Future Scenarios For Global Poverty Reduction

WHAT ARE THE IMPLICATIONS
OF THE GLOBAL CRISIS AND ITS

AFTERMATH FOR DEVELOPING
COUNTRIES, 2010-2020?
Working Paper number 68 August, 2010
Andy Sumner
Institute of Development Studies
Joe Ballantyne
The Futures Company
Andrew Curry
The Futures Company
International
Centre for Inclusive Growth

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International Policy Centre for Inclusive Growth
United Nations Development Programme
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WHAT ARE THE IMPLICATIONS OF THE GLOBAL CRISIS AND ITS
AFTERMATH FOR DEVELOPING COUNTRIES, 2010-2020? *
Andy Sumner**, Joe Ballantyne*** and Andrew Curry***
ABSTRACT
Some major “game changers” beyond the recent economic crisis and food/fuel crisis will have
an impact on the Millennium Development Goals (MDGs) to 2015 and afterwards. “Future-
proofing” the MDGs is about thinking how future(s) might impact the Goals, MDG gains, costs,
strategies and opportunities for faster progress on poverty reduction.
Scenarios—multiple coherent and plausible futures—are a vehicle both for acting on possible
future(s) and interpreting their implications. This paper explores the implications for growth
and poverty reduction in developing countries of four futures scenarios to address the
following question: “What are the implications of the global financial crisis and its aftermath,
regionally and globally, for developing countries, taking a 5–10 year view?
The scenarios and modelling were developed through interviews and workshops with a range
of stakeholders in the United Kingdom, India and Kenya. This paper takes a structured
approach to reviewing outcomes for growth, poverty reduction and the MDGs for different
developing economies, against the background of the post-crisis context. The scenarios were
developed using a version of the morphological scenarios approach, field anomaly relaxation
(FAR). This creates a backdrop of internally consistent futures for policy formation and decision
making by identifying and analysing the most significant drivers of change in the global
financial and political systems. The scenarios are closely connected to a “soft” model that
identifies possible pathways, causal linkages and transmission variables between the scenarios
and associated levels of economic growth and poverty reduction via key economic variables.
This permits more granular interpretation of the scenario outcomes than conventional
scenario-analysis techniques. This work was funded by DFID (the futures mapping) and UNDP
(the annex MDG review).
Keywords: MDGs; futures; scenario planning; poverty reduction.
* Background review authors (see annex): Andy Sumner, Tom Mitchell and Thom Tanner. Thanks to John Humphrey,
Chetna Desai, Giulia Frontini, Ben Mann, Richard Mallet, Ricardo Santos, and Aislinn Delany.
** Institute of Development Studies.
*** The Futures Company.
2 International Policy Centre for Inclusive Growth
1 INTRODUCTION
Development futures mapping is an emerging area of interest in development research, as
well as in policy in a broader sense (for examples, see Grimm et al., 2008; Hughes et al., 2008;
Lundgaard, 2009), often specifically with regard to Africa (see Table 2 and Box 1 for examples).
For instance, one could take those with a dedicated development angle, such as the European
Association of Development Research and Training Institutes’ (EADI) European Development
Cooperation 2010 and 2020 projects, the Society for International Development’s Horizon
Scanning Project, and the Millennium Project’s Africa Foresight initiative.1
Arguably, this stems from a sense that the economic crisis marked the end of a benign era
of relative stability, strong economic growth and fairly buoyant aid budgets, and ushered in a
different post-crisis world or “new normal” that may be one of multiple and interlinked crises.
Suffice to note here that the conclusion of the US National Intelligence Council Report (2008:
xii), based on a widespread and large academic consultation, is sobering: “trends suggest
major discontinuities, shocks and surprises”.
Nassim Nicholas Taleb has popularised the thesis of “Black Swans”—unexpected,
unpredictable and high-impact events such as the economic crisis itself. Taleb argues
that human beings underestimate the likelihood and impact of hard-to-foresee events.
We should not try to predict Black Swans, however, but “invest in preparedness, not in
prediction” (Taleb, 2007: 208). In short, we can seek to identify a relatively small number
of variables or drivers that are likely to have a disproportionate influence on future
“development” and possible global future(s).
2 THE POST-ECONOMIC CRISIS CONTEXT

