The future of global cooperation is circular

In the 20th century, international cooperation was characterized by a grand conceptual separation between so-called “developed” and “developing” countries. Developed countries were not only the source of financial assistance to other parts of the world, but they were also presented as sources of knowledge and experience. Misconceived, this approach is obviously anachronistic today, as decolonial and other modern narratives begin to dominate debates. But the structures left behind by this way of thinking are still very much in place. 

As the paradigm shifts to a more holistic approach in which all countries and communities have an important role to play in shaping the future of human cooperation, new institutions and approaches are needed to represent an updated way of working together. The concept of Circular Cooperation supports a modern approach to international cooperation that goes beyond the traditional vertical ones.  

First, all parts of the world are encouraged and enabled to contribute their perspectives, experiences and insights to solving global challenges. Second, all countries (not just the wealthiest) are encouraged to contribute material resources (including money) to the effort, thus shifting in status from recipient to co-contributor and ensuring a more substantial seat at the decision-making table.In both aspects of Circular Cooperation there are lessons to be learnt from the EU’s regional integration experience for global institutions and processes.  

We cannot respond to the profound challenges our world faces – from conflict to pandemics, from worsening poverty to climate change – without a profound shift in perspective and action. With its more democratic and respectful approach to development, Circular Cooperation does not relieve wealthier parts of the world of their responsibility to contribute more, but it does add substantially to the resources – both intellectual and material – with which to build a better world.  

Join #KAPTalks with Jonathan Glennie, co-founder of Global Nation, to explore the concept of circular cooperation to redefine international development. 

The lecture is hosted by the Mykolas Romeris University in Vilnius. 

When: 14th November 2023 at 12:30 Vilnius time / 11:30 CET 

Where:  LAB 102, Research and Innovation Center / Mykolas Romeris University, Didlaukio 55, Vilnius 

You can join the lecture by:

  • asking your questions to Jonathan Glennie via Twitter using #KAPTalks hashtag

Reimagining ways to achieve SDGs – innovations in finance and digitalisation

Royston Braganza is a CEO of Grameen Capital which aims to provide debt financing to social enterprises across sectors such as affordable education and skill development, affordable healthcare, clean energy & innovation, agriculture, financialinclusion and livelihoods. Having a background in banking being in his earlier assignment a head of HSBC’s SME Business and Senior Vice President with HSBC, Royston Braganza was instrumental in setting up and heading HSBC’s Microfinance & Priority Sector business inIndia. Prior to that, he worked in Citibank India for over 8 years in various assignments across both the Consumer Bank andthe Corporate Bank.

In his talk titled Reimagining Ways To Achieve SDGs Innovations In Finance And Digitalisation, Royston Braganza pondered on how to respond to crises, how to make our life better, greener, cleaner and more inclusive. Keeping in mind that people are all interconnected in today’s world, he made it elear to reimagine the innovation and moving forward by focusing on two areas, finance and digitalisation. Considering the current health crisis which tums into an economic crisis and theninto a humanitarian crisis, it affects every part of life, state-wise and individual-wise. The urge to reimagine capital, whichshould be a capital with conscience. Covid-19 has distracted the norrnality but it is also an opportunity to build new systemsbłock by błock. A crisis urges to rethink values and actions and can cause a boost to build greener and inclusive life, as it has been said by the speaker: „In terms of digitalisation, it changes everything and helps to improve life. At the moment, we use mobile phones for contact tracing, whether in India, Nairobi or Riviera, the situation is the same. We use newtechnologies – solar power in Africa; AI, machine learning.

They say that data is the new oil. It’s actually better than oil because you can use data several times, and creatively. We nowneed to leam how to use it for making life better, and we should focus on serving every single person, so nobody is leftbehind.”

