2015 is a pivotal year. Three major workstreams among all the world’s nations are going forward this year under the auspices of the United Nations to develop goals, financing, and frameworks for the “post-2015 sustainable development agenda.” First, after two years of wide-ranging consultation, the U.N. General Assembly in New York in September will endorse a new set of global goals for 2030 to follow on from the Millennium Development Goals (MDGs) that culminate this year. Second, to support this effort, a financing for development (FFD) conference took place in July in Addis Ababa, Ethiopia, to identify innovative ways of mobilizing private and public resources for the massive investments necessary to achieve the new goals. And third, in Paris in December the final negotiating session will complete work on a global climate change framework. 

These three landmark summits will, with luck, provide the broad strategic vision, the specific goals, and the financing modalities for addressing the full range of systemic threats. Most of all, these three summit meetings will mobilize the relevant stakeholders and actors crucial for implementing the post-2015 agenda—governments, international organizations, business, finance, civil society, and parliaments—into a concerted effort to achieve transformational outcomes. Achieving systemic sustainability is a comprehensive, inclusive effort requiring all actors and all countries to be engaged.

These three processes represent a potential historic turning point from “business-as-usual” practices and trends and to making the systemic transformations that are required to avoid transgressing planetary boundaries and critical tipping points. Missing from the global discourse so far is a realistic assessment of the political decisions and institutional innovations that would be required to implement the post-2015 sustainable development agenda (P2015).

For 2015, it is necessary is to make sure that by the end of year the three workstreams have been welded together as a singular vision for global systemic transformation involving all countries, all domestic actors, and all international institutions. The worst outcome would be that the new Sustainable Development Goals (SDGs) for 2030 are seen as simply an extension of the 2015 MDGs—as only development goals exclusively involving developing countries. This outcome would abort the broader purposes of the P2015 agenda to achieve systemic sustainability and to involve all nations and reduce it to a development agenda for the developing world that by itself would be insufficient to make the transformations required.

Systemic risks of financial instability, insufficient job-creating economic growth, increasing inequality, inadequate access to education, health, water and sanitation, and electricity, “breaking points” in planetary limits, and the stubborn prevalence of poverty along with widespread loss of confidence of people in leaders and institutions now require urgent attention and together signal the need for systemic transformation.

As a result, several significant structural changes in institution arrangements and governance are needed as prerequisites for systemic transformation. These entail (i) political decisions by country leaders and parliaments to ensure societal engagement, (ii) institutional innovations in national government processes to coordinate implementation, (iii) strengthening the existing global system of international institutions to include all actors, (iv) the creation of an international monitoring mechanism to oversee systemic sustainability trajectories, and (v) realize the benefits that would accrue to the entire P2015 agenda by the engagement of the systemically important countries through fuller utilization of  G20 leaders summits and finance ministers meetings as enhanced global steering mechanisms toward sustainable development.   Each of these changes builds on and depends on each other.

I. Each nation makes a domestic commitment to a new trajectory toward 2030

For global goal-setting to be implemented, it is essential that each nation go beyond a formal agreement at the international level to then embark on a national process of deliberation, debate, and decision-making that adapts the global goals to the domestic institutional and cultural context and commits the nation to them as a long-term trajectory around which to organize its own systemic transformation efforts. Such a process would be an explicitly political process involving national leaders, parliaments or rule-making bodies, societal leaders, business executives, and experts to increase public awareness and to guide the public conversation toward an intrinsically national decision which prioritizes the global goals in ways which fit domestic concerns and circumstances. This political process would avoid the “one-size-fits-all” approach and internalize and legitimate each national sustainability trajectory.

So far, despite widespread consultation on the SDGs, very little attention has been focused on the follow-up to a formal international agreement on them at the U.N. General Assembly in September 2015. The first step in implementation of the SDGs and the P2015 agenda more broadly is to generate a national commitment to them through a process in which relevant domestic actors modify, adapt, and adopt a national trajectory the embodies the hopes, concerns and priorities of the people of each country. Without this step, it is unlikely that national systemic sustainability trajectories will diverge significantly enough from business-as-usual trends to make a difference. More attention needs to now be given to this crucial first step.  And explicit mention of the need for it should appear in the UNGA decisions in New York in September.

II. A national government institutional innovation for systemic transformation

The key feature of systemic risks is that each risk generates spillover effects that go beyond the confines of the risk itself into other domains. This means that to manage any systemic risk requires broad, inter-disciplinary, multi-sectoral approaches. Most governments have ministries or departments that manage specific sectoral programs in agriculture, industry, energy, health, education, environment, and the like when most challenges now are inter-sectoral and hence inter-ministerial. Furthermore, spillover linkages create opportunities in which integrated approaches to problems can capture intrinsic synergies that generate higher-yield outcomes if sectoral strategies are simultaneous and coordinated.

The consequence of spillovers and synergies for national governments is that “whole-of-government” coordinating committees are a necessary institutional innovation to manage effective strategies for systemic transformation. South Korea has used inter-ministerial cabinet level committees that include private business and financial executives as a means of addressing significant interconnected issues or problems requiring multi-sectoral approaches. The Korea Presidential Committee on Green Growth, which contained more than 20 ministers and agency heads with at least as many private sector leaders, proved to be an extremely effective means of implementing South Korea’s commitment to green growth.

III.  A single global system of international institutions

The need for a single mechanism for coordinating the global system of international institutions to implement the P2015 agenda of systemic transformation is clear. However, there are a number of other larger reasons why the forging of such a mechanism is crucial now.

The Brettons Woods era is over. It was over even before the initiative by China to establish the Asia Infrastructure Investment Bank (AIIB) in Beijing and the New Development Bank (NDB) in Shanghai. It was over because of the proliferation in recent years of private and official agencies and actors in development cooperation and because of the massive growth in capital flows that not only dwarf official development assistance (concessional foreign aid) but also IMF resources in the global financial system. New donors are not just governments but charities, foundations, NGOs, celebrities, and wealthy individuals. New private sources of financing have mushroomed with new forms of sourcing and new technologies. The dominance of the IMF and the World Bank has declined because of these massive changes in the context.

The emergence of China and other emerging market economies requires acknowledgement as a fact of life, not as a marginal change. China in particular deserves to be received into the world community as a constructive participant and have its institutions be part of the global system of international institutions, not apart from it. Indeed, China’s Premier, Li Keqiang, stated at the World Economic Forum in early 2015 that “the world order established after World War II must be maintained, not overturned.”

The economic, social and environmental imperatives of this moment are that the world’s people and the P2015 agenda require that all international institutions of consequence be part of a single coordinated effort over the next 15 years to implement the post-2015 agenda for sustainable development. The geopolitical imperatives of this moment also require that China and China’s new institutions be thoroughly involved as full participants and leaders in the post-2015 era. If nothing else, the scale of global investment and effort to build and rebuild infrastructure requires it.

It is also the case that the post-2015 era will require major replenishments in the World Bank and existing regional development banks, and significantly stronger coordination among them to address global infrastructure investment needs in which the AIIB and the NDB must now be fully involved. The American public and the U.S. Congress need to fully grasp the crucial importance for the United States, of the IMF quota increase and governance reform.  These have been agreed to by most governments but their implementation is stalled in the U.S. Congress. To preserve the IMF’s role in the global financial system and the role of the U.S. in the international community, the IMF quota increase and IMF governance reform must be passed and put into practice. Congressional action becomes all the more necessary as the effort is made to reshape the global system of international institutions to accommodate new powers and new institutions within a single system rather than stumble into a fragmented, fractured, and fractious global order where differences prevail over common interests.

The IMF cannot carry out its significant responsibility for global financial stability without more resources. Other countries cannot add to IMF resources proportionately without U.S. participation in the IMF quota increase.   Without the US contribution, IMF members will have to fund the IMF outside the regular IMF quota system, which means de-facto going around the United States and reducing dramatically the influence of the U.S. in the leadership of the IMF. This is a self-inflicted wound on the U.S., which will damage U.S. credibility, weaken the IMF, and increase the risk of global financial instability. By blocking the IMF governance reforms in the IMF agreed to by the G-20 in 2010, the U.S. is single-handedly blocking the implementation of the enlargement of voting shares commensurate with increased emerging market economic weights.  This failure to act is now widely acknowledged by American thought leaders to be encouraging divergence rather than convergence in the global system of institutions, damaging U.S. interests.

IV. Toward a single monitoring mechanism for the global system of international institutions

The P2015 agenda requires a big push toward institutionalizing a single mechanism for the coordination of the global system of international institutions.  The international coordination arrangement today, is the Global Partnership for Effective Development Cooperation created at the Busan High-Level Forum on Aid Effectiveness in 2011.  This arrangement, which recognizes the increasingly complex context and the heightened tensions between emerging donor countries and traditional western donors, created a loose network of country platforms, regional arrangements, building blocks and forums to pluralize the architecture to reflect the increasingly complex set of agents and actors. This was an artfully arranged compromise, responding to the contemporary force field four years ago.

Now is a different moment. The issues facing the world are both systemic and urgent; they are not confined to the development of developing countries, and still less to foreign aid. Geopolitical tensions are, if anything, higher now than then.  But they also create greater incentives to find areas of cooperation and consensus among major powers who have fundamentally different perspectives on other issues. Maximizing the sweet spots where agreement and common interest can prevail is now of geopolitical importance.  Gaining agreement on institutional innovations to guide the global system of international institutions in the P2015 era would be vital for effective outcomes but also importantly ease geopolitical tensions.

Measurement matters; monitoring and evaluation is a strategic necessity to implementing any agenda, and still more so, an agenda for systemic transformation.  As a result, the monitoring and evaluation system that accompanies the P2015 SDGs will be crucial to guiding the implementation of them.  The UN, the OECD, the World Bank, and the IMF all have participated in joint data gathering efforts under the IDGs  in the 1990s and the MDGs in the 2000s.   Each of these institutions has a crucial role to play, but they need to be brought together now under one umbrella to orchestrate their contributions to a comprehensive global data system and to help the G20 finance ministers coordinate their functional programs.   

