indicator below – covering 145 countries corresponding to more than 97% of the world population – is calculated on the basis of four sub-domains related to four dimensions: economic well-being, employment quality, labour vulnerability, and labour rights. The rating ranges between 70-130 and the world average is set to 100.

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An excellent but incomplete IMF decision

By José Antonio Ocampo, Professor at Columbia University and former UN Under-Secretary-General for Economic and Social Affairs and Finance Minister of Colombia

The decision of the IMF Board last Friday to approve the allocation of $650 billion in Special Drawing Rights (SDRs) is excellent news for the world economy. This proposal had been on the table since the early phase of the COVID-19 crisis. It was vetoed by the United States under the Trump administration, but endorsed by the Biden administration, who proposed the magnitude of the agreed allocation.

The decision follows that adopted during the Global Financial crisis in 2009 to allocate $250 billion, the advantage of which was that it was timelier. There were several proposals made early during the current crisis, including the one we made with Kevin Gallagher and Ulrich Volz in March of last year, and that by Christopher G. Collins and Edwin M. Truman in April, who emphasised the importance it had for increasing the foreign-exchange reserves of low-income countries.

There were later proposals, several of a political character, to issue as much as one or two trillion dollars. They went much beyond the total IMF capital (quotas), which implied that they would have required approval by the US Congress, which would have delayed the decision. The $650 billion meets the criteria of being less than IMF quotas.

The SDRs are the global monetary asset that the IMF issues. They are part of the foreign exchange reserves of countries. Their basic limitation is that they can only be used by central banks or by specific international institutions that are allowed to hold them. Nonetheless, they can be sold to other central banks, which makes them liquid. The country that uses them has to pay an interest to the IMF SDR accounts.

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Intermediate cities: a green and transformative post-COVID-19 recovery?

By Dražen Kučan, Sector Lead / Senior Urban and Energy Efficiency Specialist, Green Climate Fund

Guilty as charged: cities and urban populations are among the core drivers of anthropogenic climate change. Cities produce between 71% and 75% of total greenhouse gas (GHG) emissions1. There needs to be a ‘paradigm shift towards low emission and climate-resilient development pathways’. A shift that can happen in developing countries by supporting and investing in high impact climate mitigation as well as resilience and adaptation initiatives.

While the paradigm shift is defined by the ‘degree to which the proposed activity can catalyse impact beyond one-off project or programme investment’, the reality is not so straightforward in the context of the urban sector. Urban areas are complex, multi-stakeholder environments that require holistic, structurally sound, sustainable solutions. They need transformative investments in energy efficient buildings; decarbonising urban energy systems; compact and resilient urban development (including investment in mass transit and non-motorised transit systems and vehicle electrification); grey to green urban infrastructure upgrading; the circular economy; and methane and emissions-free integrated waste management.     

Demand pressure on developing new urban infrastructure is high: new homes and infrastructure will have to be built at great speed for the approximately 2.5 billion new city dwellers expected by 2050. About 85% of new housing demand is projected to be in fast emerging economies (such as China) and in the majority of developing countries. Furthermore, of the 70 million new residents expected to move to pre-existing urban areas each year, the vast majority will live in intermediary cities, mostly in Africa and Asia. This adds to climate pressures, both in terms of accelerated emissions and enhanced vulnerabilities. 

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Why local? Why now? Strengthening intermediary cities to achieve the SDGs

By Shipra Narang Suri, Ph.D. Chief, Urban Practices Branch, Global Solutions Division, UN-Habitat and Federico Bonaglia, Deputy Director, OECD Development Centre

Cities and local authorities around the world have played a key role in the response to the COVID-19 pandemic, applying prevention and containment measures, providing swift humanitarian response, as well as taking the first steps towards post-pandemic recovery. They implemented nation-wide measures, but also experimented with bottom-up recovery strategies. Local authorities are an indispensable “ring” in the governance chain necessary to prevent and respond to pandemics and advance a One Health Approach.

At the same time, COVID-19 has spotlighted, amplified and exacerbated underlying structural inequities across cities, and the capacity and financing gaps facing local governments, especially in developing countries. The pandemic may have initiated or accelerated a shift towards a new urban paradigm of “inclusive, green and smart cities” but it is still too early to say whether cities in developing countries will be able to embark on this transformation. Confronted with massive increases in poverty and vulnerability, those objectives might look like less relevant, distant or even unattainable goals. Estimates from the World Bank and UN entities suggest that local governments may on average lose 15 to 25 percent in revenues in 2021. First-hand accounts from African mayors confirm they face phenomenal trade-offs and have to repurpose their scarce resources to advance a green transition to tackle the consequences of the pandemic.

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Quatrième révolution industrielle et migrations : comment assurer la transition dans les pays d’origine et de destination ?

Par Jason Gagnon, Économiste du développement et Catherine Gagnon, Stagiaire, Centre de développement de l’OCDE

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Avec l’arrivée de nouvelles technologies qui brouillent les frontières entre sphères physique, numérique et biologique, un changement spectaculaire dans la façon dont nos économies et nos sociétés interagissent, produisent et communiquent est en cours. Et comme nos économies sont aujourd’hui plus que jamais interconnectées, cette révolution industrielle a lieu dans pratiquement tous les coins du monde. Parallèlement, les migrations internationales n’ont jamais été aussi nombreuses.