The MDGs comprised an approach born of a benign era of relative stability, stronger economic
growth and fairly buoyant aid budgets. We now face a very different world. Changes sparked
by increased uncertainty and a growing sense of multiple insecurities can have adverse
impacts on poverty levels, and evidence is already emerging that the economic crisis
itself is leading to significant changes in the context for development more broadly.
! Global governance: the move from the G8 to the G20 means that large developing
nations have more representation and power, but changes in the International
Monetary Fund (IMF) and the World Bank will be crucial for wider changes in
governance.
! New economic and social policies: it is probable that developing countries will be
more inclined to explore new development models; approaches from China, the
“Beijing Consensus”, are more likely to be taken up than Western prescriptions;
the scale of the food and financial crises has made a powerful case for better social
protection systems, but building a sense of ownership in governments and civil
societies remains a challenge in securing long-term budget allocations.
As Jones et al. (2009: 51) have noted: “the era in which the seven major industrial
economies could meet with Russia and act collectively to solve global problems is over”.
The rise of the G20 and its institutionalisation at the G20 Pittsburgh Summit as the global body
for economic coordination marks a fundamental shift from the era in which agreement was
reached on the MDGs, wherein the countries of the Organisation for Economic Cooperation
Working Paper 3
and Development (OECD) were the main drivers and decision makers in global economic
affairs. The shift from the G8 to the G20 is certainly positive for developing countries’
representation, but it is less clear that the impact on development itself will be immediately
beneficial. While in recent years the G8 has had Africa and the MDGs as a permanent item on
its agenda, it has been harder to introduce issues relevant to the poorest countries, such as the
MDGs, into the G20 discussions. Increasingly, moreover, many issues are addressed in a G2
consisting of the United States and China.
The G20 is evolving as the “steering committee” on global and systemic issues that
could come to include climate, health and other matters likely to be high on the future
international agenda. As noted, a shortcoming is the absence of representation of low-
income countries, particularly African countries, in contrast to the strong representation
of the Asia-Pacific countries (ten of the 19 countries). The G20’s structures may also evolve.
There are suggestions that it should move towards a constituency-based system resembling
the model of the World Bank/IMF boards. Much will depend on how developing-country
blocs operate politically in these new international fora, and on governance reform at the
IMF and the World Bank (reform at both of these bodies has G20 deadlines for decisions in
2010 and 2011). There is consensus that the heads of the two institutions should be selected
in an open and transparent process, and should not be restricted to candidates from one
country or region. Contention remains on the composition of quotas and boards, as these
reflect voting strength and levels of access to resources.
The economic context has also been shaken by the crisis, because of the uncertainties
created by the unexpected shocks to finance and trade, as well as their knock-on effects on
millions of lives, and the shaking of confidence in what were previously thought to be the
certainties of economic theory and practice. The crisis was different for three reasons: its
origins in the industrialised countries; the speed of global transmission; and the size
of the shock. Nonetheless, not all that was expected actually happened (see Table 1).
TABLE 1
The Global Economic Crisis: What Happened? What Didn’t?
What has happened in the crisis in developing countries? What has not happened?
Slowdown in growth rates But no overall developing-country recession

Fall in export volumes But very variable
Fall in export unit values But main problem is rising commodity prices
Reductions in FDI and portfolio investment No country-specific crises as in the 1990s
Banking problems in emerging markets. Banking systems have held up well
Falls in remittances affecting poorer countries Too early to draw a definitive conclusion
Sovereign debt increasing Could become a major issue
Trade credit expected to fall Clear evidence of this problem hard to find
Aid flows expected to fall Some have cut, but no generalised fall
On a broader policy note, the Washington Consensus has been declared dead (again) but
the nature of the shift to a “Beijing Consensus” or model (meaning a greater role for state-led
or state-managed global integration) and policy experimentation is still unclear. The IMF
(2010a; 2010b; 2010c) most recently has questioned inflation targeting and capital controls,
and has raised the prospect of new financial and bank taxes. Further, the discussion of “global
economic imbalances” at the G20, and the resulting agreement that governments have a role
in directing markets in order to avoid “imbalances”, would have been an unthinkable break
with the orthodoxy just a few years ago. If it opens up discussion of a wider range of policy
instruments for development, it will have value. As noted above, however, it is far from certain
that the change in language in G20 declarations and on the pages of the Financial Times will
have any long-term impact on policy.
A further change is the continuing economic uncertainty caused by the crisis itself—it is
not clear when or if growth rates in the poorest countries will start to pick up, and whether the
poorest people will benefit in time to prevent permanent damage to livelihoods and the erosion
of assets. In terms of recovery and the fiscal outlook, there are various concerns regarding the
speed of the recovery, fiscal space, and impacts on public expenditure, social spending and debt
service, which are highly country-specific. Global growth is clear enough, judging by the IMF’s
World Economic Outlook estimates, and recovery is very much V-shaped in the emerging
economies and in Africa. Martin Wolf at the Financial Times and Moisés Naim at Foreign Policy
note the “LUV” recovery (L-shaped recovery in Europe, U-shaped in the United States, and
V-shaped in big emerging economies), implying a fiscally constrained, indebted North and a
dynamic set of larger emerging economies. Much depends on when the monetary and fiscal
stimulus is withdrawn. In short, sustained recovery is not guaranteed. Continued policy efforts
are needed to keep interest rates low, devise credible strategies for withdrawing monetary
support, maintain the fiscal stimulus into 2010 with exit strategies, repair the financial sector
in advanced and emerging economies, and bring about a global rebalancing of excessive
surpluses and deficits in line with the G20 “mutual assessment programme” led by the IMF.
Furthermore, the averages mask significant differences, and in some countries there is a
“triple whammy” of large growth decelerations, slow recovery of growth rates and little or no
fiscal space, particularly in Africa (half of all countries, according to some estimates). Moreover,
a number of fragile states are in the very high-risk category of high growth deceleration,
low/no fiscal space and three years or more to recovery. There is evidence that this will have
MDG impacts not only on growth but also on social spending, albeit varying by country.
Economic uncertainty in donor countries is also leading to a decline in public support for
aid budgets. This is an immediate concern for policymakers over the next few years, and will be
critical in determining the economic and social policy environment.
Looking further ahead, some major “game changers” beyond the recent economic crisis
and food/fuel crisis (see annex for further discussion) will have an impact on the MDGs to 2015
and afterwards. One should also note the changing nature of aid itself, given the rise of “new”
donors among the BRIC countries (Brazil, Russia, India, China) and wider afield, as well as
debates on climate finance that may dwarf “traditional aid” flows. Innovative financing is
already changing the nature and structure of aid, and donors are increasingly aware of debates
on the post-bureaucratic age. All of this indicates a political and economic environment of
increasing uncertainty over the next decade or more, or a situation of “confronting the long
crisis” to echo Evans et al., (2010).
Scenarios—multiple coherent and plausible futures—are a vehicle for acting on possible
future(s) and for interpreting their implications. To this end, The Futures Company and the
Institute for Development Studies (IDS) collaborated on a project to develop scenarios and
modelling in light of the global financial crisis, with a view to addressing the following
question: “what are the implications of the global financial crisis and its aftermath, regionally
and globally, for developing countries, taking a 5–10 year view? The scenarios and modelling
were developed through interviews and workshops with a range of stakeholders in the
United Kingdom, India and Kenya.
Working Paper 5
TABLE 2
Examples of African Futures Mapping
Country/horizon Methodology and key drivers Scenario narratives
East Africa/2040 Scenario paper “I want to be a star”: the region is so