The OECD has established a strong reputation in recent years for standard setting in a variety of dimensions of the global agenda.  Given the strong role of the OECD in relation to the G20 and its broad outreach to “Key Partners” among the emerging market economies, the OECD could be expected to take a strong role in global benchmarking and monitoring and evaluation of the P2015 Agenda.  The accession of China to the OECD Development Centre, which now has over fifty member countries, and the presence and public speech of Chinese Premier Li Keqiang at the OECD on July 1^st, bolsters the outreach of the OECD and its global profile.

But national reporting is the centerpiece and the critical dimension of monitoring and evaluation.  To guide the national reporting systems and evaluate their results, a  new institutional arrangement is needed that is based on national leaders with responsibility for implementation of the sustainable development agendas from each country and is undertaken within the parameters of the global SDGs and the P2015 benchmarks.

V.   Strengthening global governance and G20 roles

G-20 leaders could make a significant contribution to providing the impetus toward advancing systemic sustainability by creating a G-20 Global Sustainable Development Council charged with pulling together the national statistical indicators and implementing benchmarks on the SDGs in G-20 countries.  The G-20 Global Sustainable Development Council (G-20 GSDC) would consist of the heads of the presidential committees on sustainable development charged with coordinating P2015 implementation in G-20 countries.  Representing systemically important countries, they would also be charged with assessing the degree to which national policies and domestic efforts by G20 countries generate positive or negative spillover effects for the rest of the world.  This G-20 GSDC would also contribute to the setting of standards for the global monitoring effort, orchestrated perhaps by the OECD, drawing on national data bases from all countries using the capacities of the international institutions to generate understanding of global progress toward systemic sustainability. 

The UN is not in a position to coordinate the global system of international institutions in their functional roles in global sustainable development efforts.  The G-20 itself could take steps through the meetings of G-20 Finance Ministers to guide the global system of international institutions in the implementation phase of the P2015 agenda to begin in 2016. The G-20 already has a track record in coordinating international institutions in the response to the global financial crisis in 2008 and its aftermath. The G-20 created the Financial Stability Board (FSB), enlarged the resources for the IMF, agreed to reform the IMF’s governance structure, orchestrated relations between the IMF and the FSB, brought the OECD into the mainstream of G-20 responsibilities and has bridged relations with the United Nations by bringing in finance ministers to the financing for development conference in Addis under Turkey’s G-20 leadership. 

There is a clear need to coordinate the financing efforts of the IMF, with the World Bank and the other regional multilateral development banks (RMDBs), with the AIIB and the BRICS NDB, and with other public and private sector funding sources, and to assess the global institutional effort as whole in relation to the P2015 SDG trajectories.  The G-20 Finance Ministers grouping would seem to be uniquely positioned to be an effective and credible means of coordinating these otherwise disparate institutional efforts.  The ECOSOC Development Cooperation Forum and the Busuan Global Partnership provide open inclusive space for knowledge sharing and consultation but need to be supplemented by smaller bodies capable of making decisions and providing strategic direction.

Following the agreements reached in the three U.N. workstreams for 2015, the China G-20 could urge the creation of a formal institutionalized global monitoring and coordinating mechanism at the China G-20 Summit in September 2016. By having the G-20 create a G-20 Global Sustainable Development Council (G-20 GSDC), it could build on the national commitments to SDG trajectories to be made next year by U.N. members countries and on the newly formed national coordinating committees established by governments to implement the P2015 Agenda, giving the G-20 GSDC functional effectiveness, clout and credibility.   Whereas there is a clear need to compensate for the sized-biased representation of the G20 with still more intensive G-20 outreach and inclusion, including perhaps eventually considering shifting to a constituency based membership, for now the need in this pivotal year is to use the momentum to make political decisions and institutional innovations which will crystallize the P2015 strategic vision toward systemic sustainability into mechanisms and means of implementation.

By moving forward on these recommendations, the G-20 Leaders Summits would be strengthened by involving G-20 leaders in the people-centered P2015 Agenda, going beyond finance to issues closer to peoples’ homes and hearts. Systemically important countries would be seen as leading on systemically important issues.  The G-20 Finance Ministers would be seen as playing an appropriate role by serving as the mobilizing and coordinating mechanism for the global system of international institutions for the P2015 Agenda.  And the G-20 GSDC would become the effective focal point for assessing systemic sustainability not only within G20 countries but also in terms of their positive and negative spillover effects on systemic sustainability paths of other countries, contributing to standard setting and benchmarking for global monitoring and evaluation.    These global governance innovations could re-energize the G20 and provide the international community with the leadership, the coordination and the monitoring capabilities that it needs to implement the P2015 Agenda. 

As the MDGs culminate this year, as the three U.N. workstreams on SDGs, FFD, and UNFCC are completed, the world needs to think ahead to the implementation phase of the P2015 sustainable development agenda. Given the scale and scope of the P2015 agenda, these five governance innovations need to be focused on now so they can be put in place in 2016.

These will ensure (i) that national political commitments and engagement by all countries are made by designing, adopting, and implementing their own sustainable development trajectories and action plans; (ii) that national presidential committees are established, composed of key ministers and private sector leaders to coordinate each country’s comprehensive integrated sustainability strategy; (iii) that all governments and international institutions are accepted by and participate in a single global system of international institutions;   (iv) that a G-20 monitoring mechanism be created by the China G-20 in September 2016 that is comprised of the super-minister officials heading the national presidential coordinating committees implementing the P2015 agenda domestically in G-20 countries, as a first step;  and (v) that the G-20 Summit leaders in Antalya in November 2015 and in China in September 2016 make clear their own commitment to the P2015 agenda and their responsibility for its adaption, adoption and implementation internally in their countries but also for assessing G-20 spillover impacts on the rest of the world, as well as for deploying their G-20 finance ministers to mobilize and coordinate the global system of international institutions toward achieving the P2015 agenda.

Without these five structural changes, it will be more likely that most countries and actors will follow current trends rather than ratchet up to the transformational trajectories necessary to achieve systemic sustainability nationally and globally by 2030.

Ye Yu, Xue Lei and Zha Xiaogag, “The Role of Developing Countries in Global Economic Governance---With a Special Analysis on China’s Role”, UNDP, Second High-level Policy Forum on Global Governance: Scoping Papers, (Beijing: UNDP, October 2014).

Zhang Haibing, “A Critique of the G-20’s Role in UN’s post-2015 Development Agenda”, in Catrina Schlager and Chen Dongxiao (eds), China and the G-20: The Interplay between an Emerging Power and an Emerging Institution, (Shanghai: Shanghai Institutes for International Studies [SIIS] and the Friedrich Ebert Stiftung [FES], 2015) 290-208.

Global Review, (Shanghai:  SIIS, 2015,) 97-105.

Colin I. Bradford, “Global Economic Governance and the Role International Institutions”, UNDP, Second High-level Policy Forum on Global Governance: Scoping Papers, (Beijing: UNDP, October 2014).

Colin I. Bradford, “Action implications of focusing now on implementation of the   post-2015 agenda.”, (Washington: The Brookings Institution, Global Economy and Development paper, September 2015).

Colin I. Bradford, “Systemic Sustainability as the Strategic Imperative for the Future”, (Washington: The Bookings Institution, Global Economy and Development paper; September 2015). 

Wonhyuk Lim and Richard Carey, “Connecting Up Platforms and Processes for Global Development to 2015 and Beyond:  What can the G-20 do to improve coordination and deliver development impact?”, (Paris: OECD  Paper, February 2013).

Xiaoyun Li and Richard Carey, “The BRICS and the International Development System: Challenge and Convergence”, (Sussex: Institute for Development Studies, Evidence Report No. 58, March 2014).

Xu Jiajun and Richard Carey, “China’s Development Finance: Ambition, Impact and Transparency,” (Sussex :  Institute for Development Studies, IDS Policy Brief, 2015).

Soogil Young, “Domestic Actions for Implementing Integrated Comprehensive Strategies:  Lessons from Korea’s Experience with Its Green Growth Strategy”, Washington: Paper for the Brookings conference on “Governance Innovations to Implement the Post-2015 Agenda for Sustainable Development”, March 30, 2015).

“The Earth in the coming decades could cease to be a ‘safe operating space’ for human beings,” concludes a paper by 18 researchers “trying to gauge the breaking points in the natural world,” published in Science in January 2015. That our planetary environment seems to be approaching “breaking points” is but one of several systemic threats looming on the horizon or lurking under the surface.

Since the economic crisis in 2008, the world has learned that financial instability is a global threat to sustainable livelihoods and economic progress. The underlying dynamics of technological change seem to be more labor displacing than labor absorbing, creating increasing anxiety that employment and career trajectories are permanently threatened. These two challenges undermine public confidence in the market economy, in institutions, and in political leaders. They constitute systemic threats to the credibility of markets and democracy to generate socially and politically sustainable outcomes for societies.

The fact that one billion people still live in extreme poverty, that there are scores of countries that are considered to be “failed states,” and that genocide, virulent violence, and terrorism are fed by this human condition of extreme deprivation together constitute a social systemic threat, global in scope. These challenges together merge with a growing public awareness of global inequality between nations and of increasing inequality within nations. The power of money in public life, whether in the form of overt corruption or covert influence, disenfranchises ordinary people and feeds anger and distrust of the current economic system. 

These challenges are global in reach, systemic in scale, and urgent. They require deliberate decisions to abandon “business-as-usual” approaches, to rethink current practices and engage in actions to transform the underlying fundamentals in order to avoid the collapse and catastrophe of systems that average people depend upon for normal life.  

