Until early this year the Pacific islands were a rare ray of sunshine for the international development system. The region’s four least developed countries (LDCs) were first of a dozen countries worldwide scheduled to leave the UN category for the most vulnerable low income states.
Led by Vanuatu, which is scheduled to graduate in December 2020, these countries benefited from years of relative regime stability, tourism growth and solid health and education policies. Solomon Islands is scheduled to graduate in 2024. Kiribati and Tuvalu also meet the criteria.
Covid-19 has thrown a shadow across the region, cutting off the tourism on which most rely. Restrictions on movement have disrupted domestic activity. The collapse in the world economy has slashed demand for exports and forced foreign workers to go home. Global financial calamity threatens, as countries in and outside the region struggle to pay their debts.
In early April yet another tropical cyclone hit agriculture and rural communities in Solomon Islands and Vanuatu.
A poor run of luck? A ‘black swan’ – the term coined by the philosopher Nassim Nicholas Taleb for unknowable high-impact events – compounded by unlucky weather?
In a paper published last month by the Commonwealth Secretariat in London, I argue that vulnerability is an inherent and functional feature of the existing global order. The international community could do much more to support LDCs.
Vulnerability is the norm for these countries. The way the global economy and climate are currently (dis)organised, peripheral countries will always be exposed to shocks.
The Pacific island countries, like others on the global margins, have in the past couple of decades fallen foul of a series of crises that began in the rich world. They included the dotcom crash, an eight year commodity boom that led to huge price increases for imported items such as gasoline and food, a subsequent collapse, resurgence and then even deeper trough in 2016. The global financial crisis in 2008 hit LDCs more than most and small island developing states worst of all, as export demand and tourism slowed.
The rich world’s carbon addiction has played out particularly badly for the Pacific as, on top of sea level rise and the periodic plunder of their natural assets by multinationals, a series of climate cataclysms culminated in cyclone Pam in 2015.
According to the official UN measure of vulnerability, 20 of the 47 LDCs worldwide became more vulnerable between 2015 and 2018.
Covid is only the latest in this nightmarish helter-skelter. The pandemic was no black swan. It was entirely knowable and could have been prepared for: health experts warned for years that health scares were worsening in the wake of bird ‘flu, SARS and MERS.
But global leadership is lacking and the system isn’t set up to prevent crises. One of the best things that the rich world could do for LDCs is get its own house in order, clamping down on the behaviour that leads to worsening global health and economic crises.
But wealthy countries could do much more directly for the least developed. There are three types of help for LDCs: market access, aid, and assistance with taking part in the international system.
The main benefit for LDCs is that in most markets they pay no taxes on exports or restrictions on how much can be sent abroad.
But Pacific island LDCs don’t export many goods. And exports don’t respond magically to falling trade barriers anyway – they depend on domestic productive capacity.
Another support for LDCs is that official donors commit to send them certain amounts of development assistance. While aid per head to Pacific LDCs is among the highest in the world, most donor states fail to meet their pledges.
LDC governments also benefit from a series of other small advantages like free travel to some international meetings and lower payments to the UN budget. All good stuff, but small beer alongside the regular and worsening catastrophes raining down on the region.
In my paper I argue that while this support is welcome, it’s time to think bigger – particularly about economic instability and its impact on the most vulnerable. Systemic change is needed at the multilateral level, with measures to coordinate global markets and better coordination at the UN.
The paper argues for a series of around 30 support mechanisms, covering finance and investment, trade, commodities and resource extraction, technology, climate breakdown and the environment. These measures need to be part of an ecosystem led by LDCs, not offered willy-nilly at the whim of the powerful.
- A measure long argued for, is a tax on international financial transactions to slow the flow of hot money and stabilise the world economy.
- An international financing facility to boost demand in LDCs during crises.
- The evidence shows that direct cash payments to the poor work well, and can provide a buffer for the most vulnerable in society.
- Donors could finance geological information in LDCs so as to avoid multinationals manipulating knowledge about mineral reserves to their own advantage.
- Companies should be made liable for environmental damage incurred in resource extraction, including on the seabed. Such a rule should be enshrined in international law, with independent adjudication determining damages.
- It is imperative to meet climate targets. The climate fund for LDCs is depleted and should be replenished, made less bureaucratic and more accessible.
- Infrastructure should be made disaster-resilient during construction using innovative financing and made part of building productive capacity.
These are just a few of the suggestions in the paper. Business-as-usual just isn’t good enough. Unless the global system of economic governance changes radically and the architecture for LDCs drastically improves, things will continue to get more precarious. The next economic crisis or pandemic could be even worse. And, after a couple of decades of experimentation with globalisation and the market economy, the tried and tested traditional resilience measures of Pacific islanders’ subsistence ancestors will start to look more and more attractive. Pacific leaders might just start questioning their engagement with the wider world.
Dan Gay is a consultant on trade and economic development policy. From 2015-2019 he was the adviser on the least developed countries to the UN Committee for Development Policy Secretariat. www.emergenteconomics.com
Follow Dan on Twitter : @dangay