spellbound by the promise of resource wealth
1. Natural and resource wealth. that it welcomes all suitors and cedes control
2. Rural/urban disparities; migration. of its future.
3. Violence/war (or threat thereof). “I want a visa”: East Africa’s executive elite,
4. Effects of climate change/environmental damage. motivated by enlightened self-interest, deploys
5. Political stability. its intellectual skills and state power to deliver
6. Crime and unemployment. development. It also finds that a confidence in
control can only take one so far and that it
faces stark decisions.
Usiniharakishe (don’t rush me): the region’s
countries struggle to retain and reclaim control
over their most local assets—land, water,
trees, creativity—in an effort to determine their
own futures. The land slowly heals over time
and biodiversity reaches record levels.
Kenya/2020 30 researchers developing scenarios in a period of El Niño scenario: total breakdown of Kenya as
more than a year, in between five workshops. it is today.
Maendeleo scenario: initial rapid economic
1. Violence and erosion of cultural values. gains but the country is full of inequalities and
2. Unemployment. instability, without political reform.
3. Lack of government legitimacy and weak Katiba scenario: institutional (political) reform
institutions. without substantial economic transformation.
4. Mistrust of the judiciary. Flying geese scenario: political, social and
5. Decreased agricultural productivity and an economic reform leading to inclusive
uncompetitive manufacturing sector. democracy and growth.
6. Poor infrastructure and utilities.
Rwanda/2025 Conversation-based, convening with key individuals Visionary scenario: Kigali is a thriving tourist
from Rwanda and other countries destination and capital, with direct flights to all
(scenario development). major global cities, children are in school.
Years of attracting foreign investment and
1. Lack of freedom of speech and erosion of civil streamlining bureaucratic processes have
liberties. been effective.
2. Lack of political progress (pro-forma consultations Alternative scenario: Rwanda is run by
without implementing reforms). “benevolent” but strong-armed government,
3. Sluggish private sector because of bureaucracy. recognised as doing a good job and rewarded
4. Stagnating economy. for its governance style; other East African
5. Involvement in regional conflicts. Community (EAC) leaders may emerge and
take on this style of governing.
Uganda/2025 50 people from different professions and Rope bridge: legitimacy of government
backgrounds; conversations and investigations in dependent on its fostering national consensus
order to understand what has led to Uganda’s and tackling pressing problems within society.
current state. This was carried out over 18 months Ow’embaliga: displacement, disparity and
and sought to identify the factors that are influencing disintegration.
the future, as well as to map what future Ugandans Ovago Vile Vile: national unity;
are facing potentially. reconciliation, renewal and reconstruction.
1. Intransigence of the political elite in power and

their role in collapsing avenues for dialogue.
2. Deepening of poverty and social exclusion.
3. Greed and callousness of the political and
business elites.
4. Legacy of violence, conflict and mistrust.
5. Fear of renewed conflict as a result of the
transition failing.
6. A shared vision that Uganda can be
“bigger and better”.
Sources: Rwanda: <http://www.scenariodevelopment.com/Future_of_Rwanda>;

Kenya: <http://www.kenyascenarios.org/default.html>;
Uganda:< http://www.scenarios.ws/uganda/>;
Horn of Africa futures: <http://www.sidint.net/sid-first-trend-monitoring-report-greater-horn-of-east-africa/>.
BOX 1
Over the next 20 years, what factors will drive Africa and the world’s responses to the AIDS
epidemic, and what kind of future will there be for the next generation?
Three scenarios for HIV/AIDS in Africa to 2025:
Tough choices: Africa takes a stand

In this scenario, African leaders take tough measures that reduce the spread of HIV in the long
term, even if it means difficulties in the short term. The key message is that Africa can lay the
foundation for future growth and development, and reduce the incidence of HIV by means of
increased government involvement and coordination, a more coherent strategy (emphasising
both prevention and the scaling-up of antiretroviral therapy), greater HIV/AIDS spending (of about
US$100 billion) and a sharper focus on children orphaned by AIDS. But there will continue to be a
high number of deaths (which will begin to fall by 2015) and a doubling in the number of children
orphaned by AIDS, since prevention measures will take time to work through the system.
Traps and legacies: the whirlpool