Systemic risks are real. Generating new pathways to systemic sustainability are the new imperatives. Holistic approaches are essential, since the economic, social, environmental, and political elements of systemic risk are interrelated.  “Sustainable development,” once the label for environmentally sensitive development paths for developing countries, is now the new imperative for systemic sustainability for the global community as a whole.

2015 is a pivotal year for global transformation. Three major work streams among all nations are going forward this year under the auspices of the United Nations to develop goals, financing, and frameworks for the “post-2015 Sustainable Development Agenda.”  First, in New York in September—after two years of wide-ranging consultation—the U.N. General Assembly will endorse a new set of global development goals to be achieved by 2030, to build upon and replace the Millennium Development Goals (MDGs) that culminate this year. Second, to support this effort, a Financing for Development (FFD) conference took place in July in Addis Ababa, Ethiopia, to identify innovative ways to mobilize private and public resources for the massive investments necessary to achieve the new goals. And third, in Paris in December, the final negotiating session will complete work on a global climate change framework.  

These three landmark summits will, with luck, provide the broad strategic vision, the specific goals, and the financing for addressing the full range of systemic threats.  Most of all, these events, along with the G-20 summit of leaders of the major economies in November in Antalya, Turkey, will mobilize the relevant stakeholders and actors crucial for implementing the post-2015 agenda—governments, international organizations, business, finance, civil society, and parliaments—into a concerted effort to achieve transformational outcomes. Achieving systemic sustainability is a comprehensive, inclusive effort requiring all actors and all countries to be engaged. [3]

Four major elements need to be in place for this process to become a real instrument for achieving systemic sustainability across the board. 

First, because everyone everywhere faces systemic threats, the response needs to be universal. The post-2015 agenda must be seen as involving advanced industrial countries, emerging market economies, and developing nations. Systemic sustainability is not a development agenda limited to developing countries, nor just a project to eradicate poverty, nor just an agenda for development cooperation and foreign aid. It is a high policy agenda for all countries that goes to the core of economics, governance, and society, addressing fundamental dynamics in finance, energy, employment, equity, growth, governance, and institutions.

Second, systemic threats are generated because of spillover effects from activities that used to be considered self-contained and circumscribed in their impact. The world of silos and vertical self-sufficiency has given way to an integrated world in which horizontal linkages are as important as vertical specialization. The result of these interlinkages is that synergies can be realized by taking comprehensive integrated approaches to major issues. In this new context, positive-sum benefits are potentially more easily realized, but integrated strategies are necessary for doing so. 

This new context of spillovers and synergies has two implications. The domestic dimension is that whole-of-government approaches are necessary for addressing systemic sustainability. Cross-sectoral, inter-ministerial approaches are essential.  Since markets alone are not able to realize optimal outcomes in the widespread presence of externalities, the only way to realize the positive sum potential of synergies is through coordination among related actors. On the international dimension, this new context also requires more cooperation and coordination than competition to realize synergistic, positive-sum outcomes.

Third, domestic political pressures are primary. This may be a variant of the old saying that “all politics is local.”  However, the aftermath of the 2008 global financial crisis has been a world of hurt in which impacted publics are feeling anger and alienation from an economic system that has threatened their jobs, incomes, pensions, homes, and livelihoods. The task of leaders is not to pander to these plights but to lead their people to understand the vital linkage between domestic conditions and external forces and the degree to which the global context inevitably impacts on domestic conditions. Leaders need to be able to explain to their people that systemic threats have inextricable global–domestic linkages that need to be managed, not ignored.

Fourth, given all this, it is absolutely necessary that the global system of international institutions be “on the same page,” share the same vision, strategy, and goals, rather than each taking its primary mandate as a writ for independence from the common agenda. 

The major challenges for global governance in this pivotal turn from goal-setting in 2015 to the beginning of implementation in 2016 are to ensure (i) that all countries adapt and adopt the post-2015 agenda in ways that are congruent with their national culture and context while at the same time committing to reporting on all aspects of the agenda; (ii) that whole-of-government institutional mechanisms and processes are put in place domestically to realize the synergies that can accrue only from comprehensive, integrated approaches and that international cooperation mechanisms gain greater traction to reap the positive-sum outcomes from global consultation, coordination, and cooperation;  (iii) that national political leaders learn new modes of domestic and international leadership that are capable of articulating the new context and new systemic risks that need to be managed both internally and globally; and (iv) that each international institution realizes the need to be part of a system-wide global effort to achieve systemic sustainability through concerted efforts of all relevant actors working together on behalf of a common global agenda. [2]

Currently under discussion are 17 Sustainable Development Goals (SDGs) and 169 indicators for 2030 to extend and replace the eight MDGs for 2015, which had 21 targets and a variety of indicators, which in turn extended and replaced seven International Development Goals (IDGs) agreed to in 1995 by development cooperation ministers from OECD countries. There is much chatter now about whether the SDGs and indicators are too many, too ambitious, and too widespread.  The Economist asserts that the SDGs “would be worse than useless,” dubbing them “stupid development goals”. And Charles Kenney at the Center for Global Development in a thoughtful piece argues that “we lost the plot.” 

It may be true that there is too much detail. Two previous efforts, one by the Centre for International Governance Innovation (CIGI) and the Korean Development Institute (KDI) had 10 goals, and the other, the U.N. High Level Panel of Eminent Persons report in 2013 had 12 goals.[iii] This quibble alone does not prevent the use of political imagination to conjure a storyline that connects the 17 proposed SDGs with the vision of the post-2015 Sustainable Development Agenda as addressing systemic threats and having comprehensive integrated strategies for addressing them. 

Fourteen of the 17 SDGs can be clustered into four overarching strategic components: poverty (2); access (6); sustainability (5); and partnership (1). The other three goals have to do with growth and governance (institutions), which were underpinnings for both the IDGs and the MDGs though not embodied in the sets of goals themselves. The four SDG components seamlessly continue the storyline of the IDGs and the MDGs, both of which included poverty as the first goal, gender equality- education-and-health as issues of access, an environmental sustainability goal, and (in the MDGs) a partnership goal. The two underpinning components of growth and governance remain crucial and, if anything, are still more important today than 20 years ago when the global goal-setting process began. 

Continuity of strategic direction in transformational change is an asset, ensuring persistence and staying power until the goal is fulfilled.

The SDGs now convey a sense of the scale and scope of systemic threats. The sustainability goals (goals 11 through 15) highlight the environmental threats from urbanization, over-consumption/production, climate change, destruction of ocean life, to ecosystems, forests, deserts, land, and biodiversity. No knowledgeable person would leave out any of these issues when considering threats to environmental sustainability. 

The fact that goal 10, to “reduce inequality within and among countries,” is on the list of SDGs signals a new fact of political life that inequality is now front-and-center on the political agenda globally and nationally in many countries, advanced, emerging, and developing. This goal is really the “chapeaux” for goals 3 through 7, which deal with health, education, gender, water and sanitation, and energy for all—the access goals that must be met to “reduce inequality within and among countries.” It is inconceivable that a group of global goals for a sustainable future in the 21st century would leave out any of these goals crucial for achieving social sustainability, and undoubtedly political sustainability as well. 

Reducing inequality is not an end in itself but a means of providing skills and livelihoods for people in a knowledge-based global economy and hence the social and political sustainability required for stable growth. Growth is both a means and an end.

The two poverty goals are now more ambitious and inclusive than earlier. “Ending poverty” is different from reducing it, as in the IDGs and MDGs. And “ending hunger” through food security, nutrition, and sustainable agriculture are means to the end of eliminating poverty. For the Economist, eliminating extreme poverty should be the most important goal, stating that “it would have a much better chance of being achieved if it stood at the head of a very short list.”

This observation would apply if the SDGs are again intended to be, as the IDGs and MDGs were previously, development goals for developing countries. But development for developing countries is not the primary thrust and drive of the post-2015 agenda taken as a whole.  

The world is now facing systemic risks that threaten unacceptable collapse in social, political, economic, and environmental systems. A global community under threat from systemic risks needs a strategic vision and a pathway forward with specific guideposts, benchmarks, and means of implementation. 

The SDGs, the FFD documents and the U.N. Framework Convention on Climate Change accords will not be perfect. But, the three U.N. processes in 2015 capture the main elements, attempt to get specific in terms of priority actions and accountability, and together will provide a vision for the future for achieving systemic sustainability in its multiple, interconnected dimensions.

To think that simplifying the wording is going to simplify the problems is illusory. To narrow the vision to poor countries and poor people is to misunderstand the systemic nature of the threats and the scope and scale of them. 

This is a global agenda for all. Partnership now means we are all in the same boat, no longer acting on a global North-South axis of donor and recipient. Without the participation of all nations, all stakeholders, and all the international institutions, actual transformation will fall short of necessary transformation, and the world will reach breaking points that will inflict pain, suffering, and high costs on everyone in the future. The post-2015 Sustainable Development Agenda for 2030 brings an awareness of the future into the present and makes us understand that the time for action is now. 

Endnotes:

[1] For an example of a recent multistakeholder interactive conference on this set of issues, review the related report on the Brookings-Finland private meeting on March 30, 2015 on “implementing the post 2015 sustainable development agenda.

[2] See “Action Implications of Focusing Now on the Implementation of the post-2015 Agenda,” which outlines in more detail the key elements of implementation that need to be set in motion during 2015 and 2016, emphasizing especially roles for the Turkey G-20 summit in 2015 and the China G-20 summit in 2016.  

The consequences of the global financial crisis still ripple through the international system after the initial surge in global economic cooperation and governance immediately following the crisis. The ultimate effects have been that, while some elements of the international system of institutions have gotten stronger, the system as a whole is now seen as weaker, fractured, and driven more by geopolitical conflict than by institutional norms and frameworks.

