Author: Niamh Fallon
In the sixth lecture of the IIEA Development Matters series supported by Irish Aid, Professor Jeffrey Sachs took stock of the impact of COVID-19 on progress towards the Sustainable Development Goals (SDGs) and the prospects for “building back better” through sustainable and equitable solutions in the global recovery. He outlined some of the steps required for meeting these challenges in the short and long term.
In her introductory remarks to the lecture, Michelle Winthrop, Policy Director of Irish Aid, noted that we have entered the Decade of Action for implementing the SDGs, but that the impact of COVID-19 on the SDG framework remains unclear. She underlined Ireland’s commitment to the multilateral system in this context. Ms Winthrop posed the question of how to navigate the complex mixture of current challenges – some of which pre-date the pandemic, some of which have been caused by the pandemic, and some of which have been exacerbated by attempts to bring the virus under control – and how global actors might embrace the opportunities arising in recovery.
Prof. Sachs opened his remarks by stating that, in addition to stopping the spread of the virus, the biggest challenge currently facing the international community is learning from the experience of COVID-19. He stressed the importance of living up to the global commitments contained in the SDGs, the Paris Agreement, and the Convention on Biological Diversity, among others. Prof. Sachs advised national governments to use the lessons of the pandemic to reorientate social and economic policies so that they better support these goals. This, he argued, will require concrete plans at government level based on evidence and data, as well as the mobilisation of financial support.
Prof. Sachs highlighted the issue of governance as the deepest and most critical current global crisis and noted a trend away from what he referred as “rational politics” and towards populism in recent years, particularly in the US. He observed that the consequences of irrationality at political level are high, most obviously in relation to loss of life in the pandemic, but also in the sense that all SDGs are side-lined in this context.
Prof. Sachs stated that the crucial task both in tackling the pandemic and in building back better is achieving political engagement with science and expertise. According to Prof. Sachs, rational decision-making has been the key to governments’ relative success in dealing with COVID-19. A successful approach recognises the complexity of the challenges and politicians must be willing to consult with a variety of experts from wider society in order to build a complete picture, be ready to take hard truths on board, and be transparent in decision-making. Prof. Sachs observed that evidence, government reports, studies and deliberation are preferable to passing a range of laws without public consultation.
Relatedly, in order to achieve the SDGs by 2030, Prof. Sachs stated that governments should set a ten-year framework that encompasses all aspects of public policy from education to energy and land use. Part of this process is to honestly and transparently ask what it will take – in terms of policies, public investment and public financing – to reach the SDGs within that ten-year timeframe.
Prof. Sachs discussed food security as one specific negative impact of COVID-19 that requires urgent attention. He stated that the hunger crisis engendered by the pandemic is likely far deeper than currently understood as it is a largely silent crisis that affects the most powerless populations. Additionally, there is a general lack of screening for micronutrient deficiencies and malnutrition.
Prof. Sachs emphasised, however, that we are not witnessing a global food shortage in that supply chains have not collapsed. Rather, the income of the poorest populations has plummeted in areas such as remittances, retail and petty trade. Furthermore, the UN Sustainable Development Solutions Network’s 2020 Report highlights the longer-term difficulties for food-importing developing countries in the face of depreciating domestic currencies.
One approach to addressing hunger and malnutrition which Prof. Sachs highlighted is improved surveillance and data availability. He emphasised the importance of timely data that enables governments and experts to witness and respond to the crisis in real time and before the extreme effects of protest, disease and death become evident.
Prof. Sachs also suggested the extension of IMF credits on an emergency basis to facilitate more immediate intervention by governments.
Investing in the SDGs
Prof. Sachs drew a distinction between SDGs that require outright budgetary expenditure and those that are suited to investment finance. SDGs addressing areas such as healthcare, education and nutrition, for example, see a social rather than financial return and should therefore be publicly funded through budget revenues and not public borrowing or private investment. He stated that sectors such as clean energy, on the other hand, represent “bankable projects” for investment finance.
Prof. Sachs noted that the latter category also raises the question of where responsibility lies for ensuring investment in initiatives that serve long-term, sustainable development. While governments have a role to play in generating laws and strategies such as the European Green Deal – which Prof. Sachs described as the best blueprint for decarbonisation developed to date –, imperatives for investment in a sector such as renewable energy go beyond legal constraints. Prof. Sachs advised investors to look ahead to transformational trends and principles such as decarbonisation. He stated that this approach is a question of money as well as doing good in that, considering current trajectories, assets in fossil fuels will likely be stranded within the next five to ten years.
Prof. Sachs highlighted digitalisation as a second crucial transformation already underway. Digitalisation in health, governance, and payments are three notable growth areas of the economy and each represents a promising means of achieving the SDGs. Prof. Sachs noted Ireland’s central place in global digitalisation considering the country is the host of many European headquarters of Big Tech companies and plays a role as the link between the US and Europe in many digital sectors.
The Future of the International Finance System
Prof. Sachs noted that we will exit COVID-19 in 2021 with a severely disrupted global financial structure and widespread budget deficits, large public debt, and a need for increased government revenues.
In the short term, Prof. Sachs favours the IMF giving out credits to meet emergency needs. However, he stated that by 2022-23, global leaders will have to look to address the numerous financial instabilities and overhangs that have accrued in order to build a system that is better suited to sustainable development. This may necessitate a Bretton Woods II-style approach that would take a holistic view and incorporate finance, digital currencies, debt management and tax reform. According to Prof. Sachs, many of the elements needed for this are already in discussion including permanent debt relief, an OECD-level solution to digital taxation, and the IMF’s proposal for a general allocation of new Special Drawing Rights (SDRs).
COVID-19 has served to exacerbate global inequalities through the effect it has had on redistribution of wealth from low income to high income populations. Prof. Sachs quoted recent findings that the wealth of the richest 500 people in the world has increased by almost $1 trillion since 1 January 2020.
Prof. Sachs observed that as powerful companies’ profits are increasing, government revenues are decreasing substantially and stated that this illustrates the need for wealth taxation, and specifically the taxation of Big Tech companies. He further quoted the US House of Representatives Judiciary Committee’s October 2020 report, Investigation of Competition in Digital Markets, and the evidence showing such companies’ relative monopolies in their markets.
Multilateralism and International Cooperation
Prof. Sachs stressed that global cooperation will be crucial for overcoming current challenges and for realisation of the SDGs. Under the Biden administration, Prof. Sachs would anticipate a near immediate return of the US to the WHO, as well as to the Paris Agreement and UNESCO, and enhanced engagement with the UN overall.
A pressing concern is avoiding a cold war with China. Prof. Sachs noted that the framing of China as an enemy in casual rhetoric in the US is potentially harmful in that it loses sight of China as a nuclear superpower. While President-elect Biden will likely be a level-headed actor, Prof. Sachs described a “hardline liberal” element within the future Biden administration that may seek to set autocracies and democracies in opposition to each other.
However, Prof. Sachs stated that China wants and needs global cooperation and that as a major world power with a huge and skilled population, this should be encouraged. This is particularly true in the area of climate action following the recent commitment of China – the world’s leading emitter of greenhouse gases – to reaching net zero emissions by 2060. According to Prof. Sachs, focussing on areas of agreement and collective response is more constructive than finger-pointing, and fostering cooperation between large powers may be a role that Ireland can play effectively during its term as a non-permanent member of the UN Security Council between 2021 and 2022.