Power versus poverty: what should be the G20’s contribution to poverty eradication?


The website for this weekend’s G20 Summit in Brisbane notes that G20 economies account for around 85 per cent of the world’s gross domestic product but are home to more than half of the world’s poor.”  This stark statistic underlines the responsibility that G20 countries have for tackling poverty, and the critical role they could play in mobilising resources to finance the post-2015 development framework.

That being the case, we would have expected financing for development to be a major agenda item at the Brisbane Summit, especially in the run up to the next year’s Financing for Development Conference in Addis.

Instead, it appears that ‘strengthening development’ has been subsumed within the G20’s broader discussions under the following headings:

  • Increasing financing for infrastructure investment in developing countries by encouraging the right conditions to attract private sector investment
  • Ensuring that developing countries can reap the benefits of the G20’s efforts to improve the international tax system, including combating tax avoidance and increasing the sharing of information between tax authorities
  • Assisting developing economies to expand the use of formal financial services and take action to reduce the cost of transferring remittances into developing economies.

According to the official website: Focusing on these priority issues will ensure the development agenda supports global growth and ensures the G20’s broad priorities for improving global economic prospects contribute to better development outcomes.”

This analysis relies on the assumption that economic growth alone will deliver better development outcomes. But while growth remains critical, our analysis confirms that it will not be fast enough, or inclusive enough, to realise the ambitious goal of eradicating absolute poverty by 2030. Without specific targeting of resources, poverty will persist – particularly in sub-Saharan Africa. The World Bank’s most recent estimate is that, without accelerated efforts, some 400 million people will still be living in extreme poverty in 2030[i].

World Bank projections on poverty reduction by 2030

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Ending poverty and achieving other ambitious post-2015 goals for will require mobilising all available resources, domestic and international, private and public. While the efforts of developing countries and poor people themselves will contribute the most, international resources including the contributions of the G20 will have an important role to play.

The good news is that the volume of international resources received by developing countries has more than doubled since 2000, reaching an estimated US$2.2 trillion in 2012. The bad news is that some of these resource flows are highly concentrated on a small number of countries. Much of the overall growth has been driven by the expansion of foreign direct investment (FDI), lending and remittances, but two-thirds of FDI to developing countries goes to just 10 countries, while half of all remittances go to just five countries.

Although official development assistance (ODA) from traditional donors accounts for a decreasing share of the overall resources available for development, it remains the most poverty-sensitive international flow.

International financial flows to developing countries

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ODA is still the main international resource for countries with government spending of less than PPP$500 per person per year. Our analysis points to the continuing need for more, and better quality, development assistance if ambitious post-2015 development goals are to be met.

On this, the G20 economies, responsible for around 85% GDP as their website reminds us, have an extremely disappointing record. With the laudable exception of the UK, none have come close to reaching the 0.7% GNI spending target for ODA. The average across the G7 was only 0.27% in 2013. And while South–South Cooperation from emerging donors, including G20 members, is increasing, it represents a tiny proportion of their growing wealth.

At present, many G20 members are not simply funding their fair share in the fight against poverty, whether in relation to specific crises such as ebola, as Oxfam’s press release for the G20 points out, or, more generally, in terms of their overall financial contribution to development.

As the international community moves towards agreeing a new set of goals for the post-2015 framework, it is time for G20 members to start pulling their weight and mobilising their economic power to end poverty at home and abroad.

[i] World Bank, 2014/15 Global Monitoring Report