The issue is how to move the global policy agenda forward in such a way that substantive progress induces institutional strengthening. The next two years offer new opportunities for creating a positive symbiosis between policy advance and systemic improvements.

I. The U.N. global agenda

The United Nations global agenda has three tracks that relate to each other and provide opportunities to pull the world together around an integrated, comprehensive strategic vision for the world’s people and strengthen the international system in the process.

The first track is the elaboration of a sustainable development agenda for each and all countries, not just developing countries, but advanced industrial economies and emerging market countries too. This effort is already well underway and will result in a summit of global leaders in September 2015 at the U.N. General Assembly (UNGA) in New York. This process entails a set of Sustainable Development Goals (SDGs) for 2030 to be developed and affirmed by and for all countries, and which succeed the Millennium Development Goals (MDGs) that culminate in 2015 and applied only to developing countries. This post-2015 goal-setting process will provide the substantive, cross-cutting, multidimensional agenda for the next 15 years. It is simultaneously a social, economic, and environmental agenda that relates goals to each other in functional terms requiring coordination among public and private sectors, ministries, civil society groups, and international institutions.

The second track is the financing for development (FFD) track, which goes well beyond reliance conceptually and practically on foreign aid or official development assistance as in the past. FFD for the SDGs includes a focus, first and foremost, on domestic sources of finance beyond government revenues. FFD is engaged in searches for innovative sources of finance, private sector mobilization of resources, creative market incentives and mechanisms, initiatives by civil society organizations, and development of entrepreneurial and small- and medium-size business opportunities that address global issues. This effort resulted in a global leaders meeting in Addis Ababa, Ethiopia in July of 2015 that reached agreement on the major thrusts for mobilizing resources for the post-2015 agenda (Kharas and MacArthur (2014)).

The third track is the global climate change negotiations currently under way to achieve a global agreement on the United Nations Framework Climate Change Convention (UNFCCC), which will result in a global summit in Paris in December of 2015. While these detailed negotiations on climate are a separate track, it is clear that the sustainable human development trajectories being put forward in the post-2015 agenda impact and are crucially affected by the efficacy of the climate change arrangements worked out in the UNFCCC agreements in 2015.

Whereas these three tracks operationally are going forward separately, the substantive aspects of each track affect and are affected by the content of the other two. The ultimate convergence of these three streams of activities and actions will have to occur in the beginning of 2016 at the global, regional, and national levels if the implementation phase is to be successful. A business-as-usual approach will not be satisfactory if at the global level, for example, the international institutions are unable to coordinate their work, or if at the national level ministries remain within their “silos” of sectoral expertise and responsibility.

Synergies exist between goal areas that cannot be realized without coordination across sectors and institutions, impacting goal achievement (see OECD 2014 PCD). A systemic approach is necessary at all levels to address the global challenges identified in the post-2015 agenda.

II. The G-20 summits for 2015 and 2016

A major opportunity presents itself in terms of providing impetus, momentum, and leadership for these large work streams and their convergence by linking the G-20 presidency of Turkey for 2015 with the G-20 leadership of China in 2016. Turkey and China working together in tandem within the G-20 Troika over the next two years to explain, support, and sustain the mobilization effort toward the post-2015 agenda could be a major contribution to it but also strengthen the global system of international institutions in the process. For the Turkish G-20 summit, scheduled to take place in November 2015 in Antalya, between UNGA in New York in September and the UNFCCC in Paris in December, Turkey could use part of its G-20 summit to have the leaders of the world’s largest advanced and emerging market economies explain to the world the nature, importance, and relevance of the SDGs to domestic concerns and priorities of ordinary people.

A weakness of G-20 summits thus far has been that G-20 leaders have become trapped by finance ministers’ issues and discourse and have failed to connect with their publics on larger issues of direct concern to people everywhere. The post-2015 agenda provides an opportunity for G-20 leaders to lead their people in understanding how global efforts relate to domestic conditions and why dealing only domestically with issues will not suffice to advance the human agenda where the global interface is extremely palpable. G-20 leaders, under Turkey’s leadership, could step out beyond the technical jargon of finance ministries and central banks, as important as those issues continue to be, and directly address the longer-term, fundamental conditions that affect the lives and livelihoods of all people. They would thereby strengthen their own leadership profile internally by explaining the global dimensions of domestic issues as means of creating public support for the sustainability issues in the post-2015 agenda.

Past experience with the International Development Goals (IDGs) of the 1990s and the Millennium Development Goals since the early 2000s  demonstrates that linking the goal-setting effort to the implementation phase yields powerful results by capturing the political momentum of the goal setting phase and carrying that energy forward directly into implementation efforts. If Turkey and China were to work together in 2015 and 2016, thereby bridging the goal-setting year in 2015 to the beginning of the implementation phase in 2016, they could provide the catalytic leadership and continuity that would maximize the staying power of the momentum from one phase to the next.

China, for its G-20 summit preparations in 2016, could focus on developing a road map, in concert with the other countries and international organizations and especially with the United Nations, that would explicitly keep alive the activities, groups, and initiatives manifested in the goal-setting phase into the next phase of implementation beginning in 2016. These combined efforts by Turkey and China could jump-start societies focusing on accelerating efforts to transform their societies by mobilizing policies and resources for highly related goal areas of direct benefit to their people.

The immediate effects of coordinated sequential efforts by Turkey and China in their respective G-20 years to advance the post-2015 agenda would be to strengthen the relationship between the G-20 and the United Nations on the agenda itself and to strengthen the G-20 summits by having leaders lead on issues of central concern to their people, strengthening the G-20 as a leadership forum in the process. For these results to occur, Turkey and China would need to begin to work together now to develop concordance in their individual efforts and initiate activities that would benefit greatly by beginning now and running through 2016 and beyond.

Accelerating implementation: Several initiatives could be undertaken now that would set up the dynamics for accelerated implementation in 2016 and beyond.

• National strategies for achieving the SDGs: Encourage countries to adapt and adopt the SDGs to their respective priorities and social, political, and cultural contexts through deliberate decision processes and wide societal engagement.
• The role of parliaments: Bring parliamentarians and parliaments into the goal-setting process so that they are aware of the legislative, regulatory, and budgetary implications of the post-2015 agenda.
• The role of domestic ministries: Bring finance ministers and other domestic ministries and agencies together with foreign ministers in the goal-setting year to set in motion mutually involved functional relationships and operational guidelines to enhance implementation across sectors.
• The G-20 as broker and mobilizer: The G-20 could act as a broker between the International Monetary Fund (IMF), World Bank, World Trade Organization (WTO), Organization for Economic Cooperation and Development (OECD), and regional development banks and the U.N. and its agencies to assure not just coordination but more intensive interactions that would be designed to accelerate the mobilization of resources and as well as policies and private sector activities that would enhance implementation.
• The policy role of the OECD: The strong, substantive role of the OECD in G-20 summits on issues high on the G-20 agenda—such as structural reform, tax base erosion, development, environment, energy, employment, and social issues—position the OECD to continue to provide important substantive inputs to the G-20 in 2015 and 2016. The OECD would enhance the relationship of its 34 members with G-20 emerging market economies by OECD involvement in both the G-20 and the U.N. post-2015 agenda.
• Financial stability and the SDGs: Encouraged by the G-20 summits, the IMF, the Financial Stability Board, and the OECD could work together to integrate the financial regulatory reform agenda into the post-2015 U.N. process by clarifying the linkages between financial stability, regulatory reform, and incentives for long-term private investment in infrastructure (crucial to all the SDGs) and in productive activities which generate greater employment and growth.
• Multi-stakeholder participation in implementation: G-20 summits can facilitate multi-stakeholder processes for engaging civil society, labor, private sector, religious, academic, and expert communities not only in the G-20 summits, as is the current practice, but also in the post-2015 agenda and its implementation, connecting societal leaders with the SDG agenda.

III. The overarching importance of a single global agenda

If these efforts to bring together a wide cross-section of domestic and international agencies, public and private sector leaders, stakeholders, and civil society actors are to translate into actions that are meaningful to the lives and livelihoods of people, a single set of goals is essential. The lesson learned from the IDG-MDG experience was that the tendency to differentiate roles by identifying different institutions with different sets of goals was real. The United Nations had inadvertently put forward the Millennium Declaration at the September 2000 U.N. General Assembly that had “millennium targets” which were similar but not identical to the International Development Goals (IDGs). The IDGs had been developed in the mid-1990s by OECD development ministers and subsequently were endorsed by the World Bank, the IMF, the U.N. and the OECD. In fact, in 2000, for the first time ever, the heads of those four institutions signed, and the institutions themselves published, a joint report, A Better World For All: Progress towards the International Development Goals.

Despite the appearance of unity and in part because there was a lack of concordance between the Millennium Declaration Targets (MDTs) and the IDGs, there was a moment in March 2001 when it looked like there might be a decisive divergence between the U.N. and the Bretton Woods institutions, with the U.N. taking the lead on the MDTs and the World Bank and IMF taking the lead on the Poverty Reduction Strategy Process (PRSPs), leaving the IDGs marginalized altogether. This potential division of labor was thwarted by a decision to reconcile the differences between the MDTs and the IDGs by forging the Millennium Development Goals (MDGs), which embodied the principal elements of both. The MDGs surfaced and were endorsed by the Monterrey Summit on Financing for Development in March of 2002, keeping the major global institutions on the same page with bilateral donors and the same path moving toward achieving the MDGs in 2015.

Most people who know about the MDGs think their origins began at the U.N. in the year 2000. It is an often overlooked fact that the MDGs only came forward in 2002 to bridge the potential divide between the Bretton Woods institutions and the United Nations. If that divide had occurred, it would have been disastrous from a goal setting-goal implementation point-of-view. This history is quite important to bring forward into public light now because it illustrates divisive dangers that currently lurk under the surface threatening unity if not squarely addressed.

