TheWorld Bank N o v e m b e r PREMnotes 2 0 0 3 n u m b e r 8 2 Poverty Reaching effective consensus: Monterrey and the development agenda How best can the needs and demands of rich and poor countries be reconciled in efforts to foster development? The Monterrey Consensus provides guidance--but also points to serious obstacles in international negotiations. Recent international conferences have re- issues remain outside the discussion. Others "It should be the flected a renewed interest in development. go further, saying that even if the Monterrey Among the most notable have been the 2001 Consensus represents a new commitment to responsibility of Ministerial Conference of the World Trade development, the effort is ultimately futile Organization in Doha, Qatar, which launched because the development model it promotes the Bank's the "development round" of talks on trade is fundamentally flawed. This note examines liberalization; the 2002 World Summit on these issues and concludes that, though far Development Sustainable Development in Johannesburg, from perfect, the Monterrey Consensus offers South Africa; and the 2002 International Con- a genuine opportunity to forge a global part- Economics Vice ference on Financing for Development in nership for development. Monterrey, Mexico, which resulted in the Presidency and Monterrey Consensus on the international Is the consensus fair--and agenda for development. feasible? PREM Network to The Monterrey Consensus focuses on in- The Monterrey conference was a significant creasing international cooperation to reduce step in advancing the development agenda. start rethinking poverty in developing countries by: Developing countries claimed responsibility · Improving policies and outcomes in these for their development, while industrial coun- the development countries. tries pledged financial assistance to make that · Delivering more--and more effective-- development a reality. agenda." aid from donor countries. The document that emerged from the con- --Robert Wade, Professor · Improving market access for exports from ference--adopted by nearly 200 countries-- of Political Economy, developing to industrial countries. addresses donor countries' concerns about London School of Advocates of the consensus see it as evi- lack of accountability among recipient gov- dence of a stronger voice for developing coun- ernments as well as recipients' complaints Economics tries in issues related to their development about insufficient aid from donors (box 1). and of a renewed commitment by industrial Although the UN Millennium Declaration of countries to increase aid and market access. 2000 established broad consensus on the Mil- But critics claim that the Monterrey Consen- lennium Development Goals, a commitment sus is little more than artifice--and that deep to the actions and financing required to rifts between rich and poor countries prevent achieve them was lacking. Monterrey forged tangible progress. that commitment--and established a struc- Moreover, some observers have noted that ture of accountability for both industrial and despite broad areas of agreement, crucial developing countries. from the development economics vice presidency and poverty reduction and economic management network Box 1 Elements of the Monterrey Consensus of GNP. Formalizing indicators and moni- toring the dates by which industrial coun- The Monterrey Consensus is the product of the International Conference on tries boost market access to developing Financing for Development, sponsored by the United Nations and held in Mon- country exports and achieve the 0.7 per- terrey, Mexico, in March 2002. The conference brought together 50 heads of cent goal for aid--in the same way that the state and government, major intergovernmental institutions, and private sector and civil society leaders to discuss development challenges. first seven Millennium Development Goals Almost 200 countries agreed on the "Final Outcome" document drafted at are being quantified and monitored-- the conference. This brief but wide-ranging document forms the basis for the would be a useful step toward effective consensus, calling for a global partnership between industrial and developing implementation of the Monterrey Con- countries to ensure that globalization results in sustained, equitable development sensus. But as World Bank President James for all the world's people. In addition, the document declares the achievement Wolfensohn has said, the essence of a global of long-term, pro-poor growth and the Millennium Development Goals essential for raising living standards in developing countries. Vital to such efforts are: partnership for development is not in its · Developing good governance and democratic institutions. quantifiable targets, but in the goodwill · Sustaining sound macroeconomic policies. needed to make it a functional agreement. · Implementing effective social safety nets. The imbalance in the consensus also · Mobilizing foreign and domestic investment. reflects a larger problem: limited voice for · Liberalizing trade