This is a story about the deepening of AIDS, poverty, and marginalisation because of a series
of seven traps that prevent all but a few nations/privileged segments of the population from
escaping continuing poverty and HIV prevalence. The epidemic will thus continue because:
HIV is seen in isolation from its root social, economic and political contexts; resources provision
is inconsistent and unpredictable over the next 20 years; African countries fail to translate the
aspirations of pan-African unity into effective reality; donors do not harmonise their responses; aid
is volatile and of poor quality; antiretroviral drugs are easier to access than adequate nutrition and
clean water; the realities of human behaviour are denied; and the root causes of poverty are not
addressed. In this scenario, by 2025 HIV prevalence is similar to that of today (at about 5 per cent
of the adult population); the cumulative number of people dying from AIDS increases more than
fourfold; and the number of children orphaned by the epidemic continues to rise beyond 2025.
Times of transition: Africa overcomes
“Times of transition” is the story of what might happen if all of today’s good intentions were
translated into the coherent and integrated development response necessary to tackle HIV and
AIDS in Africa (through cumulative investments of nearly US$200 billion). In this scenario, there is a
doubling of aid flows to Africa, sustained for a generation, with investments in health systems,
agriculture, education, electrification, water, roads, social development, and institutional and
governance capabilities. “Times of transition” describes fundamental changes in the ways donors
provide aid and the ways governments deal with that aid, so that it promotes sovereignty, does
not undermine autonomy, is not inflationary, and does not foster dependency. The important
message of this scenario is that early expenditure, with a continuous growth in prevention
spending, means that the care and treatment budget can begin to decline as early as 2019, as the
total number of people living with HIV and AIDS begins to fall.
Implications and learning from the three scenarios
The worst of the epidemic’s impact is still to come, yet there is still a great deal that can be done to
change the longer-term impacts. How the crisis confronting Africa is defined, and by whom, will
make a fundamental difference to the outcome of tackling the crisis.The death toll will continue to
rise, no matter what is done. Most commitments do not extend beyond the next five years, and
uncertainty remains about the level of resources that will be available in the future.
Source: UNAIDS (2005).
Working Paper 7
3 WHAT IS SCENARIO MAPPING?

The history of scenario planning goes back to the early 1960s, with the work of Herman
Kahn’s Hudson Institute in the United States and the “Futuribles” movement in France.
Kahn wanted to find a way of “thinking the unthinkable” about the possibility of nuclear
conflict between the superpowers. In the 1970s, Shell adopted the method in a business
environment, using it to explore the consequences of a rapid increase in oil prices at a time
when conventional wisdom thought this improbable. Oil prices did rise, and Shell’s strategic
response transformed its market share and profitability, an outcome that increased
awareness of scenarios in the business sector.
As a discipline, scenarios work tends to be practitioner-led and is sometimes thought
to be under-theorised. Different approaches have emerged from different disciplines and
geographies. These include, for example, the dominant “double-uncertainty” matrix,
widely used in North America and the United Kingdom; the French “prospective” method;
quantitative and qualitative cross-impact methods; and more interpretative methods such as
causal layered analysis.
Bishop, Hines and Collins (2007) suggest that there are about eight “families” of scenarios
methods, and within these some 30 identifiable techniques. The morphological approach
is a variant of the “uncertainty”-based approach to scenario development. Bishop Hines and
Collins note that while morphological scenarios techniques “are more complicated and hence
less common, they do overcome the difficulty that it is devilishly hard to capture the
uncertainties of the future in just two dimensions.”
Whichever method is used, they share a common underlying philosophical basis:
that the future cannot be predicted; that there are multiple possible futures; and that
by understanding, organisations can increase their resilience to change (List, 2005).
As List (2005: 3) notes, “by the end of the 20th century, scenario work had become
the most widely used method for multiplistic foresight.”
Scenarios are a tool for thinking about the range of different possible futures, and
can be used to inform policymaking. Using scenarios to explore and rehearse uncertainties
may highlight a number of issues or potential options that require further detailed
investigation or analysis.
Scenarios are most commonly used as an analytical tool in a strategic context.
Typically, they are used to broaden and deepen the way organisations sense their external
environment, to connect this to the way they respond to stimuli, and to help define future
vision and strategic priorities. They are often used to provide answers to what are termed
“unstructured” or “wicked” problems—messy, adaptive problems that are not amenable to
conventional approaches.2
Scenarios are typically used to rehearse different policy options available to an
organisation, and to highlight their potential strengths, weaknesses and unintended
consequences. Finally (and less frequently), they are used to “future proof”
(or “windtunnel”) a decision or potential investment that is “on the table”.
Essentially, “future-proofing” the MDGs is about thinking how future(s) might impact
the Goals, MDG gains, costs, strategies and opportunities for faster progress on the MDGs.
The concept of future-proofing the MDGs is not new. It has been used with reference
to “climate-proofing” the MDGs by Fankhauser and Schmidt-Traub (2009: 5), who estimate
that the cost of making the MDGs “climate-resilient” is about a third higher than the
conventional cost of meeting the MDGs: about US$100 billion a year for the next decade,
compared with US$72 billion a year for the MDGs alone. Extra costs arise from having to
provide more development support (for example, extra bed nets against malaria), the
same support at a higher cost (for example, more expensive infrastructure), and entirely
new measures (for example, adaptive capacity building). Climate change can also lead to
the prioritisation of certain measures compared to the baseline development plan
(for example, disaster management).
Scenarios should not be considered as predictions of the future (see Table 3). In reality,
the future is likely to contain variations of elements found in each of the four narratives.
Hence the narratives should be considered as a way of illustrating the range of potential
future outcomes of combinations of drivers, rather than as definitive statements about
future developments or variations around a midpoint or base case.
TABLE 3
What Are Scenarios?
Scenarios should … Scenarios should not …
Effective scenarios should provide descriptions of alternative Scenarios should not be considered as predictions of the
coherent and plausible futures, informed by structured and future. In reality, the future is likely to contain variations of
rigorous analysis of the most significant drivers of change. elements found in each of the four narratives.
The narrative should present a logically coherent world, Importantly, scenarios should not present a generalised view
highlighting the drivers of change which combine to produce of feared or desired outcomes. In any future world, there will
particular outcomes. be a range of “winners” and “losers”, and it is important that
the scenario narratives reflect this.
The scenarios should be internally consistent.
Finally, it is crucial that scenarios are not the product of
Crucially, effective scenarios should provide a specific, outside futurists or consultants. In order for scenarios
strategy-focused view of the future. to gain traction within an organisation, it is important that
people feel a sense of ownership of the narratives,
Rather than describing a future world in general terms, they and have a clear and robust understanding of the
should provide specific and strategically relevant information process undertaken to develop them.
on pertinent areas.
4 OUR METHODOLOGY
4.1 GENERATING THE SCENARIOS