The speakers used an example of Grameen Foundation that in 2007 acknowledged that 400M people in India have to live with 2$/day and set a goal to bring microfinancing to 400M people via helping microfinancing companies to raise capital.Eventually and gradually microfinance NGOs tumed into mainstream banks and in 2008, through these NGO tumed into banks, Grameen had emphasised the impact on 52M clients, affecting the lives of about 300M people counting in the familymembers. Microfinancing has been a positive story, showing that one can do good and do well at the same time. lt is possible to make profit by facilitating affordable healthcare, education or housing to people who very much need it. This sentiment has been echoed in every aspect of life, including in churches and company boards. Now impact has become mainstream and fast­ growing, supporting the achievement of SDGs. Thanks to Grameen Foundation, 200M accounts were opened in a very short period in India, which was supported by the fact that 1B people got an ID, and that mobile technologycan be used. Nowadays, it is obvious that companies invest in their employees, are customer centric, reimagining the way todo business.

Royston Braganza also focused on ways to attract mainstream capital to combat the consequences of Covid-19 in his lecture, which tums to be the most relevant issue and barrier to achieve SDGs. Again, using an example of Grameen Foundation that has shown that taking a bigger risk can pay off – the foundation created an impact fund and distributed it in smaller shares of it to smaller distributors (at the moment it is a Covid-19 impact bond, which supports women artisans who get a monthly stipend and a training, which will help them to overcome the difficulties created by the pandemie). The existing models, Royston mentioned, are transferrable to other SDGs, for example to the climate: when big companies like Shell or Nesquik become funders of the bond, it should be distributed to communities through smaller NGOs and entities to fund activities and create impact at grass root level. The existing models can be scaled by awareness raising, and by creating one’s own networks.

Concluding the lecture, Royston Braganza mentioned that Grameen Foundation imagines financing the sustainable developmentgoals 1) through technology, 2) by measurement (for example, avoid green washing and rely on facts), 3) by results-basedapproach – by paying not for building a hospital but paying for a health outcome, 4) using a total ecosystem approach, i.e. taking into account that everyone is connected, and therefore we need to work together, 5) by the principle of universal inclusion.
The event was moderated by Dr Mihkel Solvak.

Economic recovery in the post-pandemic world

How will the world economy look like after the pandemic? Will governments take initiative to reshape their economies to better serve human needs? Is this a turning point for restructuring globalization for the public good? These were some of the questions addressed by Nobel Prize-Winning Economist Joseph Stiglitz in his Kapuscinski Development Lecture on „The Post-Pandemic World: Restructuring Globalization for the Global Public Good”.

Joseph Stiglitz started his lecture by recognizing that countries around the world responded differently to Covid-19 pandemic. According to him, the US, Brazil and India failed in their respective responses to the crisis, whereas Denmark and New Zealand did a better job in controlling both the pandemic and its economic aftermath. So what accounts for the successes and failures of different countries in coping with the Covid-19 pandemic? Are there any generalizations, Stiglitz asked, that we can draw from this encounter? According to Stiglitz, countries that recognize the importance of science and the institutions; and those that demonstrate deep respect for their citizens have done better. As he discusses in his recent book, Power, People and Profits: Progressive Capitalism for an Age of Discontent , countries which respect science, social organization, credibility and the institutions for the verification of truth have succeeded to raise the standard of living for their societies in the last 250 years. Not surprisingly, these countries managed to cope with the pandemic better than others.

Stiglitz argued that 6 months after the outbreak of the pandemic, it became clearer that the US was particularly vulnerable to this crisis due to the existing inequalities such as the lack of access to health care and good nutrition. “This is not an equal opportunity virus,” Stiglitz continued, “it goes after those who are most vulnerable. It has exposed and exacerbated inequalities in our society.” Now, there is a global consensus that we don’t want to bounce back to where we were in January 2020.

Speaking on the impact of Covid-19 on globalization, Stiglitz argued that the pandemic made us all suddenly all that “viruses do not carry passports, they can go anywhere in the world.” However, the economic system we have created is not resilient to global supply chains with a clear example being the US inability to produce masks, protective gear for health care workers or ventilators at the height of the pandemic. Stiglitz conclusion was that there is a need to create more resilient supply chains going forward. The lecture was followed by a Q&A session moderated by Anya Schiffrin.

Photo: Daniel Baud and the Sydney Opera House

Finance for the people

The finance sector of Western economies is the product of a ‘bottom-up’ process, in which institutions evolved to serve the local needs of households for payments, savings, and the mutual sharing of risks. These institutions were adapted over time to meet the developing needs of merchants and business.

