Emerging Powers and the Future of International Development: What Role for the UK?

David Hulme

Brooks World Poverty Institute

The UK and International Development: Looking Good

• Last 15 years have seen UK play a leading role• Prominent with MDGs, Monterrey Consensus, Africa

Commission, post-2015 Agenda• Increasing aid to 0.7% level –against the OECD trend• Contributes to positive image of the UK: seen as

committed and very competent (DFID)• Strong supporting institutions – Universities, NGOs,

faith groups and commercial advisory services

Official Development Assistance as % of GNI

(UK 2002-2012)

(Germany 2002-2012)

(Netherlands 2002-2012)

(Japan 2002-2012) (United States 2002-2012)

KEY: BLUE = DAC Total

RED = Country Total

(France 2002-2012)

International Development on the Move

• Significant improvements in economic and human development indicators since 2000

• Complex patterns but all regions show improvements – from Afro-pessimism to progress in Africa (eg child mortality)

• But, global governance of development seen as ‘glass half full’ or ‘weak’ or ‘failing’– Lack of progress with MDG Goal 8 (global

partnership)– United Nations Development System and

bilateral aid remain uncoordinated

Child Mortality 1990 & 2012

(UNICEF, WHO, WB and UN-DESA, 2013: Levels and Trends in Child Mortality Report)

The Changed Context

• From uni-polar to multi-polar world – ‘post-American world’; no longer capitalism versus socialism but Anglo-Saxon model or Chinese model or Brazilian model; rise of G20

• Climate change steaming ahead 2oC guaranteed• Population growth and demographic challenges

(ageing, migration, youth)• Urbanisation and the urbanisation of poverty and

inequality• Technological change – especially ICTs• Security threats continue but are changing

International Development at Manchester

• UK’s biggest concentration of researchers and postgraduate students on international development

• International centres of excellence – Brooks World Poverty Institute– Institute for Development Policy and Management– Effective States and Inclusive Development Centre– IRIBA (Brazil in Africa)– Capturing the Gains– Humanitarian and Conflict Response Institute

…and much more

Today’s Focus – Emerging Powers

• Research at Manchester makes a number of distinct contributions – focus on three issues today

1. BRICs beyond China – especially Brazil and India’s influences

2. Beyond the BRICs – emergence of new middle and regional powers: South Africa, Turkey, Indonesia and others

3. Creating analytical frameworks that help understand the greater choices developing countries have on polices and models

An Analytical Framework for Understanding these Changes

Ideas

Material Capabilities Institutions

Robert Cox’s Framework (2002)

Emerging Powers Impacting on Material Capabilities• Material Capabilities – technological and organizational

capabilities with productive or destructive potential– China – manufacturing growth and demand for raw

materials– India - affordable pharmaceuticals for developing

countries; software and ICTs– Brazil – high productivity tropical agriculture;

aeronautics– South Africa – agriculture; raw materials and

minerals; commercial conservation and hunting– And others…

Emerging Powers Impacting on Ideas

Ideas – the concepts and narratives that explain what is happening/should happen. These shape norms and values. Often they are several and opposed.

– Turkish model of growth, democracy and moderate Islam

– Brazil: national development banks for infrastructural development; social protection and conditional cash transfers

– India: rights-based approaches to development; democracy with capitalism

– China: centralized authority is best for growth and poverty reduction

– And others…

Emerging Powers Impacting on Institutions

– Institutions - amalgams of material resources and ideas usually based on the power relations of their time of origin. They commonly take an organizational form.

– China renegotiating capital contributions to World Bank and IMF– South Africa means BRICS Bank will be small – less of a

challenge to World Bank and regional banks– Brazil has put sustainable development goals on par with post-

MDGs at the UN– South African retail models spreading across Africa– India – notable for its failure to take a lead to initiate change in

international organizations– OECD - Spanish as the emerging de facto second language

(Spain, Mexico and Chile)

Three Major Examples

• Today we focus on three examples of the impact of emerging powers that are not given sufficient attention in the UK

• The rise of India and the reshaping of international development (Kunal Sen)

• Is there a Brazilian model of development? (Armando Barrientos)

• South Africa: Emerging Power or African Power? (Stephanie Barrientos)

The Rise of India and the Re-shaping of International Development

Kunal Sen

Institute of Development Policy and Management (IDPM)

Brooks World Poverty Institute

India’s Rise

• The emergence of India along with China as major forces in the global economy has been one of the most significant economic developments in the past quarter century.

• Rapid convergence to living standards of advanced market economies, halving of the GDP per capita gap in

1990-2009.