Our scenarios were developed using a version of a method known as field anomaly relaxation
(FAR), which is based on morphological analysis.
This approach focuses on identifying and analysing the most significant drivers of change
in the global financial and political system over the next 5–10 years. It allowed the project team
to identify and develop four coherent and internally consistent scenarios and economic
modelling based on analysis of those drivers
This approach aims to create a backdrop of internally consistent futures for policy
formation and decision making. Reflecting the breadth of the project question, it allowed
Working Paper 9
a greater level of depth and veracity to be incorporated into the scenario narratives than
the traditional “2x2” scenario approach, and enabled a closer link to the modelling work.
Morphological analysis is a deductive process, in that the scenarios are “deduced” from an
analysis of the drivers of change.3
A core assumption of the methodology is that we live in “fields” of interactions with other
people and events. These fields can include structural factors such as political stability, social
organisations or economic growth and exchange rates, as well as individual variables such as
personal interactions and decisions. The fields are also interrelated: certain combinations
of different fields present a coherent frame for understanding the future, while other
combinations lack coherence (for example, a combination of high economic growth with
high energy prices and high levels of political instability would be considered internally
inconsistent). By examining different combinations of fields, the full morphological approach
explores the range of imaginable and plausible patterns of interaction, eliminating those that
do not satisfy an overall assessment of internal coherence. The remaining, internally consistent
patterns are then used as stepping stones to create paths into the future.
The project involved an initial scanning phase, during which the project team
developed a long list of about 60+ key drivers of change, which were identified through a
combination of desk research and interviews with development experts. See Sumner and
Tiwari (2009) for the full list.
“Drivers of change”, of course, is an approach familiar to many in development
policy (Warrener, 2004). We define drivers of change here as forces (which can be social,
technological, economic, environmental or political) that are likely to influence the outcome
for the overall system or subject defined by the project question over the specified time
period. They may influence it positively or negatively. In addition, a driver of change can
be characterised by the way it impedes the rate of change—for example, “the low rate of
investment in new technology”. The processes of scanning for drivers and then analysing them
for importance and degrees of uncertainty are the platforms on which work in the scenarios
field (and work in the futures field more generally) are based. Clusters of these drivers of
change formed the “fields” or sectors of interaction central to the morphological approach.
A number of techniques were used to refine this long list. Initially, workshops were held
with stakeholders to reduce the initial 60 drivers to a shorter list of about 30 that (after review
and testing) were considered to have greater impact on the shape of the global economy and
development over the next decade. This assessment was largely qualitative. Relationships
between these drivers were subsequently analysed by means of an impact matrix, based on
the work of Godet (2001) to identify both “contextual drivers” (high-impact, and relatively
independent of the other drivers) and those drivers that were important and also uncertain
(high-impact and relatively interdependent).
This analysis was cross-checked using Decision Explorer, a software tool that maps and
analyses relationships within systems (Eden and Ackerman, 1998). Together, these three stages
have been found to give sufficiently robust analysis of drivers and their inter-relationships in
scenarios-development processes. The important and uncertain drivers were then grouped
into factor themes, as outlined below, to describe the overall landscape.
The six core drivers chosen from the process above as priority drivers were:
! shifts in global wealth distribution;
! trends in multilateralism;
! changes in the intra-country polarisation of wealth/income inequality;
! changes in the nature of aid and development funding;
! rising energy prices (over the long term); and
! changes in information flows.
A range of plausible outcomes or factors associated with these uncertainties over the
period covered by the scenarios were then identified, and these uncertainties were put
together in plausible combinations to create the outline scenario narratives. Table 4 shows
the range of futures associated with each variable.
TABLE 4
Range of Futures Associated with Each Variable
Sector Factor Factor Factor Factor
Shift in global wealth Collapse of the US$ Rise in national Rapid shift in global Rejuvenation of
distribution protectionism wealth from west to Western economies
east and slow of global
wealth shift
Trends in Multilateralism Minilateralism Bilateralism

multilateralism
Polarisation of Continued polarisation Stabilisation at Political action

wealth/ income of wealthy/poor present levels of taken to reduce
inequality inequality inequality
Nature of aid and Reductions in aid Vertical integration/ Continued

development expenditure as aid concentration of aid fragmentation of aid
funding processes lack public
accountability
Rising energy prices Slow / steady increase Sharp rise in energy Greater volatility in Stagnation in energy
(over the long term) in energy price prices energy prices prices
Information flows Continued growth in Greater state control Decline/stagnation