From the perspective of prioritizing implementation, the truth is that multiple sets of goals blur the strategic vision, fail to communicate direction, weaken effective leadership, and encourage special pleading for differentiated interests instead focusing on the common, public interest. The U.N. has the lead role in global goal setting and has strengthened its own role in the global system in recent years. However, looking forward now to the SDG implementation phase, a danger might be that the Post-2015 agenda could be seen as the creature and captive of the United Nations, whereas it must be fully endorsed and internalized within the global system of international institutions as a whole. For that to happen, it would be necessary to move now, during the goal-setting year, to include all the relevant international and domestic actors that are crucial to the implementation phase of the post-2015 agenda.

The implications of including the post-2015 agenda in the G-20 summits in 2015 and 2016:

• It would make clear to relevant publics and actors that this set of global goals is universal, applicable to advanced countries, emerging market economies, and developing countries; it is not a “development agenda” but a “sustainability agenda,” which is broader, more strategic, and higher on the policy agenda of most countries.
• It would make clear the inextricable dynamics between domestic priorities and global goals; the SDGs are not foreign policy objectives or aid targets for development; they are domestic priorities affected by global impacts and generating global spillovers that need to be managed, not neglected.
• It would make the incorporation of finance ministers and domestic ministers with foreign ministers, along with international institutions, an imperative, rather than a utopian, ideal.
• It would make obvious the need to have a wide range of international institutions dealing with health, labor, education, women, climate, and the environment on the same page with the United Nations and the Bretton Woods institutions working together toward the SDGs.
• It would link the need for multi-stakeholder participation in goal setting to the goal implementation phase to mobilize support, policies, and resources but also to reveal and work on the interconnectedness of the goals themselves taken as a whole. 

Hence, the critical imperative is that there be a single narrative, a single set of goals, for all the domestic and global players to relate to, affirm, and implement. Otherwise, a fractured global order will produce lower-yield outcomes, and competition among priorities, sectors, and actors will result in poorer goal performance than would be possible with an integrated, concerted approach where all actors are working toward the same ends.

IV. Possible G-20 Actions by Turkey and China

Turkey has developed a process for the G-20 summit scheduled for November 14-15, 2015 in Antalya. Implementation, inclusion, and investment—the three “I’s”—are the overarching themes already established. The three “I’s” ties are tightly tied to the Australian G-20 outcomes—implementing action plans to achieve the incremental growth target of an additional 2 percentage points of GDP by 2018; including lower-income people in growth and lower-income countries in the global economy; and investing in infrastructure.

Each of these priorities is supportive of and compatible with the post-2015 agenda, even though they are not yet directly addressed to it. A decision by Turkey to include the post-2015 agenda in the 2015 G-20 would be easily achieved by cross-walking the SDGs over to and into the three “I’s” and vice versa. The central priority of the post-2015 agenda is, after all, “implementation.” The overarching meaning of the six elements of the post-2015 agenda (dignity, prosperity, justice, partnership, planet, and people (U.N. SG Synthesis Report December 2014)) is their impact on “inclusion.” And “investment” in infrastructure is crucial to all of the 17 SDGs.

The three pillars for Turkey’s 2015 agenda are: (i) strengthening the global recovery and lifting potential growth (the 2 percent target); (ii) enhancing resilience (financial regulatory reform]; and (iii) buttressing sustainability. Clearly, the third pillar on sustainability opens the door for the incorporation of the post-2015 agenda into the Turkey G-20, if Turkey wishes to do so. And the other two pillars fully support the sustainability agenda and are linked to it, or need to be.

For China, the post-2015 agenda presents a unique opportunity for the Chinese government to seize on a global agenda that has specific, strong, and visible links to the domestic concerns of the Chinese people. China could use the 2016 G-20 summit both to provide international leadership for global cooperation and to demonstrate the connection of global issues to domestic conditions through their impact and spillover effects. Because the post-2015 agenda is a universal agenda, by prioritizing it in its G-20 summit, China would be embracing the multiplicity of its own identity as a developing country but also as a dynamic emerging market economy that is destined to eventually play a global leadership role equivalent to advanced countries.

Furthermore, China seems intent on being a competitive nation in various spheres while at the same time being cooperative in others. The G-20 summit presidency for China in 2016 provides China with an opportunity to strengthen its role in international cooperation by being ambitious in the reach of its agenda for the G-20 in 2016, by its conduct as a member of the G-20 Troika for the next three years, and as the host government for the G-20 in 2016. By choosing to support Turkey in its consideration of incorporating the post-2015 agenda in the G-20 summit in 2015 and by China itself addressing the implementation issues in 2016, China would be reaping the demonstrably higher-yield gains generated by linking the SDG goal-setting phase in 2015 to the implementation phase in 2016.

Integrating the three tracks of SDG goal setting, financing for development, and progress on climate change actions is complementary but complex. While challenging, China has sufficiently high stakes in the outcomes of all three of these tracks to have a national interest in leading a global effort over the next three years to energize the convergence of agendas and institutional mandates necessary to generate bigger outcomes for people everywhere, including in China.

V. Results: Strengthening global governance and leadership

What follows from the analysis here is that the decision to include the post-2015 agenda in the Turkey and China G-20 summits would be a choice about the substance but also about the process of global economic governance, in which the G-20 has a leadership role. To do so in the way outlined here, would:

• Strengthen the global system of international institutions by bringing them together around a single comprehensive, integrated sustainability agenda;
• Create synergies between the United Nations and the other international institutions rather than identifying the post-2015 agenda with the U.N. alone and relying unnecessarily on the U.N. for its implementation;
• Connect G-20 leaders with a broader human and planetary agenda beyond economics and finance, which in turn would connect G-20 leaders with their publics as they visibly address the domestic concerns of their people in their global context; and
• Strengthen the role of the G-20 in global economic governance by putting the G-20 out in front as a broker among stakeholders, a catalytic coordinator of relevant domestic and international actors, and a leader on behalf of the concerns, lives, and livelihoods of people.

Selected References

Colin I. Bradford (2002), “Toward 2015: From Consensus Formation to Implementation of the Millennium Development Goals. Issues for the Future: The Implementation Phase”, Development Economics Department (DEC), The World Bank, December 2002.

Colin I. Bradford (2014), “The Changing World Economy and Global Economic Governance”, power point presentation at the Korean Delegation seminar “The OECD and Global Governance”, OECD, Paris, December 11, 2014.

Colin I. Bradford (2014), “Global Economic Governance and the Role of International Institutions”, Second High-level Policy Forum on Global Governance:  Scoping Papers, UNDP Beijing China, 22 October 2014.

Colin I. Bradford (2015), “Governance Innovations for Implementing the Post-2015 Sustainable Development Agenda: Conference Report”,  Brookings Institution, Washington, D.C., March 30, 2015.  http://www.brookings.edu/~/media/Events/2015/03/30-post-2015-sustainable-development-agenda/330-PostReportFinal.pdf?la=en   

Ye Yu, Xue Lei and Zha Xiaogang (2014), “The Role of Developing Countries in Global Economic Governance---with a Special Analysis on China’s Role”, Second High-level Policy Forum on Global Governance:  Scoping Papers, UNDP Beijing China, 22 October 2014. Authors are from the Shanghai Institutes of International Studies.

Homi Kharas and John McArthur (2014), “Nine Priority Commitments to be Made at the UN’s July 2015 Financing for Development Conference in Addis Ababa, Ethiopia,” October 2014. http://www.brookings.edu/research/papers/2015/02/united-nations-financing-for-development-kharas-mcarthur

OECD (2014), “Policy Coherence for Development and the Sustainable Development Goals”, Paris: OECD, 10 December 2014, prepared for the 8^th Meeting of the National Focal Points for Policy Coherence for Development (PCD) held at the OECD on 17-18 December 2014. 

Event Information

During the past decade, an abundance of wealth in minerals and hydrocarbons in Latin America and the Caribbean has translated into substantial revenues and macroeconomic growth. However, operations in the extractive sector have also led to significant challenges, such as corruption, negative social outcomes and environmental impacts.

On November 4, the Latin America Initiative and Energy Security Initiative at Brookings, with the Inter-American Development Bank (IDB), hosted a discussion on governance and institutional capacity in the extractive sector in Latin America and the Caribbean, drawing on findings from the publication Transparent Governance in an Age of Abundance: Experiences from the Extractive Industries in Latin America and the Caribbean, published by the IDB. Edited by Malaika Masson and Juan Cruz Vieyra, the book presents transparency as a central element to bolster governance quality and state legitimacy in the context of an increasingly demanding citizenry.

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Audio

• Transparent Governance in Latin America’s Extractive Industries

How to react to presidential candidates who are running, in part or wholly, on their experience in private business?

It’s impossible for anyone to come into the White House with all the skills required to be a good president. We can know that key traits include intelligence, both cognitive and emotional; self-confidence; and decisiveness. Also needed are the ability to communicate; to listen and learn; to delegate; to recognize problems–and a sense of humor and humility.

Candidates’ stands on the issues are critical in primaries and in the general election, but I suspect that the views of many independent voters–whose ranks are growing–may not be as intensely held as those of partisan voters.

Given Americans’ widespread frustration with traditional politicians, it is understandable why a few candidates with at least some business experience have entered the fray. Having run a business exposes one to how government affects the private sector, which is the engine of economic growth and drives improvements in living standards.

But running a private-sector business is very different from heading a federal government that employs millions, and that takes in and spends trillions, while also dealing with a wide range of domestic and foreign policy issues, many of which demand immediate attention. These things require dexterity–and the combined challenges are ones that no business ever comes close to dealing with. (Probably the closest experience to the presidency is running a large state. But even then, no governor has had to confront the range of foreign policy challenges facing the president.)