Living Standards (Per Capita Income)

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GDP per capita in PPP (1990=100)

Changes in Poverty and Inequality, early 1990s to mid/late 2000s

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China

India

Indonesia

South Africa

Turkey

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Poverty ($1.25 a day)Inequality (Gini)

Percentage Point Change

A Different Growth Model in Asia

• All successful Asian countries moved from the import substituting phase of economic development to an export-oriented development strategy, with a strong growth in the labour intensive segment of the manufacturing sector.

• Surplus labour pulled in massive amounts from less productive agriculture to the more productive manufacturing sector.

• This did not happen in India.• Economic growth was mostly due to a export-oriented

services sector (information technology), not due to manufacturing.

• Very little shift of labour out of agriculture, and lack of labour-intensive growth.

Material Capabilities

• Private sector led development model.• Generic drug exporter to the world, increasing in

importance as patents for many best-selling medicines come to an end.

• Outward oriented entrepreneurs (e.g. large business groups such as Tata, Essar, and Reliance), not exporting goods as much, but business models, technology, management.

• And a ‘Look East’ policy of greater integration with East and SE Asia that is slowly taking shape, that has the potential to take South Asia closer to the growth poles of East Asia.

Ideas

• Democracy and Capitalism intertwined.• A ‘liberal’ counterweight to an authoritarian China? • A ‘laboratory’ for a rights based approach to

development: understanding the potential and the limitations.

Institutions

• A gradual shift towards more impersonal ‘rule of law’ institutions that check discretionary use of power (e.g. anti-corruption agencies, the Supreme Court).

• Greater accountability of the state and the private sector, with a vigorous free press and an active civil society.

• Market institutions now firmly embedded, with economic dynamism that bridges the large-small divide.

India in Africa

• Increasing presence in Africa, through telecoms, services, horticulture, …

• “The commerce between India and Africa will be of ideas and services, not of manufactured goods against raw materials after the fashion of Western exploiters.” (M.K. Gandhi).

• A different terms of engagement in Africa? Or more of the same?

• A more feasible model of economic growth for Africa than the classic East Asian developmental state?

India’s Role in the Re-shaping of International Development• No clear strategic focus on foreign policy.• Ideas vs Incentives: neither one nor the other,

somewhere in the ‘fuzzy middle’.• An international leadership role that it does not want to

assume.• A rising India would need to take on responsibilities

commensurate with its power.

Implications for UK Development Policy

• A greater presence/influence in Asia through a stronger partnership with India.

• Beyond aid: closer trade links with the EU, e.g. moving on the stalled EU-India Free Trade Agreement negotiations.

• Movement of people and ideas: not closing down the borders to either.

Is there a Brazilian ‘Model’ of Development?

Armando BarrientosBrooks World Poverty InstituteInternational Research Initiative on Brazil and Africa (IRIBA)a.barrientos@manchester.ac.uk

Brazil’s emergence as a superpower 6th largest economy, leading role in the G20Brazil growing engagement in South-South trade and technical assistance

Marked improvement in economic and social indicators

Economic growth, although not at China’s levelsPublic finances: stable macroeconomic policies and high tax/GDP ratioPoverty: large reductions in povertyInequality: significant reduction in income inequality

…is there a ‘new development model’ in Brazil?Opinion is divided on several issues

When? Is there a break point?What, if any, are the main components of this ‘model’? How are Brazil’s achievements to be sustained?

Brazil’s growth performance improved in the 2000s

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Brazil - GDP (% growth p.a) 3-year average

GDP (% growth p.a)

IPEA Data

But, what is impressive is the quality of growth: Inclusive, pro-poor growth

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Growth incidence curves for Brazil, 2003–2011

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Growth incidence curve. Growth rate in mean.

Data Source Bianchi et al

Improvement in public finances

29.61

26.9626.49

27.0327.72

28.79

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32.3031.68

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21.6322.24

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26.5125.89 26.25

27.21 27.1127.66 27.67

26.8427.04

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Brazil - Improvement in Public Finances 1994-2010Al Govt. revenues/GDP Tax/GDP ratio

Data Source: Base CIAT-BID

Leading to sustained poverty reduction

1992 1993 1995 1996 1997 1998 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009

Extreme poverty % pop. 28.65 28.86 22.49 23.15 23.01 22.16 22.61 22.91 21.50 22.99 20.57 17.77 14.94 14.70 12.50 11.86Poverty % pop 53.13 54.08 45.81 45.45 45.60 45.05 45.95 45.58 44.79 46.83 44.92 41.60 37.04 35.97 32.49 31.07

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Brazil poverty indicators 1992-2009Data Source: IPEA

…and a reduction in income inequality

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60.260.0 60.1 60.1 59.9

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Brazil - Gini coefficient of incomeGini

Data Soure: IPEA

When?

