Building the SDG economy

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By Homi Kharas and John MacArthur

Pouring several colours of paint into a single bucket produces a grey pool of muck, not a shiny rainbow. Similarly, when it comes to discussions of financing the Sustainable Development Goals (SDGs), jumbling too many issues into the same debate leads to policy muddiness rather than practical breakthroughs. For example, the common “billions to trillions” refrain on SDG financing falls into this trap. While originally a useful device for calling attention to the need for a paradigm shift in financing, including from private sources, the meme’s emphasis on mega-aggregates is now a distraction from operational considerations.

The purpose of SDG financing is to ensure the right mix of resources are available in the right places at the right time to solve specific real-world problems. These include challenges like deprivation of basic human needs, obesity-induced non-communicable disease, species loss from land and oceans, and greenhouse gas emissions into the atmosphere. The SDGs will only be properly financed and achieved when there is clarity on each of the underlying problems to be solved, on the respective mechanisms needed to address them, and on the appropriate mix and volume of resources needed for implementation. 

Our starting point is to ask what it will take to build a new global economy that is consistent with the SDGs, including the imperative to address climate change. We think of an “SDG economy” as one where the aspirations of two foundational agreements on sustainable development are met. One is embedded in the third paragraph of the 2015 United Nations resolution (70/1) that gave us the SDGs, entitled “Transforming our world: the 2030 Agenda for sustainable development.” It offers a concise description of the overall ambition:

We resolve, between now and 2030, to end poverty and hunger everywhere; to combat inequalities within and among countries; to build peaceful, just and inclusive societies; to protect human rights and promote gender equality and the empowerment of women and girls; and to ensure the lasting protection of the planet and its natural resources. We resolve also to create conditions for sustainable, inclusive and sustained economic growth, shared prosperity and decent work for all, taking into account different levels of national development and capacities.

The private sector is crucial for many tasks, but the public sector is dominant for tackling market and coordination failures that cause SDG challenges to persist.

The second foundational agreement is embedded in paragraph 12 of the UN’s 2015 Addis Ababa Action Agenda on financing for development. It makes a commitment for a new “social compact,” one that delivers social protection and essential public services for all:

“To end poverty in all its forms everywhere and finish the unfinished business of the Millennium Development Goals, we commit to a new social compact. In this effort, we will provide fiscally sustainable and nationally appropriate social protection systems and measures for all, including floors, with a focus on those furthest below the poverty line and the vulnerable, persons with disabilities, indigenous persons, children, youth and older persons. We also encourage countries to consider setting nationally appropriate spending targets for quality investments in essential public services for all, including health, education, energy, water and sanitation, consistent with national sustainable development strategies.”

Within this Addis pledge, the emphasis on nationally appropriate spending targets is crucial. Addis did not envisage a single point estimate of spending needs for all, but instead allowed for country differentiation. Hence each country has a unique fiscal path to developing its own SDG economy.

Ultimately, SDG economies require building public services and societal systems that do three things: ensure essential public services are available to every human being; build fast-growing cities and industries that succeed on environmental and social terms too; and retrofit currently “advanced” cities and industries that are still not delivering on a range of SDG outcomes, such as the global food system and its adverse effects on health and the environment. In moving towards this vision, all segments of society must contribute. The private sector is crucial for many tasks, but the public sector is dominant for tackling market and coordination failures that cause SDG challenges to persist.(

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