(ICT) information flows of information flows of penetration of
information flows
Each scenario included, at core, plausible combinations of the ranges of uncertainties

outlined above (see Table 5).
There are a number of benefits to using the deductive approach. It is a structured
process, with a clear flow from drivers to scenarios construction. It also provides a relatively
straightforward way to connect the scenarios to their strategic and policy implications. The factor
combinations, initially identified through analysis by The Futures Company and IDS, were tested
at stakeholder workshops as part of the scenario-development workshop.
Working Paper 11
TABLE 5
Scenarios by Key Drivers
Sector Roller Coaster Western South by Southeast The Odd Couple
(Re)Invention
Shift in global wealth Collapse of the US$ Global wealth shift Rapid shift in global Rise in national
distribution slows wealth from West to protectionism
East
Trends in Multilateralism Western-led Bilateralism Minilateralism
multilateralism multilateralism
Polarisation of wealth/ Continued polarisation Stabilisation at Political action taken to Stabilisation at

income inequality of wealthy/poor present levels of reduce inequality present levels of
inequality inequality
Nature of aid and Reductions in aid Asset transfer to Continued Vertical integration/
development funding expenditure as aid poorer countries via fragmentation of aid concentration of aid
processes lack public carbon trading system
accountability
Rising energy prices Slow / steady increase Slow / steady Greater volatility in Sharp rise in energy
(over the long term) in energy price increase in energy energy prices prices
prices
Information flows Continued growth in Continued growth in Decline/stagnation of Greater state control
information flows information flows penetration of of information flows
information flows
4.2 THE MODELLING APPROACH AND ASSUMPTIONS

Any categorisation of countries is contentious (see Harris, Moore and Schmidt [2009] for a recent
review of “developing”-country classifications). Our model is based on a typology of developing
countries according to their relationship with the global economy. The categories were chosen
to reflect any given country’s relationship with the rest of the world through the balance of
payments, and thus the link between the future scenarios or contexts and the country’s key
macroeconomic variables by addressing these questions: Is the country a net fuel importer or
exporter? Is the country dependent on non-fuel primary commodity exports and/or aid?
These questions led us to develop country groupings based on combinations of net
fuel-importing countries (Table 7) and fuel exporters, and dependency on non-fuel primary
commodity exports and aid.4 We deal with fuel exporters as one grouping (rather than
combinations of fuel exporter with aid and non-fuel commodity exporters) because under
all scenarios fuel prices are rising, implying that fuel revenues will accrue to those countries
(the use and distribution of those fuel revenues is then a governance question).
TABLE 6
Combinations of Aid and Non-Fuel Commodity Dependent Countries
Is the country non-fuel commodity export dependent ?
Yes No
Is the country aid Yes
dependent?
No
The specific quantification of thresholds for these variables are as in Table 7. Of course,
these are not uncontentious.5
TABLE 7
Definitions Used for Net Fuel Exporters, Non-Fuel Commodity Dependency,
Foreign Aid Dependency
Indicator Our definition Details and data
Net fuel exporter >20% of exports US$ value Countries that have more than 20%
of export value in fuels.
There is an IMF WEO category of “fuel
exporters” by the main source of export
earnings.
Data from UNCTAD.
Net fuel importer Positive net fuel trade Countries that import more fuels than
they export.
Data from UNCTAD.
Non-fuel primary commodity >50% of exports US$ value in three Countries with more than half of all
dependency leading commodities export earnings in three commodities.
Data from UNCTAD.
High foreign aid dependency >9% of GNI Countries with ODA/GDP greater
than 9%.
Data from World Bank WDI.
Sources: OECD (2003), Harmonising Practices for Effective Aid Delivery. Paris. OECD; UNCTAD (2009), Trade and
Development Report. Geneva, UNCTAD.
We can then outline the characteristics of different countries. See the tables in the annex
for countries and data, including additional information on private capital flows—foreign
direct investment (FDI) and remittances—as it is relevant to the later discussion. We did not
include portfolio flows because these are significant only in South Africa and Indonesia.
We then have country groupings as follows.
Net fuel exporters; for example, Nigeria, South Africa, Sudan and Indonesia.
Net fuel importers:
! with neither primary commodity export dependency nor aid dependency: for
example, Bangladesh and Nepal;
! with primary commodity dependency but without aid dependency: for example,
Kenya and Jamaica;
! with both primary commodity export dependency and aid dependency: for
example, Afghanistan, Ethiopia, Ghana, Malawi, Mozambique, Rwanda, Sierra
Leone, Tanzania, Uganda and Zambia.
We take these country groupings and consider each future scenario. First, we ask
what each scenario means at a global level for trends in: fuel prices (already explicit in each
scenario); non-fuel primary commodity prices; the size and composition of aid flows; the size
and composition of private capital flows (notably FDI and remittances). Key assumptions are in
Tables 8, 9 and 10.
Working Paper 13
TABLE 8
Key Variables and Underlying Assumptions as to Determinants
Key variables linking scenario to countries Key assumptions at to main determinants of trends
Fuel prices Explicit in each scenario.
Non-fuel commodity prices Prices are a function of prevailing trends in protectionism, which
will raise prices; robust global growth, which will raise prices; and
robust growth in the BRICs, which will raise prices.
Aid flows Size of flows are a function of a climate regulation agreement,
which will increase flows; multilateralism, which will increase flows;
and robust growth in the BRICs, which will increase flows (in non-
traditional aid).
Private capital flows Size of private flows are a function of prevailing trends in
protectionism, which will reduce flows; global growth, which will
increase flows; robust growth in the BRICs, which will increase
BRIC outward private capital flows; and OECD growth, which will
lead to increases in OECD outward capital flows.
Finally, for each country grouping in each scenario we make assumptions for trends in
medium-term economic growth prospects (based on trends in fuel prices, non-fuel commodity
prices, aid flows and private capital flows), trends in labour demand (based on fuel prices, non-
fuel commodity prices, aid flows and private capital flows) and trends in public budgets (based
on fuel prices, non-fuel commodity prices and aid flows) (see Table 9).
TABLE 9
Key Variables and Underlying Assumptions as to Determinants
Key variables linking scenario to countries Key assumptions at to main determinants of trends
Medium-term economic growth prospects Rising fuel prices dampen growth prospects for fuel importers and
raise growth prospects for fuel exporters; rising commodity prices
raise growth prospects in commodity dependent countries; rising
aid raises growth prospects in aid dependent countries; and
private capital flows raise growth prospects in all countries.
Labour demand Good growth prospects raise labour demand significantly if in
non-fuel and non-commodities in particular.
Public budget surplus/deficit Good growth prospects lead to good public budget prospects.
Of course, many of these assumptions may not hold in reality for all sorts of reasons, and
many are determined by the quality of governance and social and economic policy (take, for
example, whether oil revenues lead to healthy budgets).
We then aggregate these trends to consider three key poverty indicators, taking three
key MDGs: the dollar-a-day indicator, primary enrolment and child mortality. Although the
timeline is 5–10 years, and thus to 2015 and beyond, we chose the MDGs to make the
modelling concrete and also because household income poverty, child education and child
mortality are likely to remain crucial dimensions of poverty reduction after 2015. Income
poverty is linked to growth, labour demand and trends in food prices (assuming a significant
link between food and fuel prices). Education and health poverty are linked to growth and
public budgets (see Table 10).
TABLE 10
Modelling Assumptions
Outcome Assumed key determinants
Trends in Strength of Strength of