and increasing market access. · Increasing the amount and effectiveness of official development assistance. developing countries in development issues. · Making debt burdens sustainable. Many critics have noted this lack of voice in The document also calls for continued engagement to make the consensus the governance structures of international operational--including annual reports on its progress and a follow-up confer- financial institutions, and so have expressed ence by 2005. support for reforming these structures. Yet calling the Doha conference the "devel- But the news is not all good, and there opment round" and support for the Mon- is reason for skepticism about the agree- terrey Consensus show that the voice of ment's structure and its chances of becom- developing countries is increasing. ing operational. The first seven Millennium More important, the consensus shows that Development Goals are primarily the respon- developing countries will push forward sibility of developing countries, while only regardless of the halting cooperation of the eighth (forming a global partnership for industrial (OECD) countries. Indeed, for development) falls mainly on industrial coun- Ariel Buira, director of the G-24 Secretariat, tries, as noted by Evelyn Herfkens of the the Monterrey Consensus is not so much an United Nations. attempt at a balanced contract but a recog- Furthermore, the first seven goals include nition by developing countries that "their an elegant system of targets, indicators, and development is their own responsibility," timelines for monitoring progress. But the with necessary complements provided by eighth goal--and the increased aid and industrial countries in the form of increased trade reforms among OECD countries aid and market access. Monterrey leaves no needed to achieve it--has no commensu- doubt--getting its house in order is the rate targets and timelines. Herfkens has developing world's top priority. noted that within the World Bank and other development institutions, an "army of peo- A consensus to move in the ple" is tracking developing countries' pro- wrong direction? gress. Yet no similar group is monitoring Another criticism of the Monterrey Con- donor countries' obligations. sensus goes beyond merely insisting on a The structural imbalance of the consen- balanced contract, instead assailing the sus has led some observers to question its development approach embodied in the potential for implementation. Many doubt consensus. These critics claim that even if that industrial countries have the political the consensus were a balanced contract will to counter entrenched producer inter- between industrial and developing coun- ests favoring trade barriers or to increase tries, it would merely be a consensus to foreign aid to the stated goal of 0.7 percent move in the wrong direction. PREMnote 82 November 2003 In its focus on the Millennium Develop- model embodied in the Monterrey Con- ment Goals and their myriad quantifiable sensus nothing more than free market fun- indicators, has the Monterrey Consensus for- damentalism, they paint an unfair and gotten the vital importance of growth? unrealistic caricature. Still, the persistence of Although growth is implicitly required to these critics is a reminder that it is always achieve the development outcomes speci- wise to continuously question basic assump- fied by the Goals, there is a danger that tions, and that policies often considered overemphasizing the Goals will detract from taboo--among them protection for infant efforts to promote growth. industries, selective industrial policies, and At best, looking at each Goal individu- capital controls--merit further evidence- ally poses an obstacle to promoting com- based analysis. prehensive, multisector approaches to "The credibility of development. At worst, overemphasis on the Silences in the consensus Goals as isolated indicators to be achieved A consensus as broad as that adopted at Mon- the package this time on a fixed timeline smacks of target planning terrey is often as significant for what it excludes in the mold of former centrally planned as for what it includes. The impact of the con- around very much economies. The temptation to portray achiev- sensus could be undermined by the absence, ing the Millennium Development Goals as a or at least underemphasis, of several themes depends on the direct product of increased aid could detract considered fundamental to economic devel- from a more sophisticated understanding opment. The vital role of economic growth extent to which we of how economic growth affects efforts to has already been noted; other "silences" in reduce poverty and advance human devel- the consensus include private sector devel- become serious opment. Thus the World Bank must remem- opment, foreign direct investment, and tech- ber its role: as Geoffrey Lamb, the Bank's nology and knowledge transfer. about the vice president for resource mobilization and Economic growth in developing countries cofinancing, has said, "Our job should be cannot occur without a vigorous