The UN ratified its Sustainable Development Goals (SDGs) a month ago. $US2.5 trillion of foreign aid spending between 2015 and 2030 will be devoted to achieving them. UN Secretary-General Ban-Ki Moon says they are a plan “for ending poverty in all its dimensions, irreversibly, everywhere, and leaving no one behind”. He is wrong. The SDGs are inefficient, driven by politics and misdiagnose poverty.
Unfortunately, it is poor people themselves who will suffer as a result of foreign aid programs that are less effective than they could be.
The SDGs are supposed to build on the work of the Millennium Development Goals (MDGs) which expired this year having run since 2000. But whereas the MDGs consisted of 8 goals with 18 targets, the SDGs consist of 17 goals with 169 targets.
The SDGs fall into the trap common amongst big multilateral foreign aid organisations of trying to fix everything, rather than working in the areas where they can have the biggest impact. In attempting to be everything for everyone, the SDGs have only succeeded in becoming a disparate wish-list for the development community.
As a result, the 169 targets are both too ambitious and too specific. For example, goal 1.1 seeks to “eradicate extreme poverty for all people everywhere” whilst goal 14.9 wants to “provide access of small-scale artisanal fishers to marine resources and markets”.
This is because the establishment of the SDGs and future discussions about funding them are intensely political processes. Foreign aid has often been a political tool. The strategic, economic and political imperatives of donor and recipient nations are regularly placed ahead of the people foreign aid is intended to help.
To overcome this problem, Danish economist Bjorn Lomborg constructed a rigorous cost-benefit analysis on each of the SDG targets. He whittled the list of 169 down to just the 19 most impactful targets.
That is not a hard-nosed "economic rationalist" approach to foreign aid. It is about to trying to ensure development has the greatest impact for the people who need it. Foreign aid can't fix everything but as development economist William Easterly says, it can help some people some of the time. The fact that the SDG process is political and ideological means the kind of foreign aid the goals offer isn't as helpful to poor people as it could be.
But there is a far more basic problem with the SDGs. They treat the symptoms of poverty, rather than the cause. Poor people are poor because they have been prevented from participating in free markets. This is because free markets are the best drivers of economic growth, which in turn provides access to health, education and other things the SDGs are trying to achieve.
Economic growth means governments collect larger taxation revenue, leading to more effective public provision of hospitals, schools and more. It also allows access to private sectors in health, education and other fields.
No country has developed successfully without some measure of free markets. The evidence of this is absolutely manifest in the last few decades.
In China, free market reforms such as allowing international trade, removing barriers to private enterprise and reducing state control of agriculture have lifted 680 million people out of poverty since 1980. Furthermore, World Bank economist Martin Ravallion believes economic growth in other developing countries has lifted 280 million people out of poverty since 2000.
These gains have been underpinned by growing economic liberalisation in some parts of the developing world. The Cato Institute's Economic Freedom of the World Report 2015 found that economic freedom has increased significantly since 1980 and that countries that are economically freer are almost always more prosperous.
As outlined above, it is this enlarged economic power that secures the social outcomes the framers of the SDGs are attempting to achieve.
In addition to these social benefits, unhindered participation in markets also achieves many of the non-material aspirations of the SDGs, such as reducing discrimination against women and minorities. Evidence suggests increased market participation by a community generates greater social tolerance within it.
A recent study found that the economic liberalisation in India has partially eroded the caste system. Increased female entrepreneurship precipitated by microfinance has been shown to reduce domestic violence and gender discrimination. Swedish economists recently found that countries with greater economic freedom were more likely to have greater tolerance of gay people.
In light of the economic, social and moral benefits of economic growth precipitated by free economic participation, the solution seems clear. Foreign aid must be focused on removing the barriers that prevent poor people from participating in free markets and facilitating the development of markets that benefit poor people.
The SDGs are unwieldy, political and inefficient. But in treating the social symptoms of poverty, rather than the core economic reality, they also miss the point. Poverty is best relieved not by cherry-picked initiatives or well-intended handouts. It's relieved by giving the poor the ability to participate in the economy. The framers of the SDGs — apparently the world's best and brightest development minds — ought to realise that.
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