This story raises a key question about development and development assistance: can governments that say they wish to foster development among poorer countries do so, when at the same time they pursue policies that impoverish the countries they are trying to help?
The general problem is a lack of coherence among policies: one set of policy objectives conflicts with or undermines another. Alas, policy incoherence in government programmes is common. As a former politician and cabinet minister in a G7 country, I enjoyed a firsthand view of that. In every instance I recall, incoherence was rooted in what were perceived by some as political imperatives.
I have encountered two schools of thought within the OECD on what can be done. The first is the one I champion, namely our role in pointing out how some of our policies undermine development. Agricultural subsidies and trade barriers are notorious examples, for not only do they prevent the developing world from fully exploiting our markets, but they prevent our own citizens from accessing cheaper, often better, products.
Tied aid, which commits recipients of financial assistance to specific suppliers from donor countries, is also an incoherent policy, as it is in direct conflict with trade liberalisation and free markets. Again, it is motivated by political considerations. Some argue that without tied aid, development funding would decline! If this position is correct, it suggests that incoherence is sometimes better than nothing. I am not convinced.
But it is incoherence in the area of migration that troubles me right now, particularly if it means emptying the developing world of valuable human capital. Migration can be a positive force if, for instance, it results in substantial financial remittances back to the developing world. But the active recruitment efforts by developed countries – some call it poaching – to induce skilled doctors, nurses, scientists and engineers to settle in rich economies, without any compensation for the investment in these skills made by the taxpayers in low-income ones, is a concern. These skills are competitively priced by OECD standards, but they may be scarce and valuable back home.
Human capital is the most important driver of economic growth. Physical assets or commodities cannot migrate of their own volition. Human capital can and does. Obviously, preventing migration would be unacceptable, the movement of labour being a fundamental freedom we uphold. But there is still incoherence in terms of a development strategy when OECD governments actively solicit skills from the developing world that cannot easily be replaced. Some coherence might be restored, for instance, if public policy in destination countries required some compensating payment in return.
Some argue that it is incoherent if we do not bring the policy knowledge within the OECD to developing countries, for their direct benefit. Though I have long promoted this concept of transferring knowledge, to me, this is not an issue of policy coherence; this is an issue of development policy, pure and simple. My own view is that there has been a widespread failure of the development community over many years to identify, adapt and apply the policies and insights within their governments and within the OECD that could spur development. It is now accepted wisdom that development cannot be a matter only of roads and bridges, or schools and hospitals, but must also be built on a policy environment founded on the rule of law, and institutions that enable businesses and the economy to flourish. We must transmit our expertise in such matters if we are to make our own donor aid and development policies more effective. Moving money and goods is important, but so is moving knowledge and expertise.
Imparting this knowledge offers an enhanced role for the OECD development community. Its members are well placed to identify the policy shortcomings and needs of development strategies on the ground, as well as transmitting knowledge, in areas like technology, banking, legal reform, and so on. There is, of course, a need for governments in developing countries to ensure coherence in their own policymaking. Have they created a favourable environment for investment? Are they cutting their tariffs? Are they building the institutions that are needed for market economies and successful entrepreneurship? Just like flows of trade, skills and knowledge, policy coherence for development is a two-way street.
©OECD Observer No 245, November 2004