How Have ‘Developing’ Countries Actually Developed? Alternatives to Neoliberalism

How Have ‘Developing’ Countries Actually Developed? Alternatives to Neoliberalism

June 2018

This paper reviews how several developing countries which can be considered successes (with qualifications) have progressed economically, briefly capturing what policies and institutions might explain their performance. The analysis considers Mauritius, South Korea, Ecuador, Cuba, and the Nordic model/Norway. It also briefly considers Chile – a country whose ‘success’ is sometimes explained by neoliberal policies – and Botswana – often held up as Africa’s most successful developer.

In recent decades, the British and US governments, in particular, have largely promoted neoliberalism in developing countries as a supposed strategy to reduce poverty and promote economic development. Perhaps better described as ‘market fundamentalism’, neoliberalism has tended to involve: privatising key areas of the economy; reductions in state spending and the general role of the state; de-regulation of the financial sector and of corporate activities (relying on voluntary ‘corporate social responsibility’); strong promotion of foreign investment with few barriers, often accompanied by cutting taxes, promoting tax incentives for foreign investors; and failing to address rising inequality. Some of these policies are beginning to change, given the obvious failures of this model, but its general thrust is often still in evidence in the economic policies and aid strategies (not to mention domestic policies) of Western states such as the UK and the US.

Countries which have successfully developed in the postwar world do not owe their progress to neoliberalism. It is more accurate to say that the kinds of policies promoted by relatively successful states have generally tended to involve the opposite: a strong, interventionist role for the state; privileging domestic over foreign investors; liberalising only once the domestic economy and local firms can compete in world markets; periods of trade protection; and explicitly pro-poor state spending.

 

 

 

 

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The Alternatives: Approaches Towards a Life in Full

The Alternatives: Approaches Towards a Life in Full

Report for Health Poverty Action (April 2018)

This research collates some of the evidence of alternative approaches to market fundamentalism, or neoliberalism, from a range of countries which have – to varying extents – successfully promoted inclusive development or indeed, alternatives to Western ideas of development itself. They include South Korea, Cuba, Mauritius, Ecuador and the Nordic countries. The report analyses the economic and other policies that have been used by these governments to improve health and reduce poverty. It shows that market fundamentalism is a political choice and that the poverty, poor health and inequality it creates are not natural phenomena. There are a range of alternative policies that have contributed to improving people’s wellbeing and health and reduced poverty. Although there is no one size fits all, there is an urgent need to challenge those promoting market fundamentalism and look to these alternatives

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Making Tax Work for Girls’ Education: How and why governments can reduce tax incentives to invest more in girls’ education

Making Tax Work for Girls’ Education: How and why governments can reduce tax incentives to invest more in girls’ education

Report for ActionAid (February 2018)

This report presents new research in four developing countries – Malawi, Mozambique, Nepal and Tanzania – and shows: How much revenue these governments are losing to tax incentives, including from the tax treaties they have signed with other countries; What it would cost these countries to provide all girls with full access to primary education, and; How much this investment in girls’ education would benefit not only the girls themselves but the economy as a whole.

The research finds that:

  • Three of the four countries are losing more than half a billion dollars a year to tax incentives
  • The costs of educating all girls currently out of primary school is miniscule by comparison. Tanzania, for example, loses 15 times more in tax incentives each year than it would cost to educate all girls currently out of primary school
  • Two countries, Mozambique and Nepal, would gain more than $1 billion by educating all girls currently out of primary school over their 45 year working lives.

There are 61 million children of primary school age around the world who are out of school – most of whom are girls. To ensure that all girls have a good quality education, governments in developing countries need to increase their spending on education and improve its quality. One key way to raise extra resources is by increasing tax revenues, and one major way to do that is to reduce or eliminate the tax incentives that many governments now offer, especially to corporations.

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The Conflict, Stability and Security Fund: Diverting Aid and Undermining Human Rights

The Conflict, Stability and Security Fund: Diverting Aid and Undermining Human Rights

Report for Global Justice Now (December 2017)

The UK government’s Conflict, Stability and Security Fund (CSSF) raises all kinds of questions about the future of UK aid, the nature of the UK’s relations with states abusing human rights and the government’s openness with the public. Established in 2015, the CSSF is a £1 billion annual pot of money operating in dozens of countries which supposedly promotes the UK’s national security interests. Yet there are such fundamental problems with the CSSF that a complete overhaul is needed: It is increasingly using aid money to fund military and counter-terrorism projects which do not appear focused on what aid should be about: eradicating poverty and promoting inclusive development; It is funding ‘security’ forces in several states involved in appalling human rights abuses, thus the UK risks complicity in these violations; It is not transparent. Despite some improvements recently made to the Fund, programme details are scant and some appear to be misleading.