But that was a long time ago. America and Western Europe today have a finance sector excessive size; a sector that has lost touch with the real economy, and which trades with itself, talks to itself, and judges itself by its own criteria. The outcomes have proved catastrophically unstable. What lessons for developing countries can be learned?

Beyond crowdfunding: power of crowd in development

Development assistance in a new world

Extreme poverty has been halved and people have never been richer, healthier or better educated. More than 600 million people have been brought out of poverty in China alone. But average global improvement is of little help for the over one billion people still living in extreme poverty. The world will come together this year at the UN to agree on the complete eradication of extreme poverty by 2030 and a new set of sustainable development goals. For the first time in human history, we have the knowledge and resources to eradicate poverty while preserving the planet.

Most important is policies. We must learn from success and do more of what works. Child mortality has been reduced by two thirds in Ethiopia and that alone has saved more lives per year than the number of people dying in all global wars combined. Schoolchildren in Vietnam are now doing better at school than children in much richer OCD countries. Korea has gone from one of the poorest countries in the world to one of the richest in a few generations. Young Koreans are 390 times richer than their grandparents were!  Lithuania has successfully transitioned into a democratic market economy and is now one of the fastest growing economies in Europe. There are so many stories of successful development. We must replicate these successes on a global scale.

Money is also important. Global aid remains stable at record high levels and reached $135 billion last year. Development aid has increased by 66% since 2000. And new donors are adding to this. China is now a major provider of aid. India, Indonesia and Brazil are giving as well as receiving aid. The United Arab Emirates is the most generous country in the world, giving 1.17% of national income to development assistance. Turkey is above the OECD average, hugely generous to Syrian refugees and increased spending by 8% last year. Hungary and Estonia increased development aid more than anyone at 25% and 19% last year. We need more and better aid! But we also need to use aid to mobilize the two biggest sources of development finance in the world: Private investments and tax!

Learn more as Erik Solheim, Chair of the OECD Development Assistance Committee, an alliance of the world’s main donors, talks about development aid in a new world.

How reduce poverty – aid that works

During the lecture, professor Hulme introduced ideas from his recently published book “Just Give Money to the Poor”. In this book he describes a different way of development aid; he called it “a development success story.” Many parts of the book are available on the Brooks World Poverty Institute website.

Cash transfers or broader concept of how social protection is provided for the populations has been slowly spreading across the world. It is not mentioned in the Millennium Development Goals. However, this concept is rapidly growing and in 2010 at „MDGs + 10 meeting” which was held in New York, there were frequent references to the need for cash transfers, to having social protection and social platforms for population. These days’ cash transfers are used by more than 110 million families in at least 44 countries; that is approximately 750 million people benefiting from cash transfers in low income and middle income countries. This number even increases as China introduces this concept, too. So, it may reach 1 billion people in low income and middle income countries. The ideas and impetus to introduce cash transfers have not come from aid donors or rich world, but it has came from the Global South, more specifically South Africa, Brazil, Mexico, India, followed by Indonesia and China. Professor Hulme stressed the need for political consensus in order to promote these programs; politics and cash transfers have to go hand in hand.

Professor Hulme introduced what he was going to talk about. The message was 4 findings, 2 debates and 5 principles. The findings are that recipients in low income and middle income countries use money well, although these are only small sums of money. It is also an efficient means of reducing poverty in a short term. People can increase household income, reduce hunger, improve nutrition and get children go to school. However, there are also long term benefits. This concerns literacy, physical well being of children and of populations. Cash transfers can also contribute to the economic growth and make it more pro-poor. There is also some evidence that it can help with the political evolution of countries. Professor Hulme mentioned affordability of cash transfers, too. He argued that it can be afforded on a modest scale and then it can be developed over time.

Professor Hulme introduced two debates, about conditions and targeting. There are two kinds of evidence. Both, conditions and targeting can be good and bad. So, it needs to be debated and it has to be approached very contextually. One has to think about the country, locality and objectives of the programme. These programmes of cash transfers can go ahead if they are fair, assured, practical, make a difference also with a small amount of money and if they are popular in political terms.