A critical difference between running a business and government is that CEOs can usually make sure that their orders are carried out; and if they’re not, those who didn’t do their jobs can be fired. Imagine a president tried working with Congress that way. “My way or the highway” won’t cut it.

One might think that military leaders would face the same problem, but successful generals, especially in recent times, have had to develop and hone political skills as well as knowing how to fight. Gen. Dwight Eisenhower is now regarded as a good president not only because of his military experience but because he also was a politician-administrator while commanding allied forces during World War II. George Washington had both a military and business background, but he was a politician too–and the government he oversaw wasn’t much larger than his (substantial) private business.

Some 2016 voters will cast ballots based on particular issues. But for others, particularly those who believe this country is on the wrong track, a candidate running on his or her business background in an effort to stand out from the pack is not likely to have the qualifications most important to being a successful president.

In our latest 21st Century Capitalism initiative paper, "What must corporate directors do? Maximizing shareholder value versus creating value through team production," author Margaret M. Blair explores how the share value maximization norm (or the “short-termism” malady) came to dominate, why it is wrong, and why the “team production” approach provides a better basis for governing corporations over the long term.

Blair reviews the legal and economic theories behind the share-value maximization norm, and then lays out a theory of corporate law building on the economics of team production. Blair demonstrates how the team production theory recognizes that creating wealth for society as a whole requires recognizing the importance of all of the participants in a corporate enterprise, and making sure that all share in the expanding pie so that they continue to collaborate to create wealth.

Arguing that the corporate form itself helps solve the team production problem, Blair details five features which distinguish corporations from other organizational forms:

1. Legal personality
2. Limited liability
3. Transferable shares
4. Management under a Board of Directors
5. Indefinite existence

Blair concludes that these five characteristics are all problematic from a principal-agent point of view where shareholders are principals. However, the team production theory makes sense out of these arrangements. This theory provides a rationale for the role of corporate directors consistent with the role that boards of directors historically understood themselves to play: balancing competing interests so the whole organization stays productive.

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• Download the paper

In the marijuana reform conversation, one of the grandest boogeymen is “Big Marijuana.” Reform advocates, opponents of marijuana legalization, patients, consumers, media, and many others worry openly that the marijuana industry will consolidate into a corporate beast and a bad market actor reminiscent of Big Tobacco companies.

In a paper released earlier this month entitled, “Worry about bad marijuana—not Big Marijuana,” Jonathan Rauch and I engage the likelihood and risks of the emergence of such a corporate entity. Although the paper makes several points, we begin with a discussion of exactly what “Big Marijuana” means. What we find is that the concept is tossed around so frequently, assigned to so many different types of market actors, that it has ultimately lost meaning.

Often, the term is used to describe any large corporate entity or consolidation effort within the marijuana industry. In reality, standard corporate consolidation or the existence of large companies in an industry are basic aspects in capitalism. What’s more there are huge differences between marijuana industry actors today and Big Tobacco companies of the middle of the 20^th century—in terms of size, scope, and market power to name a few. It should be expected that an industry that is young, fractured, and rapidly maturing will endure periods of consolidation and in the process, large and successful corporate entities will emerge. One should not assume, however, that such behaviors are sinister, suspect, or intent on engaging in immoral or illegal activities.

Nor should one assume that only large corporate entities can engage in bad behaviors. They surely can, but other market actors may as well. The policy conversation around marijuana industry structure often holds Big Marijuana up as the actor who will bring problems for enforcement, diversion, sale to minors, sale to problem users, etc. The reality is that a marijuana entity of any size can behave in many of those behaviors. The problem with an unending focus on industry structure or corporate size is that policymakers and regulators can give a pass to smaller actors who may engage in the types of behaviors people inside and outside of industry seek to avoid—those same types of behaviors we saw from the tobacco industry.

We argue there is a more sensible, safer step forward that begins with a simple premise. There are certain outcomes that the marijuana industry must avoid, and policy and regulation should preferably ban, but at least disincentivize those outcomes. We mention a few in the paper: antisocial marketing (marketing to children or problem users), regulatory capture, outcomes that hurt medical marijuana patients, and increasing barriers to entry and corporate crowd out—but others like diversion, illegal sales, and more must (and do) concern policy makers. In some cases, certain behaviors are more likely to come from larger corporate entities, but many behaviors can happen, independent of firm size.

There are a variety of ways to avoid some of these outcomes beyond a focus on firm size and corporate consolidation. Some of those options are highlighted by the RAND Corporation’s Drug Policy Research Center. In “Options and Issues Regarding Marijuana Legalization,” the authors argue a shift away from the corporate model—either through the use of non-profit entities or government operation of whole portions of the market (supply, retail, or both) can have real benefit. These approaches can allow regulators greater control over negative market actions and induce incentives focused on public health and good governance, rather than profit maximization. Those arguments are quite convincing, but as states continue to construct medical and recreational marijuana programs using the corporate model, it is important to consider policy approaches within that existing framework.

Thus, we recommend that regulators and policy makers not primarily focus on firm size, corporate consolidation, or the corporatization of the marijuana industry. Instead, they should work to avoid specific outcomes they see as unwanted or bad and pass laws, promulgate regulations, conduct information and education campaigns, and take whatever actions are necessary to stop them in their tracks. At the end of the day, one thing is clear: no one wants “Bad Marijuana” regardless of whether it comes from Big, Small, or Otherwise-Sized Marijuana.

Click through to read the full report, “Worry about bad marijuana—not Big Marijuana.”

Click through to watch the public event and paper release “Big Marijuana: How corporations and lobbies will shape the legalization landscape.”

Nearly two years after ousting President Muhammad Morsi, Egypt’s military continues to crack down on the Muslim Brotherhood. Much like during Egypt’s 1952-54 political transition, the recent interactions between the powerful armed state bureaucracy and the influential religious organization have had a major impact on the country’s political trajectory. In both instances, the military and Muslim Brotherhood initially cooperated before ultimately clashing violently. How has each entity determined what approach to take toward the other? What does a continued imbalance in civil-military relations mean for Egypt’s future?

In a new Brookings Doha Center Analysis Paper, Omar Ashour examines the legacies and patterns of cooperation and conflict between the leaderships of Egypt’s military and the Muslim Brotherhood. Relying on extensive field research, he analyzes how each entity has made its critical decisions regarding the other by applying various decision-making models. Ashour considers the impact of cost-benefit analysis, organizational dynamics, factional disputes, and psychological factors to gain a deep understanding of the leaders’ motives.

Read "Collusion to Crackdown: Islamist-Military Relations in Egypt"

Ashour concludes that Egypt's prospects for social stability and economic recovery will remain bleak if the relationship between the military and the Muslim Brotherhood is not redefined within institutional, democratic rules of political competition. He argues that Egypt’s military should embrace a balanced civil-military relationship to realize broad, long-term benefits and avoid otherwise inevitable and costly clashes with segments of Egyptian society. As for the Muslim Brotherhood, Ashour recommends that it reevaluate its recent decisions and work to develop a sustained, solid, and cross-ideological civilian front that can pressure the military to leave politics and allow for democratization.

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• English PDF
• Arabic PDF

The Muslim Brotherhood has faced a great deal of opposition in the Middle East in recent years, with Egypt, Saudi Arabia, and the United Arab Emirates all declaring it to be a terrorist organization. Jordan’s Muslim Brotherhood, which has historically operated as a loyal opposition to the palace, has also come under fire as regional instability has dampened Jordanians’ appetite for protest and reform. While the group still enjoys significant public support, it is facing a number of internal tensions, culminating in its recent split. How can the Jordanian Muslim Brotherhood retain its political clout? Can it play a role in stabilizing and strengthening Jordan?

Read The Muslim Brotherhood in Jordan: Time to reform

In this new Policy Briefing, Neven Bondokji discusses the various reform efforts undertaken by Jordan’s Muslim Brotherhood since 2010, and argues that it urgently needs to see them through. She identifies key challenges, including the division over the Zamzam reform initiative, overlap between the movement and its affiliated political party, the inclusion of women, the ongoing ideological shifts in the movement’s political discourse, and generational tensions. Additionally, Bondokji examines how Jordan’s East Banker-Palestinian fault line is manifested within the Brotherhood.

Bondokji makes a series of recommendations, including that the Muslim Brotherhood ensure the independence of its political party’s leadership and decision-making, actively engage in and disseminate discourse on plural politics and policy debates, and introduce new leaders and styles of communication. She also asserts that Jordan’s government must empower political parties and allow for a more representative parliament. The application of such reforms, Bondokji concludes, would allow Jordan’s Muslim Brotherhood to be an asset in the country’s efforts against destabilizing extremism.

Downloads

• English Paper
• Arabic Paper

Event Information

Australia's mandatory Superannuation Guarantee requires its citizens to save at least 9 percent of their income towards retirement. In many Asian nations, economic growth has spurred reexamination of pension systems to meet the needs of rapidly evolving societies. Would a mandatory savings plan be more effective than the current U.S. voluntary system? How have Asian nations have restructured their pension systems to deal with legacy costs? And what can Americans learn from the way Australia uses both employer and employee representatives to shape investment choices?

On September 17, the Retirement Security Project at Brookings and the AARP Public Policy Institute hosted a discussion of what the United States might learn from retirement savings systems in Australia and Asia. Opening speakers included Nick Sherry, who helped shape the Australian system as a cabinet minister and ran a Superannuation fund in the private sector, and Josef Pilger, an advisor on pension reform to both the Malaysian and Hong Kong governments and many industry providers. Steve Utkus, David Harris and Benjamin Harris, retirement experts from both the United States and the United Kingdom, considered how reforms in Australia and Asia can shape the American debate and whether this country should adopt key features from those foreign systems.

Audio

• Retirement Savings in Australia, Asia and Beyond: What are the Lessons for the United States?

