Inclusive Development, the Crisis of Global Capitalism, and the 2016 Sustainable Development Goals

    In this entry, Teichman discusses the Sustainable Development Goals (SDGs), drawing on some of ideas elaborated on in The Politics of Inclusive Development. Policy, State Capacity and Coalition Building, 2016.

    The new Sustainable Development Goals, passed by the General Assembly of the United Nations in September of 2015, represent an unprecedented commitment to a wide range of impressive objectives. This latest document pledges to eradicate “poverty in all of its forms,” to establish “human rights for all,” with particular attention directed at addressing gender inequality, and to protect “the planet from degradation.” In addition to ensuring that economic, social, and technological progress occurs “in harmony with nature,” the document makes a commitment to foster peaceful, just, and inclusive societies that are “free from fear and violence,” and to work towards conditions in which “no one is left behind”.

    The group that formulated the SDGs responded to widespread criticism of the earlier Millennium Development Goals (MDGs) from civil society, labor organizations, and the academic community. The new Goals, unlike the MDGs, recognize the importance of employment generating economic growth, as a necessary component of a world “in which every country enjoys . . . decent employment for all.” Goal 9 is especially encouraging; it calls for the promotion of “inclusive and sustainable” industrialization and innovation to raise significantly industry’s share of employment and GDP in Global South countries, with the goal of doubling its share in the least developed ones. The new document has also responded to criticisms that the pressing issue of inequality (both within and between countries) had been largely ignored by the MDGs, acknowledging that high levels of income inequality can block the economic growth that is essential to prosperity and sustained poverty reduction.

    The continuing deterioration of the global economy, however, does not augur well for the achievement of the SDGs. A recent study produced by the South Centre, Colombia University, and the International Labor Office (ILO), which bases its data on International Monetary Fund (IMF) projections, presents convincing evidence of a forthcoming adjustment shock expected to have a negative impact on 132 countries, with developing countries being the most affected. Indeed, the IMF is now actively recommending austerity measures, involving large-scale reductions in government spending, to Global South countries. Recommended policies include reductions in subsidies on fuel and food, cutting or capping the wage bill, rationalization of social safety net spending, labor flexibilization, and increasing consumption taxes. Privatizations are once more back on the agenda in policy discussions. Recent policy discussions between the IMF and India have advised against expanding the country’s subsidized food program, established to reduce hunger, because it will contribute to the fiscal deficit. The Colombia University/ILO document points out that a shift toward greater austerity is now on the policy agenda of most Global South countries. In 2014, Brazil announced substantial spending cuts, including a reduction in public health and housing spending. More recently, the Brazilian government reduced spending in its well-known conditional cash transfer program, Bolsa Familia, by 35 percent, a program widely believed to have been responsible for poverty reduction over the last fifteen years.

    However, the impact of fiscal cuts on social welfare goes beyond the implications for social spending and the consequent diminishment of recent gains made in reducing levels of extreme poverty and deprivation. Fiscal cuts will also have a negative impact on growth and employment as cuts to government expenditure will reduce not only government employment but also the employment opportunities of private sector firms dependent on government contracts. It is hard to imagine how improvements in employment opportunities and in decent employment can occur in a context of fiscal constraint and renewed initiatives toward labor flexibilization.

Equally important is the political fallout. The elimination and/or reduction of subsidies, and the consequent increase in prices of basic necessities such as food and fuel, has already sparked protests in many countries.  The by now standard “solution” to the twin pressures to reduce public spending while providing social protection to the neediest through the mechanism of highly targeted programs, is not likely to assuage growing political unrest. For one thing, it takes time for new targeted programs to take effect. Furthermore, as considerable research has shown, targeting inevitably leaves out many vulnerable and needy households. Moreover, wage and salary caps, combined with government and private sector layoffs, will impact members of the middle class, whose active discontent can quickly become politically destabilizing. As I discussed in my previous blog entry on Brazil, it does not take long for political alliances favouring expanded social welfare for the deprived, to break down. In the wake of ensuing unrest, new governments, far less concerned about the welfare of lower socio-economic groups, may well emerge.

    However, even if buoyant commodity prices had continued to provide a favourable global economic context for the Global South, it is questionable whether the SDGs would be efficacious. The SDG document is long on lofty statements of goals, and very vague of how exactly those lofty goals are to be achieved. This is particularly true for Goal 8, the promotion of sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all. What is glaringly absent is a recognition of the importance of the role of state policy in ensuring the emergence and growth of employment generating transformative economic activities. Further, policies conducive to this end require the building of national state capacity—a pressing necessity that is notable for its absence from the “means of implementation” section of the document. Instead, the main instrument for the achievement of the SDGs appears to be a “revitalized Global partnership,” involving direct foreign investment, technical support, and development aid to the Global South. The means envisioned is one involving increased international public finance, in a process that brings together governments, the private sector, civil society, the UN system, and other actors. States are not central actors in this endeavour; their role is to “follow up” and to “review.”

    Indeed, the neoliberal policy paradigm remains a resilient feature of the SDGs insofar as it assumes a generally minimalist role for the state and state policy in industrial development (broadly defined). While the Goals document does talk about need for “cohesive nationally owned development strategies,” and promises that each country’s policy space will be respected, it cautions that development strategies must remain “consistent with relevant international rules and commitments,” a clear indication that the predominant trade and investment rules are unlikely to be tampered with. Indeed, vague references to the need to take into account the interests of developing countries in trade discussions focus primarily on the needs of the least developed countries. The document evinces strong faith that with the “right” policy environment, the market will provide the economic growth and employment generation that countries of the Global South so desperately need: the role of states is that of “ensuring a conducive policy environment for . . . industrial diversification and value added to commodities.” The document’s architects claim that “private business activity, investment, and innovation are major drivers of productivity, inclusive economic growth, and job creation.”

    There is, moreover, the belief that economic globalization as currently constituted can be made to work for the Global South. Target 9.3 calls for the integration of small scale and other enterprises, particularly in developing countries, into Global Production Chains. This recommendation is made despite considerable evidence that movement up these chains from the low technology end (involving low paid employment with little social protection), on the part of Global South enterprises, is very difficult and highly unlikely. Finally, faced with high levels of inequality in a growing number of countries, the document maintains faith in a strategy that focuses on increasing the income levels of the bottom 40 percent of the population, instead of strongly redistributive measures to address the high concentration of wealth and income among the wealthiest (Target 10.1).

    While the SDGs represent an international consensus that global capitalism has fallen short in its ability to provide a sustained and sustainable improvement in human welfare, we are very far from grappling with the means by which the lofty goals of the SGGs can be achieved. In addition, the global economic context has made it increasingly difficult to develop the politics and effective state capacity necessary to move toward more inclusive development trajectories in the Global South.