Cash transfers are payments which are regular (people get them on a regular basis, usually monthly), long-term (people can get them for a few years or for a whole life), rights based (people are entitled to have them, it should not just be a charity) and tax-financed (ideally financed from the domestic tax, donors can help in establishing the schemes and financing them in the early years). They should be a form of a social assistance not a social insurance or a labour market regulation.

There are 5 types of cash transfers: social pensions (people are entitled to get them reaching a certain age), child benefits (e.g. in Southern Africa countries), family grants (for poorest families), disability allowances (in African and Asian countries), and cash for work programs (people get money for working on public works such as in India).

South Africa is a good example to be used as a case study. It has social pensions and child benefits. Around 2,3 million people, this is 85% of people aged over 63 get the social pension although they have not contributed to it. Child benefits have expanded a lot over the last four years. 8,5 million people receive them which is over 55% of children under the age of 16. In this case, there is targeting, but it is unconditional. Although, it is a big sum of money (3,5% of the GDP), there are benefits of reducing poverty in a short term. These schemes are diffusing across the Southern African region. Namibia, Lesotho and Botswana already use the scheme of social pensions and there are other countries in the region which are considering their introduction. Professor Hulme noticed that South Africa has enormous problems with not generating employment, so the cash transfers are not enough in themselves. Other fundamental changes in the macroeconomic structure are needed.

Another example, which professor Hulme used, was Brazil. He introduced the scheme of Bolsa Familia which goes to around 11,6 million families with per capita income under 30% of minimum wage, so it is targeted and there are conditionalities, too. Social pensions go to 6,6 million of people. So, all in all, 39% of the population gets cash transfers (it is 1,5% of its GDP). Brazil has had excellent economic growth over the last ten years, and inequality and poverty has reduced.

Results of many studies showed that poor use money wisely, mainly on family, that there are benefits for the next generation (regarding nutrition, education, etc.) and it does not discourages the work. Cash transfers can offer short-term and long-term benefits. Concerning short-term benefits, the grants are used by whole family, around a half of it is spent on more and better food, children are taller and healthier with increased school attendance and higher potential to learn, and it contributes to the reduction of inequalities, e.g. in income, food consumption and access to education. The most important long-term advantages are that the money is spent locally. Other people are probable to get employment as money is spent for buying local. So, it stimulates the local economy, it increases investments and it encourages job seeking.

There is an existing stereotype that cash transfers make people lazy. Professor Hulme argues that it is not true. He said that cash transfers provided a necessary base for poor people. They know how to invest money locally to have a profit. The problem is that they lack cash to take opportunity. Cash transfers also reduce risk aversion. Poor people are conservative about taking risk. But households which get cash transfers can think about taking small risks. Closely related to risk is also planning. Risk represents an enormous problem for poor families; very often they would face questions such as will my family starve if I try a new crop and I fail? Should I risk buying a fertilizer? Or, can we afford a bus fare to look for the job? Therefore, cash transfers are very important, because they represent a guarantee of the future income, it permits risk taking and it provides a sort of insurance in the case of failure. Cash transfers also allow small farmers and entrepreneurs to take a micro-credit, because in the case of failure it may be paid by cash transfers.

There are 4 assumptions that have to be taken into account if the political leaders or aid donors decide to implement this strategy. Is poverty partly caused by lack of predictable income? Are opportunities available? Can we trust poor? Is giving money to the poor ethically right? Professor Hulme thinks that if cash transfers are applied contextually the answer to all the questions is yes and therefore cash transfers should be introduced.

There has been a change in the elite or middle class attitudes in the last decade in developing countries. There is a gradual rejection of the attitude that growth is enough, that the poor are lazy, that we cannot afford welfare or social protection. And there is an increasing consensus that if a country wants to have national development, there is a need for growth, human development and human security. It is accompanied by understanding that poor are good “economists”. A very important fact is that costs of social protection constitute only 0,5 -2,0 % of GDP and therefore it should not represent a real problem for the economy.

Among scholars there are 2 ongoing debates: conditions and targeting. There are arguments for and against conditions. In Mexico, there are highly conditional programs. In South Africa, programmes are unconditional. Arguments for are that one can improve the long-term impacts and change the culture of certain social groups. On the other hand, paternalism and low quality of existing services are main arguments against conditions.