private sec- obligations... to make poor countries and low-income tor supported by foreign direct investment. countries into normal countries, that is, Underscoring the lack of focus on growth of OECD countries." countries which have endogenous and rea- at the Monterrey Consensus, therefore, are --Evelyn Herfkens, sonably effective processes of capital accu- the forgotten roles of the private sector and Special Adviser to the UN mulation and growth." foreign direct investment. Although both Secretary-General The Bank should not allow the Mon- are mentioned in the document adopted at terrey Consensus to be misconstrued as a the conference, they have--in the view of quid pro quo--money given by industrial some critics--received scant attention. countries in exchange for reforms and Given that foreign direct investment in accountability in developing countries-- developing countries is five times official which would essentially amount to "old-style development assistance, the development conditionality come back," in the words of community overlooks such investment at its Shanta Devarajan, staff director of the peril. In its efforts to achieve the Millennium Bank's World Development Report 2004. Devel- Development Goals, the Bank must take a opment cannot be bought so easily. leading role in forging public-private part- Some critics go beyond these concerns, nerships and ensuring that foreign direct issuing broad indictments of what they con- investment is spread equitably throughout sider the misguided and ineffective free mar- the developing world. ket fundamentalism implicit in the prevailing Another element of silence in the con- model for development. These critics are sensus is the vital role of knowledge and tech- correct in pointing out that many success- nology transfer in providing a foundation ful (former) developing economies--par- for sustained economic growth. As Devara- ticularly in East Asia--have diverged from jan says, policy and institutional reforms in orthodox policy prescriptions in recent developing countries are insufficient with- decades. But by calling the development out the ability to scale up output--an abil- PREMnote 82 November 2003 ity that only knowledge and technology vide cause to push for more (and more effec- transfer can provide. Yet the Monterrey tive) aid, better policies and institutions, and Consensus glosses over this vital issue, an increased market access for the develop- indifference that could limit economic ing world--in short, to make the promises growth and undermine the effectiveness of of Monterrey functional. As Lamb has said, the consensus. In response, Devarajan has despite the many reasons for pessimism, the called for a "systematic effort by the donor political moment is propitious: "It has be- "Development is community to effect that knowledge trans- come possible to hold industrial countries fer." Future international forums should to account for some things in a way that was going to happen focus more explicitly on private sector just not on the agenda before...and we have growth, foreign direct investment, and to capitalize on that, highly imperfect and as a result of a very knowledge and technology transfer to the highly sporadic though it is." developing world. close partnership This note was written by John Page (Director, Poverty Any consensus on the Reduction, PREM Network) and Todd Pugatch between the private consensus? (Junior Professional Associate, Office of the Vice Wide-ranging criticism of the Monterrey President, PREM Network), based on the PREM sector and the Consensus suggests that the "consensus," if Conference Plenary Session, "Partnerships for Fairer not an outright misnomer, will at best require Development--Building an Effective Consensus: public sector." significant political maneuvering and resolve Monterrey, Doha, and the World's Poor," held 15 to ensure its proper functioning. Indeed, if April 2003. All quotations in this note are drawn --Shahid Javed Burki, CEO, there is agreement on anything, it is that from that session. The session's moderator was John EMP Financial Advisors industrial and developing countries have not Page; the panelists were Evelyn Herfkens, Shahid yet arrived at the type of contract that, to Javed Burki, Ariel Buira, Robert Wade, Shanta paraphrase Bank President Wolfensohn, can Devarajan, and Geoffrey Lamb. be put in a drawer and forgotten because it If you are interested in similar topics, consider works so well. As Herfkens has concluded, joining the Pro-Poor Growth and Inequality The- "the essence of all this is political will." matic Group (contact Louise Cord, x30969), the Still, healthy skepticism should not give Growth Thematic Group (contact Edgardo Favaro, way to outright cynicism. The flaws in the x30599), or the Empowerment Community of consensus are not sufficient justification Practice (contact Abigail Somma, x84949). For to condemn the entire approach or to scrap more information on Thematic Groups, visit efforts at implementation. 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