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The environmental challenge humanity faces is unprecedented in scale and consequences. For too long have macro views alone veiled the microphysics of economic development, writes economist Claudio Fernandes in the aftermath of the Hamburg Sustainability Conference.
The Hamburg Sustainability Conference (HSC), that just held its first iteration on October 7th and 8h, is another initiative from the German government in partnership with the United Nations Development Programme (UNDP) to contribute to the 2030 Agenda implementation. It is worth to recognize that since 2016, the Ministry of Economic Development and Cooperation (BMZ) has seriously collaborated to expand the reach and depth of knowledge toward the sustainable development goals, starting with the Partners for Review initiative, that among other things also inspired the Brazilian Spotlight Report methodology – a successful monitoring tool published by Gestos and produced by the civil society working group GT 2030 Agenda, a network of sixty-four non-governmental organizations.
This high-level Conference, opened by the German Chancellor Olaf Scholz under the eyes of several heads of states, the president of the World Bank and the IMF General Manager, was quite extensive. It was divided in two main branches of talks and showcase of deeds. Financing was a dominant theme of debate, spread out among New Alliance, Future, and Solutions talks as well as part of Accelerator roundtables that presented positive examples of financing innovation and connecting projects to investors – tourism in Zanzibar, biomethane from Lucresta, mGurush fintech from Uganda, among others.
Civil society organizations had small speaking participation in the official multi-stakeholder program with significant participation of the private sector as well as philanthropic and governmental organizations –particularly from Europe and Africa, though it did have all continents represented, and we manage to sufficiently intervene throughout.
Notwithstanding, the Conference was designed to provide networking opportunities, including the offer of a mobile app (that unfortunately crashed on my iPhone) and collect ideas to try and untangle the financing knot to accelerate the transition to sustainable development and climate resilience.
A lack of will in international finance is evident
What has become obvious nine years since the 3rd Conference on Financing for Development (FfD) is that despite all efforts and good intentions, private capital has not appeared neither sufficiently nor timely to co-finance the Sustainable Development Goals (SDGs). Enterprises of all sizes have not cleaned up their production and supply chains, and developed countries have exported their footprint through financial engineering off-sets, such as the ethereal carbon market or overseas manufacturing. Not even gender equality has been implemented in a considerable pace throughout the financial institutions, the ones that could more easily alter their procedures.
Another evidence to emerge from HSC’s debates is the lack of will for deep reforms in the international financial architecture, one that would optimize and place capital in the hands of those most capable of implementing the SDGs instead of keeping capital in the hands of large corporations, which are mostly part of the problem – take plastic production, fossil fuel dependent sectors etc.
There is a superlative gap between the billions of dollars available in the multilateral development banks and the territories and their communities. The same applies to the resources in the global funds. The large projects financed by Multilateral Development Banks (MDBs), whether by the World-, Asian-, African- or the New Bank, end up affecting communities and repeatedly creating negative social and environmental externalities.
This is but one reason for so much mistrust in the financing for development arena. Furthermore, besides the usual governmental country platforms with their complex and erratic political arrangements, there is no financial intermediation between the supply of capital to the microeconomic level of development, which is where change really occurs.
What it needs to transform the financial architecture
Besides reforming the long overdue governance structure of the Bretton Woods Institutions and being done once and for all with the gentlemen’s agreement on their top executive nominations, another major change that needs to occur is a deep reevaluation of the common ideological mindset that drives their decisions. Orthodox economics based on outdated concepts hinders effective policy making.
At the HSC’s opening panel, it was surprising to hear Ms Kristalina Georgieva make a point of the International Monetary Fund (IMF) giving “space for countries to grow,” contradicting in public the Fund’s continuous practice of advocating for conditionalities that shuts developing countries fiscal spaces, fueling a trap of indebtedness, low productivity, and commodity dependence, a neocolonial design to the benefit of value extraction. Not to speak of the quota system and loan surcharges.
Contrary to the hegemony narrative and political economy belief system, the world economy is not the fantasy land of free markets, multiple enterprises pushed by innovation, and law-abiding institutions. Whether nationally or internationally, the economy is dominated and politically conditioned by über-large corporations and cartels with power-hungry tentacles for profit maximization, in many ways acting in bad faith in order to guarantee disproportionate gains, such as the post-Covid case of inflation mostly caused by corporate price gouging. Will the negotiation for the 4th FfD Conference change its approach based on evidence or will it insist on mythical narratives?
Repeated many times, rarely respected: Business as usual will not advance the sustainability agenda
Transforming the financial architecture requires a good deal of effective interdisciplinary experience. The environmental challenge humanity finally realized it faces is quite unprecedented in scale and consequences. As repeated many times, though rarely acted on it, business as usual will not advance the sustainability agenda.
We must create new pathways to leverage the important work of community-driven innovation, unpaid care work, and micro-economic arrangements based on solutions to real needs of populations within their territory. This is what will fix people to the land and reduce immigration, one of the externalities of growing inequality within the current development regime.
For too long has the macro views alone veiled the microphysics of economic development. In order to change this, there must be another type of institutional arrangement and design thinking to overcome the lassitude of the current model for sustainable financing.
Claudio Fernandes is economist of Gestos, a Brazilian NGO, and of GT 2030 Agenda.
| Claudio Fernandes |  |
Gestos / GT 2030 Agenda |