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20130917_retirement_savings_transcript

As every good teacher knows, education is not just about academics. It is about broadening horizons and discovering passions. (The root of education is the Latin e ducere, meaning “to draw out.”) From this perspective, extra-curricular activities count for a great deal. But as Robert Putnam highlights in his book Our Kids, there are growing class gaps in the availability of music, sports, and other non-classroom activities.

Fewer field trips?

Schools under pressure may also cut back on field trips outside the school walls to parks, zoos, theaters, or museums. In the 2008-09 school year, 9 percent of school administrators reported eliminating field trips, according to the annual surveys by the American Association of School Administrators (AASA). That figure rose through the recession:

Just 12 percent of the administrators surveyed about 2015-16 said they had brought back their field trips to pre-recession levels. Museums around the country report hosting fewer students, from Los Angeles and Sarasota, to Minneapolis, and Columbia, Missouri. None of this is definitive proof of a decline in field trips, since we are relying on a single survey question. But it suggests a downward trend in recent years.

Museums help with science tests

If some children are missing out on field trips, does it matter? They may be nice treats, but do they have any real impact, especially when they take time away from traditional learning? There is some evidence that they do.

Middle school children with the chance to go on a field trip score higher on science tests, according to a 2015 study by Emilyn Ruble Whitesell.

She studied New York City middle schools with teachers in Urban Advantage, a program that gives science teachers additional training and resources—as well as vouchers for visiting museums. In some schools, the Urban Advantage teachers used the field trip vouchers more than others. Whitesell exploits this difference in her study, and finds that attending a school with at least 0.25 trips per student increased 8^th grade scores by 0.026 standard deviations (SD). The odds of a student passing the exam improved by 1.2 percentage points. There were bigger effects for poor students, who saw a 0.043 SD improvement in test scores, and 1.9 percentage point increase in exam pass rates.

Art broadens young minds

Students visiting an art museum show statistically significant increases in critical thinking ability and more open-minded attitudes, according to a randomized evaluation of student visits to the Crystal Bridges Museum in northwest Arkansas. One example: those who visited the museum more often agreed with statements like: “I appreciate hearing views different from my own” and “I think people can have different opinions about the same thing.” The effects are modest. But the intervention (a single day at the museum) is, too. Again, there were larger effects for poor students:

All this needs to be put in perspective. In comparison with the challenge of closing academic gaps and quality teaching, field trips are small beer. But schools create citizens as well as undergraduates and employees. It matters, then, if we have allowed field trips to become a casualty of the great recession.

The much anticipated Third Plenum of the Chinese Communist Party’s 18^th Congress closed its four-day session last Tuesday. A relatively bland initial communiqué was followed today by a detailed decision document spelling out major initiatives including a relaxation of the one-child policy, the elimination of the repressive “re-education through labor” camps, and a host of reforms to the taxation and state-owned enterprise systems. Today’s blizzard of specific reform pledges allays earlier concerns that the new government led by party chief Xi Jinping and premier Li Keqiang would fail to set major policy goals. But is this enough to answer the three biggest questions analysts have had since Xi and  Li ascended a year ago?

Those questions are, first, do Xi and his six colleagues on the Politburo standing committee have an accurate diagnosis of China’s structural economic and social ailments? Second, do they have sensible plans for addressing these problems? And third, do they have the political muscle to push reforms past entrenched resistance by big state owned enterprises (SOEs), tycoons, local government officials and other interest groups whose comfortable positions would be threatened by change? Until today, the consensus answers to the first two questions were “we’re not really sure,” and to the third, “quite possibly not.”

These concerns are misplaced. It is clear that the full 60-point “Decision on Several Major Questions About Deepening Reform”[1] encompasses an ambitious agenda to restructure the roles of the government and the market. Combined with other actions from Xi’s first year in office – notably a surprisingly bold anti-corruption campaign – the reform program reveals Xi Jinping as a leader far more powerful and visionary than his predecessor Hu Jintao. He aims to redefine the basic functions of market and government, and in so doing establish himself as China’s most significant leader since Deng Xiaoping. Moreover, he is moving swiftly to establish the bureaucratic machinery that will enable him to overcome resistance and achieve his aims. It remains to be seen whether Xi can deliver on these grand ambitions, and whether his prescription will really prove the cure for China’s mounting social and economic ills. But one thing is for sure: Xi cannot be faulted for thinking too small.

Main objective: get the government out of resource allocation

The four main sources we have so far on Xi’s reform strategy are the Plenum’s Decision, the summary communiqué issued right after the plenum’s close,[2] an explanatory note on the decision by Xi,[3] and a presumably authoritative interview with the vice office director of the Party’s Financial Leading Small Group, Yang Weimin, published in the People’s Daily on November 15, which adds much useful interpretive detail.[4] Together they make clear that the crucial parts of the Decision are as follows:

• China is still at a stage where economic development is the main objective.
• The core principle of economic reform is the “decisive” (决定性) role of market forces in allocating resources (previous Party decisions gave the market a “basic” (基础）role in resource allocation.
• By implication, the government must retreat from its current powerful role in allocating resources. Instead, it will be redirected to five basic functions: macroeconomic management, market regulation, public service delivery, supervision of society (社会管理), and environmental protection.

In his interview, Yang Weimin draws a direct comparison between this agenda and the sweeping market reforms that emerged after Deng Xiaoping’s southern tour in 1992, claiming that the current reform design is a leap forward comparable to Deng’s, and far more significant than the reform programs of Jiang Zemin and Hu Jintao.

This a very bold and possibly exaggerated claim. But the basic reform idea – giving the market a “decisive” role in resource allocation – is potentially very significant, and should not be dismissed as mere semantics. Over the last 20 years China has deregulated most of its product markets, and the competition in these markets has generated enormous economic gains. But the allocation of key inputs – notably capital, energy, and land – has not been fully deregulated, and government at all levels has kept a gigantic role in deciding who should get those inputs and at what price. The result is that too many of these inputs have gone to well-connected state-owned actors at too low a price. The well-known distortions of China’s economy – excessive reliance on infrastructure spending, and wasteful investment in excessive industrial capacity – stem largely from the distortions in input prices.

Xi’s program essentially calls for the government to retreat from its role in allocating these basic resources. If achieved, this would be a big deal: it would substantially boost economic efficiency, but at the cost of depriving the central government of an important tool of macro-economic management, and local governments of treasured channels of patronage. As a counterpart to this retreat from direct market interference, the Decision spells out the positive roles of government that must be strengthened: macro management and regulation, public service delivery, management of social stability, and environmental protection. In short, the vision seems to be to move China much further toward an economy where the government plays a regulatory, rather than a directly interventionist role.

Keep the SOEs, but make them more efficient

Before we get too excited about a “neo-liberal” Xi administration, though, it’s necessary to take account of the massive state-owned enterprise (SOE) complex. While Xi proposes that the government retreat from its role in manipulating the prices of key inputs, it is quite clear that the government’s large role as the direct owner of key economic assets will remain. While the Decision contains a number of specific SOE reform proposals (such as raising their dividend payout ratio from the current 10-15% to 30%, and an encouragement of private participation in state-sector investment projects), it retains a commitment to a very large SOE role in economic development. The apparent lack of a more aggressive state-sector reform or privatization program has distressed many economists, who agree that China’s declining productivity growth and exploding debt are both substantially due to the bloated SOEs, which gobble up a disproportionate share of bank credit and other resources but deliver ever lower returns on investment.

The communiqué and the Decision both make clear that state ownership must still play a “leading role” in the economy, and it is a very safe bet that when he retires in 2022, Xi will leave behind the world’s biggest collection of state-owned enterprises. But while privatization is off the table, subjecting SOEs to much more intense competition and tighter regulation appears to be a big part of Xi’s agenda. In his interview, Yang Weimin stresses that the Plenum decision recognizes the equal importance of both state and non-state ownership – a shift from previous formulations which always gave primacy to the state sector. Moreover, other reports suggest that the mandate of the State-owned Assets Supervision and Administration Commission (Sasac), which oversees the 100 or so big centrally-controlled SOE groups, will shift from managing state assets to managing state capital.[5] This shift of emphasis is significant: in recent years SOEs have fortified their baronies by building up huge mountains of assets, with little regard to the financial return on those assets (which appears to be deteriorating rapidly). Forcing SOEs to pay attention to their capital rather than their assets implies a much stronger emphasis on efficiency.

This approach is consistent with a long and generally successful tradition in China’s gradual march away from a planned economy. The key insight of economic reformers including Xi is that the bedrock of a successful modern economy is not private ownership, as many Western free-market economists believe, but effective competition. If the competitive environment for private enterprises is improved – by increasing their access to capital, land and energy, and by eliminating regulatory and local-protectionist barriers to investment – marginal SOEs

must either improve their efficiency or disappear (often by absorption into a larger, more profitable SOE, rather than through outright bankruptcy). As a result, over time the economic role of SOEs is eroded and overall economic efficiency improves, without the need to fight epic and costly political battles over privatization.

Can Xi deliver?

Even if we accept this view of Xi as an ambitious, efficiency-minded economic reformer, it’s fair to be skeptical that he can deliver on his grand design. These reforms are certain to be opposed by powerful forces: SOEs, local governments, tycoons, and other beneficiaries of the old system. All these interest groups are far more powerful than in the late 1990s, when Zhu Rongji launched his dramatic reforms to the state enterprise system. What are the odds that Xi can overcome this resistance?

Actually, better than even. The Plenum approved the formation of two high-level Party bodies: a “leading small group” to coordinate reform, and a State Security Commission to oversee the nation’s pervasive security apparatus. At first glance this seems a classic bureaucratic shuffle – appoint new committees, instead of actually doing something. But in the Chinese context, these bodies are potentially quite significant.