Ces deux mégatendances ont une forte interaction qui va considérablement modifier la mondialisation telle que nous la connaissons. Les pays du Conseil de coopération du Golfe (CCG) en sont une belle illustration : à la fois tournés vers un nouveau modèle économique, ils restent très dépendants de la main-d’œuvre migrante, notamment d’origine d’Asie du Sud et du Sud-Est. Des mesures politiques concrètes doivent donc être mises en place dans ces pays d’origine et de destination pour permettre une transition plus fluide au niveau mondial.

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The fourth industrial revolution and migration: how to ensure a smooth transition?

By Jason Gagnon, Development economist and Catherine Gagnon, Intern, OECD Development Centre

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A dramatic change in the way our economies and societies interact, produce and communicate is underway as a fusion of technologies blurs the lines between the physical, digital, and biological spheres. And with our economies more globally interlinked today than ever, this industrial revolution extends to practically every corner of the world. Meanwhile another sweeping trend is gaining traction: international migration is at an all-time high as new host countries, routes and freshly skilled workers multiply, and as a young population eager to make a mark on the world continues to grow.

The two megatrends of technology and international migration have the potential to significantly change globalisation as we know it. The Gulf countries offer an illustration of the especially pronounced interaction between both trends. On one hand, Gulf Cooperation Council (GCC) countries have made it a priority to usher in this new economic era. On the other, GCC countries are some of the world’s most dependent countries on migrant labour. How can GCC countries ensure a smooth labour market transition as they shift to this new economic model? And how can the primary migrant countries of origin to the GCC – mostly in South and Southeast Asia – navigate the changes they will face in the main destinations for their labour migrants?

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The growing role of the private sector in development co-operation: challenges for global governance

By André de Mello e Souza, Researcher, Institute for Applied Economic Research (IPEA), Brazil

Global development is increasingly being seen as reliant on the private sector, both for its financing and project implementation1. As Development Assistance Committee (DAC) members attempt to redistribute the burden of sponsoring initiatives abroad, they tend to shift this burden to profit-seeking corporations, while counting the funds provided to trigger investments by such corporations as part of their conceded Official Development Assistance (ODA)2. In so doing, they are also responding to the perceived dearth of resources from multilateral sources, especially the UN. Additionally, by engaging the private sector they enable and incentivise their own corporations to compete with those from China in developing countries where Chinese economic presence is deeply felt. 

However, the engagement of the private sector in development co-operation efforts and its treatment as an integral sponsor of such co-operation overseas is not limited to traditional donors, but can also be seen among Southern providers, especially those from Asia. Most notably, the concept of ‘Development Compact’, championed by India, grants the private sector a privileged position in international development co-operation across five different levels, namely, trade and investment; technology; skills upgrade; lines of credit and grants.

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COVID-19 pandemic: threats to SMEs in poorest nations require swift policy action

By Frank Hartwich and Jenny Larsen, United Nations Industrial Development Organization (UNIDO)

Factories around the world roared into action again in the second half of 2020, following the COVID-19-related slump that brought large parts of industrial production to a standstill in early 2020. The bounce back, led by Europe, China and other parts of Asia, has been faster than expected, with most of the losses felt in the first half of 2020 recovered by early 2021, although there are big differences between regions and sectors.

Using the limited data available, it appears that manufacturing in selected LDCs has also staged a recovery. UNIDO’s Index of Industrial Production (IIP) – only available for four of the 46 LDCs – showed a dramatic drop in the early part of 2020, followed by a sharp rise in early 2021, although a closer look at the data reveals a nuanced picture. Mozambique and Senegal saw little impact from the pandemic whereas in Bangladesh and Rwanda the effects were much stronger. In general, within low-tech industries which predominate in LDCs, the food industry benefitted from the pandemic while other sectors such as textiles, clothing and leather were hit particularly hard.

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The debt burden: why ex-post intervention shouldn’t be the default option

By Rodrigo Olivares-Caminal, Professor of Banking and Finance Law at the Centre for Commercial Law Studies, Queen Mary University of London, and Paola Subacchi, Professor of International Economics, Global Policy Institute, Queen Mary University of London

The financial response to the COVID-19 crisis has driven debt building at an unprecedented speed, which has increased the risk of debt distress and the odds of a new debt crisis cycle. Emerging markets and developing economies are most at risk. When the COVID-19 crisis began in February 2020, it demanded extraordinary policy measures to protect lives and provide support to those who had lost their livelihoods. The public debt vulnerabilities for many countries, especially the poorest ones, were already significant at that time, but the subsequent collapse of many economic activities exacerbated the situation. As of 30 April 2021, 29 countries were at high risk of debt distress, and 7 low-income countries had already succumbed to it. Somalia, for example, is currently in debt distress and needs to secure relief to restore debt sustainability.

Emerging markets and developing economies are most at risk because of their exposure to international capital flows and the fact that portions of their debt are issued in hard currencies, namely the US dollar. This leaves them vulnerable to changes in US monetary policy, and so to sudden outflows when risk aversion and international financial volatility are high. Some countries have learned lessons from previous debt crisis cycles – as is evident, for example, in the development of local-currency securities markets which mitigate the risk of foreign-currency borrowing – but such resilience is patchy and far from being systemic.

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