Extent of Strength of Climate
Level 1 economic OECD country BRIC country
multilateralism global growth “deal”
protectionism growth growth
Non-fuel
x x x x
commodity prices
Volume of aid x x x x
Volume of private
x x x x
capital
Fuel Commodity Private capital

Level 2 Growth Aid
prices prices flows
Strength of growth n/a x x x x
Strength of labour
x x x
demand
State of public
x x x x x
finances
Labour Public Food prices
Level 3 Growth
demand budget (oil prices)
Dollar-a-day
x x x
poverty
Education MDGs x x
Health MDGs x x x
We now outline each scenario in detail and MDG-related impacts for different types of
countries. Box 2 introduces the four scenarios by identifying key drivers of each.
BOX 2
Future Scenarios Developed and Key Drivers
South by Southeast: Key Drivers

! Minilateralism.
! Rapid shift in wealth from West to East.
! Sharp rise in energy prices.
! LICs excluded from emissions until

thresholds reached.
Wo
orking Paper 15
Weestern (Re)Invvention: Keyy Drivers

! Developmeent of Western multilateralism
m.
! Rejuvenatio
on of Western economies
e and
d
maintenan
nce of their sharre of GDP.
! Steady incrreases in energyy price.
! Frameworkk for emission reductions

r and
d asset
transfer fro
om rich to poorr countries via
carbon cred
dits.
Thee Odd Couplle: Key Driverrs

! Developmeent of “minilateeralism” and prrotectionism
on trade flo
ows.
! Steady incrrease in energyy prices.
! A common regulatory fra

amework for em
mission
reductions..
! Continued internal polariisation of wealthy/poor
Rolller Coaster: Key Drivers

! Collapse off the dollar.
! Bilateralism
m.
! Increased volatility
v in eneergy prices.
! Piecemeal//regionalised en
nvironmental
regulation mechanisms.
5 SCENARIO 1: SOUTH BY SO
OUTHEAS
ST
5.1 OUTLINE NARRATIVE