Targeting is the second part of the debate. If you target you can give money to those who need it most. Targeting is different from country to country as well as from program to program, i.e. South Africa: pension is untargeted; meanwhile child benefit is targeted on poorest half. Arguments against targeting are that it is difficult to do it accurately, it is divisive and may be seen as unfair, it brings opportunities for corruption or manipulation and it represents additional administrative costs. The problem with targeting is also when you try to target the poorest of poor, i.e. in Africa it has proved to be problematic as people can say “we are all poor”. Professor Hulme in this case emphasized the necessity to apply contextual knowledge and to avoid taking extreme sides for or against it.

Cash transfers need to be seen as fair. This means that most citizens must agree on “who gets grants”. They need to be assured on a weekly basis, a monthly basis or annually. It needs to be practical, so you have to be able to deliver it. It needs to be more than a few cents. It should make at least 20% of poor household income. And finally, they should be popular and politically acceptable. Politicians, middle class and elites should support them. They should not just be a single programme, but they should become a part of an evolving social policy framework.

Professor Hulme thinks that cash transfers provide immediate poverty reduction and social protection; they may increase good governance and reduce risk. They increase investments and impact next generations. They are a necessary step on the way to a national welfare system. However, it must be seen as developmental, not as safety nets. Therefore, the main message is to give money to the poor. However, not as a charity or out of helicopters, but as a carefully designed programs deriving from national decision-making and experience and there is a role for donors and international agencies to support it with cross-national learning, help countries to recognize the affordability and joint financing, particularly in low income countries in Africa.

Lessons from 50 years of aid giving

During her talk prof. Lancaster highlighted the issues that a new donor country should take into consideration in building its own state aid program and used the more than fifty years experience of the USA, but also her own decades of involvement both as an academic but also as a practitioner in the field and a high ranking administrator, to demonstrate good practice but also the things to avoid. The main theme of the talk is that foreign aid for development is a discrete activity, involving trained and experienced professionals and effective business practices. How and where such a function is organized is also important to the effective functioning of aid, and therefore, each donor country taking into consideration the prevailing environment, available resources, other constraints and the international best practice should develop its own state aid program.

What Cyprus can do is to assist people in need after a natural disaster or national emergency or people in the middle of war or fleeting war zones. This is a critical role for Cyprus and in the past few years has repeatedly contributed assistance, aid, shelter and medical support. The proximity of Cyprus to the Middle East and the long term relations with the people of the region enable Cyprus to be of assistance in times of need. Such examples include the recent war in Lebanon where thousands of people found refuge in Cyprus; assistance, aid and medical support and supplies to Palestinians in the Gaza Strip the victims of Tsunami in East Asia, and the peoples of Armenia, Georgia and Nagorno Garabah among others.

In the case of Cyprus a small, new donor with no tradition in the field the Government prefers to channel aid through NGOs active in the field such as the Red Cross, Ayia Sofia Foundation and the Volunteer Doctors of Cyprus. This is fine provided that the organizations implement effective business practices as described below.

They need to have effective business practices: systems that permit them to plan interventions effectively, contract and implement them, monitor their progress and assess their outputs, outcomes and impact. Monitoring and assessment is important but often a weakness of aid agencies. There needs to be a degree of independence in the latter function from the aid agency for best results. At the same time part of the aid should go into strengthening the administration and accounting functions of the NGOs as means to ensure sound and transparent administration and accountability. Along the same lines the legal framework that allows these organizations to function should be strengthened and external audit from qualified accountants should be reinforced for all projects.

The organization and location of an aid agency is also important: should it be part of the foreign ministry (as in Cyprus) or autonomous? When it is the former, foreign policy considerations can come to drive aid allocations to countries and decisions on their use. Of course in the case of Cyprus initiatives, guidelines and/or projects undertaken by the EU also influence the process. In the US (which has claimed a world leadership role), this can be problematical, leading to a loss of the development mission. In a smaller country this is not so much of a problem.

Finally, all democratic aid-giving governments need to be able to create a political coalition of support at home for annual aid expenditures (including within government, the legislature and the general public) to ensure that these annual expenditures have an adequate political base to sustain them. These are the challenges facing Cyprus today as it begins its journey as a donor as well as a recipient of foreign aid.