1. 1 Human Poverty & The MDGs: The Implications for Economic Policies International Conference on “The Many Dimensions of Poverty”, Brasilia, 29-31 August, 2005

2. 2 Main Topics of Paper Examines Human Poverty Relates Human Poverty to the MDGs Draws implications for National Economic Policies Highlights global trends in Resource Flows and Implications for Redistribution

3. 3 Human Poverty The Capability Poverty Measure (HDR 96) The Human Poverty Index (HDR 97) Define essential or foundational capabilities: an ‘absolutist core’ The means still vary by society Limit the dimensions, and ensure the link to policy

4. 4 The MDG Framework The MDGs embody, implicitly, a Human Poverty approach A comprehensive, operational framework Linking forms of deprivation with public policies & investment: a need for well- defined indicators The problem of synergies: integrated public investment programmes Develop short-term indicators for public action now

5. 5 MDGs, Economic Policies & Growth Neoliberal economics poses roadblocks Paper focuses on fiscal, monetary and financial policies Macroeconomic stabilization is not sufficient for growth The result: only modest growth along with financial crises Need coherent strategies for broad- based growth Rapid public & private capital accumulation and shared benefits

6. 6 MDG-Based Economic Policies: Fiscal Policies The anti-state Neoliberal bias: public investment supplants private investment In most regions, public investment in decline since 1970s Sub-Saharan Africa: 4.7 per cent of GDP (1970s) to 3.3 per cent (1990s) In poor economies (with under-utilized capacity), there is little danger of ‘crowding out’ Public investment promotes greater equity, which itself enhances prosperity

7. 7 MDG-Based Economic Policies: Monetary Policies Monetary Policies should follow fiscal policies: treat inflation phobia Inflation in developing countries now under 6 per cent (from over 50 per cent in early 1990s) Cost-push inflation (oil prices) is the present danger, not excess money ‘Inflation-targeting’, based on high real interest rates, is counter-productive Recycle oil surpluses for investment to boost aggregate supply

8. 8 MDG-Based Economic Policies: Financial Policies Financial liberalization neither pro-growth nor pro-poor Banks supply short-term, high-cost credit, not long-term investment credit In low-income countries, the interest-rate spread has widened from 8 to 12 percentage points during 1990-2003 Focus on providing incentives for financing private investment The most glaring constraint: a lack of domestic savings—net national savings is 14% of GNI

9. 9 Global Savings and Investment Middle income & transition economies export ‘excess savings’ Low-income countries import excess savings, but only 3% of GDP Japan, China, Russia, Saudi Arabia and Korea also export savings The United States absorbs 72% of all excess global savings—7 times total ODA! Capital is ‘flowing uphill’, to one rich country, not ‘downhill’ to poor countries

10. 10 An Emerging Oil Crisis? Global demand for oil outpacing global supply Questions about available supply, chiefly Saudi Arabia’s (1/5 th of proven global reserves) Demand: the U.S. consumes one fourth of all oil (rising shares for China & India) U.S. economic growth already fragile— propped up by foreign lending (170% of income)

11. 11 The MDGs & Global Trends Imbalances in global savings & investment need correction Savings-surplus countries (China): Expand domestic demand Rich savings-deficit countries (U.S.): Contract consumption Recycle excess savings to poor countries Big effects will be due to changes in economic policies, not so much ODA

12. 12 The Effect of Rising Oil Prices U.S. growth is bound to slow: need to reduce debt-fueled consumption Oil consumption is being ‘redistributed’ to China & India The danger is an abrupt, painful U.S. contraction, with big knock-on effects How to avert a new round of stagflation? How to recycle the oil surplus to poor countries, where oil intensity remains high?