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Open Letter from Catholic Bishops to mining companies in South Africa urging greater transparency in their use of tax havens

Open Letter from Catholic Bishops to mining companies in South Africa urging greater transparency in their use of tax havens

29 November 2017

The Southern African Catholics Bishops Conference (SACBC) has today written an open letter to 21 mining companies operating in South Africa asking each to explain why it is using tax havens. New research conducted for the SACBC shows that these 21 companies, which include some of the largest in the country, such as Anglo American, AngloGold Ashanti, Impala Platinum, LonMin and Petra Diamonds, all have subsidiaries in tax havens, also known as secrecy jurisdictions: these include the British Virgin Islands, Cayman Islands, Mauritius, Jersey, the Netherlands and Bermuda. The 21 companies collectively have 117 subsidiaries in such tax havens.

Open letter is here

Media release is here

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Eritreans Exploited: UK Corporate Complicity in Human Rights Abuses

Eritreans Exploited: UK Corporate Complicity in Human Rights Abuses

Report for War on Want (January 2017, published online October 2017)

Eritrea’s totalitarian state is extreme and includes a ratified Constitution that hasn’t been implemented; the absence of national elections since independence from Ethiopia in 1991; its Parliament does not meet; the President, Isaisa Afwerki rules without institutional restraint; the government owns all media; and non-governmental organisations are not permitted. Much of Eritrea’s foreign exchange income comes from foreign gold and copper mining company projects in which the Eritrean government holds a 40% stake. The state control of these revenues is enhanced by the complete lack of mining revenue transparency in the country, a fact that has been persistently documented in various UN reports. There are several ways in which Britain is connected to Eritrean mining, thereby being complicit in the practices of this repressive regime. This includes not just the mining companies involved in exploration in the country, but the financial institutions that have invested in UK and other mining companies operating in Eritrea.

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Increasing Global Education Financing: Bold and Credible Pledges to Achieve Sustainable Change

Increasing Global Education Financing: Bold and Credible Pledges to Achieve Sustainable Change

Briefing for Global Campaign for Education (June 2017, published online October 2017)

Developing country governments have committed to ensuring inclusive and equitable quality education and lifelong learning for all by 2030, but to achieve this requires greater education spending: to at least 4-6% of GDP and 15-20% of national total budgets. Currently, low-income countries allocate an average of 16.7% of their national budgets to education (Sub-Saharan Africa 16.6%; South Asia 15.3%). UNESCO estimates that government spending on education by low-income countries will need to increase by 50% as a share of GDP by 2030. Governments can and must increase resources allocated to education, and ensure that this funding is spent equitably and effectively to secure the right to free, quality education. This briefing analyses why and how they should do this. Domestic resources to finance this extra education spending can be found. In particular, developing countries should expand their tax bases in progressive ways to ensure that they are raising at least 20% of their GDP in tax revenues. Currently, low-income countries raise on average around 16%, compared to around 33% in OECD countries.

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European Development Finance Institutions and Allegations of Land Grabs:  The Need for Further Independent Scrutiny

European Development Finance Institutions and Allegations of Land Grabs: The Need for Further Independent Scrutiny

Report for FERN (September 2017)

This study highlights the role of European Development Finance Institutions (DFIs) in alleged land grabs and questionable forestry projects in Africa. It documents nine such cases involving eight of the European DFIs. It raises the urgent need for more independent research into these projects and the need for much more scrutiny of the investment portfolios of the DFIs, including by the DFIs themselves and by national parliaments.

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Out of Pocket: How much are parents paying for public education that should be free?

Out of Pocket: How much are parents paying for public education that should be free?

Policy brief for ActionAid (August 2017)

According to international human rights law, primary education should be free of charge, and secondary education should be made progressively free. Yet in developing countries education is rarely entirely free: despite international obligations, many states continue to impose fees to access primary education. At the same time, families, many among the poorest in the world, have to pay the ‘indirect’ costs of education, such as for school books, uniforms or school maintenance. This briefing provides new figures on the costs incurred by parents when sending their children to school. These costs must be paid by the state, and no child should ever be denied access to education because of inability to pay the fees. Governments need to invest much more in providing a quality education for all their children – one which is truly free.

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Missed Opportunity: How could funds lost to tax incentives in Africa be used to fill the education finance gap?

Missed Opportunity: How could funds lost to tax incentives in Africa be used to fill the education finance gap?

Policy brief for ActionAid (August 2017)

How much revenue do African governments lose from providing tax incentives, such as giving companies tax holidays and exemptions on paying taxes on import duties and value added tax? And if these precious national budget resources were set aside to fund quality, public education instead, how much greater could education spending be? This brief provides figures for revenue losses from tax incentives for several African countries. It concludes that governments in sub-Saharan Africa may be losing US$38.6 billion a year, or 2.4% of their GDP, to tax incentives. This is equivalent to nearly half (47%) of their current education spending. Having a much clearer pro-poor policy for granting incentives and using some of these resources to fund education could provide a much-needed and significant boost to education budgets across Africa.

 

 

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