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Brazil - Consumer Price Inflation % p.a. (IPCA) Consumer Price Inflation % p.a. (IPCA)

1930s-1980s – Import SubstitutionIndustrialisation

1985-1993 – Crisis, democratisation and Adjustment

1988 New Constitution

1993-1996 – The Plano Real

What are the main components of a Brazilian ‘Model’?

Political consensus across parties focused on incremental and inclusive reform leading to stable macroeconomic and fiscal policy

F. Henrique Cardoso [1994–2002]; Lula [2002-2010] and Roussef [2010-?]

Continuity of state planning capacity and pragmatic interventionism

Market reform in early 1990s privatised State Owned EnterprisesCombination of liberal reform-driven incentives and persistence of state strategic planning and investment (e.g. National Development Bank

BNDES)Comparatively successful leveraging of inward FDI to realise improvementsin competitiveness

Investment in social policy – Education, health but primarily poverty reduction

Favourable external conditions, especially rising commodity

How are Brazil’s achievements to be sustained?

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Brazil 2007 World 2005 OECD 2005

Domestic Energy Supply - Renewable vs non-renewables

Renewables Non-renewables

From Uribaci Sennes an Narciso [2009]

Green energy policy

In conclusion

Marked improvement in economic and social indicators in Brazil

Due to a combination of macroeconomic and financial stability; investment in social policies; and favourable external conditions

If there is a ‘model’, it lies in Brazil’s capacity to respond to globalisation on its own terms

IN TE R N ATIO N AL R E S E A R C H IN IT IATIV E O N B R A Z IL A N D A F R IC A

South Africa: Emerging Power or African Power?

Stephanie Barrientos

Institute of Development Policy and Management (IDPM)

Brooks World Poverty Institute

s.barrientos@manchester.ac.uk

South Africa Context

• S. Africa emerging middle power – World GDP: Brazil 3%; India 2.5%; S. Africa 0.5%

• Economic & Social Challenges:– Strong links to EU (affected by euro crisis) – Unrest in mining sector (50% exports) – Marikana– High Inequality and poverty levels– Unemployment (25%), skills shortages– Addressing legacy of apartheid

• ZA largest African economy (30% Africa GDP)

Africa: ‘The New Growth Frontier’

• Rates of GDP Growth 5% Sub-Saharan Africa (WB 2012)• Nigeria - 6.6%• Kenya - 4.6% • South Africa – 2.5%

• Consumer growth within Africa (Accenture 2012)– Consumer growth SSA 4% p.a. 2000-2012– 9 countries key to est. $1 trillion consumer spending 2020

Country 2010 Spend 2020 Est. Spend

Nigeria $ 115 bn $167 bn

Kenya $ 23 bn $ 37 bn

South Africa $ 215 bn $ 315 bn

Shifting Markets

South Africa Fresh Fruit - Export Destination (% export value)

Region 2001 2011

Africa 4.7 7.3

Asia& Middle East 19.9 31.0

EU 27 (ex UK) 47.7 35.8

UK 22.1 15.9Source: ITC trade database 2012

Changing retail landscape

Rising Private Standards

localg.a.p.

Climbing Value Chain Ladder

Product: Domestic

SupermarktStandards

Product & Process: Regional

Supermarket Standards

Product, Process,

Environ & Social: Global Supermarket

Standards

Implications for UK Retailers & Development Policy• UK Retail

– "Africa is really important to Sainsbury's and our customers … because we source a wide variety of products from this vast continent. Judith Batchelar, Director, Sainsbury's Brand.“

• Aid for Trade (WTO, EU and UK)– At the border, behind the border…. Beyond the border (value

chain)– Donors – e.g. DFID Trade and Global Value Chain Initiative

• Building & Supporting African Alliances – Regional/trade organisations– Governments– Private Sector– Civil Society

Implications for UK Policies

• Points to significance of BRICs beyond China. Opportunities to partner Brazil or India?

• Points to significance of emerging middle powers for international development – South Africa, Turkey, Indonesia, others?

• Recognising that Turkey is more than an EU membership issue – major implications for international development. In isolation or in partnership with UK?

• Policy focus needed on ideas and institutional influences as much as financial and resource flows