In the last years of the Hu Jintao era, reforms were stymied by two entrenched problems: turf battles between different ministries, and interference by security forces under a powerful and conservative boss, Zhou Yongkang. Neither Hu nor his premier Wen Jiabao was strong enough to ride herd on the squabbling ministers, or to quash the suffocating might of the security faction. By establishing these two high-level groups (presumably led by himself or a close ally), Xi is making clear that he will be the arbiter of all disputes, and that security issues will be taken seriously but not allowed to obstruct crucial economic or governance reforms.

The costs of crossing Xi have also been made clear by a determined anti-corruption campaign which over the last six months has felled a bevy of senior executives at the biggest SOE (China National Petroleum Corporation), the head of the SOE administrative agency, and a mayor of Nanjing infamous for his build-at-all-costs development strategy. Many of the arrested people were closely aligned with Zhou Yongkang. The message is obvious: Xi is large and in charge, and if you get on the wrong side of him or his policies you will not be saved by the patronage of another senior leader or a big state company. Xi’s promptness in dispatching his foes is impressive: both of his predecessors waited until their third full year in office to take out crucial enemies on corruption charges.

In short, there is plenty of evidence that Xi has an ambitious agenda for reforming China’s economic and governance structures, and the will and political craft to achieve many of his aims. His program may not satisfy market fundamentalists, and he certainly offers no hope for those who would like to see China become more democratic. But it is likely to be effective in sustaining the nation’s economic growth, and enabling the Communist Party to keep a comfortable grip on power.

Editor's Note: Arthur Kroeber is the Beijing-based managing director of Gavekal Dragonomics, a global macroeconomic research firm, and a non-resident fellow of the Brookings-Tsinghua Center. A different version of this article appears on www.foreignpolicy.com.

Event Information

Despite being a developed and prosperous country, Japan faces a host of basic challenges today and going forward—some of its own creation and others beyond the country’s control. For example, Japan lacks essential natural resources, while also facing overcrowding in cities and depopulation in rural areas. As a result, food and energy self-sufficiency is low. Also, while the dual phenomena of a low birthrate and an ageing population have long been deemed problematic, these issues are rapidly growing more serious. The problems Japan faces today are potentially the same problems the rest of the world will face in the near future. Japan, therefore, may serve as a bellwether for the global community as many nations anticipate similar challenges in the future.  

On October 26, the Center for East Asia Policy Studies at Brookings and the U.S.-Japan Research Institute co-hosted Hiroshi Komiyama, chairman of the Mitsubishi Research Institute and president emeritus of the University of Tokyo, for a discussion of his recent book, “Beyond the Limits to Growth: New Ideas for Sustainability from Japan.” In this book, Komiyama examines the issues facing Japan—and the world—presenting a number of potential viable solutions and offering insights into Japan’s experiences and the lessons it can provide for a more sustainable future.

Audio

• Overcoming the limits to growth: Sustainability lessons from Japan

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20151026_japan_sustainability_transcript
• hiroshi komiyama presentation

As part of his economic revitalization plan, Japan’s Prime Minister Shinzo Abe has been touting “womenomics,” a plan to increase the number of women in the labor force. One way for women to enter the workforce but bypass the conventional corporate structure is through entrepreneurship.

Four questions for three female entrepreneurs

At a recent Center for East Asia Policy Studies event on womenomics and female entrepreneurship in Japan, we brought together three successful female entrepreneurs to discuss their experiences both in the United States and Japan. Prior to their panel discussion, we asked each of the speakers four questions about their careers.

1. What was the trigger that made you decide to start your own business?
2. What was the biggest hurdle in starting and/or running your business?
3. How or when was being a woman an asset to you as an entrepreneur and/or running your business?
4. How has the climate for female entrepreneurs changed compared to when you started your business?

Despite the differing environments for entrepreneurs and working women in the two countries, the speakers raised many of the same issues and offered similar advice. Access to funding or financing was an issue in both countries, as was the necessity to overcome fears about running a business or being in male-dominated fields. All of the speakers noted the positive changes in the business environment for female entrepreneurs since they had started their own businesses, as well as the impact this has had in creating more opportunities for women.

Donna Fujimoto Cole

Donna Fujimoto Cole is the president and CEO of Cole Chemical and Distributing Inc. in Houston, Texas. She started her company in 1980 at the urging of her clients. Today Cole Chemical is ranked 131 among chemical distributors globally by ICIS (Independent Chemical Information Service) and its customers include Bayer Material Scientific, BP America, Chevron, ExxonMobil, Lockheed Martin, Procter & Gamble, Shell, Spectra Energy, and Toyota. Cole is also an active member of her community and serves on the boards of a variety of national and regional organizations.

Fujiyo Ishiguro

A founding member for the Netyear Group, Fujiyo Ishiguro is now the president and CEO of the Netyear Group Corporation based in Tokyo, Japan. The firm, which was established in 1999, devises comprehensive digital marketing solutions for corporate clients. The Netyear Group was listed on the Mothers section of the Tokyo Stock Exchange in 2008. Recently, Ishiguro has served on a number of Japanese government committees including the Cabinet Office’s “The Future to Choose” Committee and the Ministry of Economy, Trade and Industry’s “Internet of Things” Committee. 

Sachiko Kuno

Sachiko Kuno is the co-founder, president, and CEO of the S&R Foundation in Washington, D.C., a non-profit organization that supports talented individuals in the fields of science, art, and social entrepreneurship. A biochemist by training, Kuno and her research partner and husband Ryuji Ueno have established a number pharmaceutical companies and philanthropic foundations including R-Tech Ueno in Japan and Sucampo Pharmaceuticals in Bethesda, Maryland. Together, Kuno and Ueno hold over 900 patents. Kuno is active in the greater Washington community and serves on the boards of numerous regional organizations.

Full video of the event featuring these speakers can be found here.

Video

• The importance of mentors for female entrepreneurs
• Female entrepreneurs: Different options and different styles
• Female leadership creates opportunities

The confluence of the agreement on 17 Sustainable Development Goals (SDGs, or Global Goals) in 2015, and the increased attention being paid to the role of non-traditional actors in contributing to shared prosperity, provide a unique opportunity to focus attention on attempts to identify promising new solutions to the barriers that impede the full development of the world’s youngest citizens. Current estimates indicate that 200 million children globally under the age of 5 are at risk of not reaching their development potential. With these goals, the global community has a tremendous opportunity to change the course of history. There is evidence that certain early childhood development (ECD) interventions—spanning the nutrition, health, water and sanitation, education, social protection, and governance sectors from conception to age 5—have high potential to help to achieve the SDGs related to child development. Furthermore, early childhood interventions have been found to improve adult health and education levels, reduce crime, and raise employment rates, which will be paramount to achieving global economic, climate, and physical security.

Impact bonds have the potential to address some of the main financing and delivery constraints faced in ECD. By providing upfront private capital, impact bonds could help to address service provider liquidity constraints and leverage public capital by allowing the government to connect preventive programs with future benefits to individuals, society, and the economy. Impact bonds also have the potential to drive performance management, support monitoring and evaluation, and create accountability, which all help to address quality and capacity constraints. By fostering innovation, experimentation and adaptive learning in service delivery, cost-effective solutions could be identified through impact bonds. By producing evidence of outcome achievement, impact bonds could shift the focus toward effective ECD programs. Finally, collaboration across stakeholders—a necessary component of impact bonds—has the potential to allow for alignment of interests and a win-win situation for investors, outcome funders, and program beneficiaries alike.

The high participation of non-state actors and potentially significant returns in ECD make it a promising sector for impact bonds. Unlike other services that may have entrenched interests, the multitude of agencies and non-state entities financing and providing ECD services potentially allows for more experimentation. The preventive nature of ECD programs also fits well with the core feature of SIBs, which is that preventive investments will result in valuable short- and potentially long-term outcomes. There is evidence that ECD interventions can have immense effects on later-life outcomes. For example, a longitudinal study of a program in Jamaica, in which participants received weekly visits from community health workers over a 2-year period, was found to increase the earnings of participants by 25 percent, 20 years later.

There may, however, be some particular challenges associated with applying impact bonds in the ECD sector. Impact bonds (and other Payment by Results mechanisms tied to outcomes) require meaningful outcomes that are measureable within a timeframe that is reasonable to the outcome funder (and investors in the case of an impact bond). Meaningful outcomes are outcomes that are intrinsically or extrinsically valuable. Intrinsically valuable outcomes that are measureable within a reasonable timeframe could be extrinsically valuable if they are proxies for long-term benefits to individuals, society, or the economy. The delay between ECD interventions and later-life results may prove an impediment in some cases. By identifying appropriate interim measures such as language development, socioemotional development, and schooling outcomes that may proxy for desirable longer-term outcomes, the issue of delay could be mitigated. For example, there is evidence that early stimulation and health programs can have statistically significant effects on schooling outcomes in the short-run. An increase in focus on the intrinsic value of short-term outcomes that result from ECD interventions, such as child survival, is also important.

As the global community moves beyond the Millennium Development Goals to a set of Global Goals and associated targets linked to measurable outcomes, there is an opportunity to demonstrate a commitment to invest in future generations. Leveraging upfront funding, focusing on outcomes through adaptive learning and testing new ways to deliver early childhood interventions more effectively are all means of achieving the ECD-related goals. Despite the hype around all of the new financing mechanisms, the keys to creating high-quality, locally appropriate programs remains simple—real-time collection of outcome data, the freedom to fail, and the flexibility to course-adjust. In some circumstances social service provision based on outcomes and adaptive learning may require mechanisms like impact bonds or other Payment by Results mechanisms. In other circumstances it may not. As this very nascent field continues to grow, more research will be needed to capture lessons learned, contextualize them within the larger landscape of ECD financing and service provision, and apply them to real-world social challenges with the world’s youngest and most disadvantaged populations at the forefront of the conversation. 

Read the previous report on the landscape of impact bonds across sectors and geography »

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