N E
5.1
1.1 Stagna
ating West,, Resurgent East
The receession of 20
008–2010 prroves a significant even
nt in driving the financiaal rebalancing away
from We estern powe ers towards the East. Haampered byy billions of dollars of bad loans, a failure
f
to reform
m the bankiing system significantly
s y and huge pension defficits, Westeern econom mies
continue to stagnate. Even after the “official” end of the recession, growth remains slow, and
significant stimulus expenditure ultimately fails to revitalise industrial sectors in developed
countries. The West appears to be slipping into a Japan-style “lost decade” of low interest
rates and low levels of return.
In contrast, many developing countries handle the fallout of the financial crisis with
greater success. Cash-rich China increases its domestic investments, leveraging its significant
foreign exchange reserves to buy foreign assets, provide direct financial assistance and make
long-term deals with resource-rich countries (many in Africa) that lack liquidity. This move
proves adroit given the sharp increase in the price of oil and energy prices, driven largely by
increasing demand from emerging economies and also by the failure of energy technologies
to deliver predicted efficiency gains.
Moreover, the burgeoning middle classes in China, India and South America prove able to
maintain domestic levels of demand, promoting continued rapid economic growth in these
areas. Their growing influence is not just economic but also cultural. The Indian Premier
League in cricket, Bollywood films, tai chi and Chinese food all challenge the hegemony
of Hollywood, burgers and the English Premier League in football.
5.1.2 Minilateralism
Though there are calls for a “New Bretton Woods” to regulate the global economy better,
policymakers fail to agree on a set of globally transparent and effective rules to apply to a
world of differing capitalisms and levels of financial and institutional development.
The result is that the idea of a single “international community” consisting of nation states
is no longer a reality. Rather, a series of de facto trading blocs emerges. China has liberalised its
economy by opening up to controlled forms of investment from “trusted partner states”
such as Singapore, Malaysia and South Korea, and has signed a host of financial and trade
agreements with much of the rest of Asia, Middle Eastern oil producers and Russia.
These agreements, typically legitimated on the grounds of protecting these nations from
“destabilising Western speculation”, emphasise many features of what commentators call the
“Chinese model” of development, with tighter capital controls and greater state intervention
across the economic cycle.
Meanwhile, in developed markets, ongoing economic stagnation leads to a resurgence
of nationalism and growing calls for economic protectionism: “Buy Local” campaigns (many
endorsed by local politicians) grow in popularity in Europe and the United States. Politicians
and pundits watch the relative economic decline of Europe and the US, the “hollowing out”
of the industrial base and the growth of China’s economic sphere of influence with a growing
sense of alarm. One response is much closer ties between the trading blocs of the European
Union (EU) and the North American Free Trade Agreement (NAFTA).
Low-income countries (LICs) lacking significant natural resources often find themselves
left out of major trading blocs in this scenario. The African Union encourages the development
of a regional trading bloc across the continent but this effort is only partially successful,
because many resource-rich African countries tend to focus their diplomatic energies
and calls for FDI on one or other of the regional trading blocs.
Power is more dispersed in this scenario. Though the United States remains the single
most powerful actor, its relative strength is in decline and US leverage is more constrained.
Working Paper 17
Without any significant central coordination, regulation tends to be led at a regional level and
varies significantly between economic jurisdictions. Capital and goods flows between the
blocs are impeded, and financial-service firms must often compete as regional entities with
separate balance sheets. There is little coordination between the different trading blocs,
and the Bretton Woods institutions (World Bank, IMF) are increasingly marginalised.
5.1.3 A Piecemeal Approach to Climate Change

Globally, there is no overarching “deal” to reduce carbon emissions significantly. Instead, the
approach to emission reductions is piecemeal and measures are often taken at a regional level.
There is little coordination in terms of emission cuts between the major trading blocs, and
pledged reductions are typically non-binding. LICs are generally excluded from any
requirement to reduce CO2 emissions until an emission threshold is reached.
5.1.4 Restrictive Communications

Communications and connectivity are more controlled and monitored by governments than
they were in the first decade of this century, a trend that has been increasingly stealthy as data-
surveillance techniques have become more sophisticated. One result is further to reduce
political activism and the influence of non-governmental organisations (NGOs) in both the
South and the North.
TABLE 11
South by Southeast: Focus and Flow Questions
What are the major Production in this world is much more regional in nature. Global flows of goods are reduced both
patterns of production in by the establishment of global trading blocs with limited flows of goods and capital between
this world? them, and by sharp increases in energy prices, which in turn increase the cost of shipping.
What are the major Overall consumption falls in this world: there is less international movement of goods,
patterns of consumption and thus what is consumed tends to be more regional in nature.
in this world?
How do people connect to Connections intensify within economic blocs in this world, but tend to decrease outside of it.
one another in this world? English declines as the global lingua franca, particularly in countries closely tied to China, and
hence websites are typically read in local languages. There is considerably more state
monitoring of electronic communications: the Internet proves not to be the democratising force
that many had hoped for in the 1990s.
What are the institutional The Bretton Woods institutions, such as the World Bank and IMF, have significantly less
structures which support influence in this scenario, and tend to be much more regional in nature.
this world?
Which groups are Countries outside the major trading blocs are often marginalised in this world. While some LICs
marginalised in this attract significant investment, typically in their resource sectors, many others exist outside the
world? major trading blocs, with negative economic impacts.
Western economic powers stagnate economically (and to a degree socially) in this world.
Which groups are heard? Energy producers, leading countries in regional trading blocs, regional governance bodies.
Who gains from this Gainers in this world include resource-rich countries and developing countries that emerge
world? relatively unscathed from the recession.
Trends in non-oil Overall direction of the trend: increasing.
commodity prices Non-fuel commodity prices rise because of significant demand from China and India,
and greater protectionism may also increases prices.
Trends in size and volume Overall direction of the trend: declining.
of aid flows Aid flows are falling overall because of the declining influence of the West, but offset somewhat
as aid flows shift composition to non-traditional donors.
"
Trends in size and form of Overall direction of the trend: mixed

private capital flows Private capital flows are stagnating overall but there is a shift in composition as non-OECD
capital flows increase at the same time as a decline/stagnation in OECD capital flows. Regional
investment patterns become more pronounced—that is, Chinese FDI in ASEAN; South Africa in
SADC; Russian in the Stan republics. Remittances from the European Union (EU) stagnate or
fall but remittances from middle-income countries to LICs increase. Regional migration expands
in “growth centres” such as Beijing and migration fluctuates with growth in those centres.
5.2 IMPLICATIONS FOR POVERTY AND GROWTH

In the South by Southeast scenario, fuel prices are rising steadily. Non-fuel commodity
prices rise because of significant demand from China and India, while greater protectionism
may also increase prices. Aid flows are falling overall because of the declining influence of the
West, but this is offset somewhat as the composition of aid flows shifts to non-traditional
donors. Private capital flows are stagnating overall but there is a shift in composition as
non-OECD capital flows increase while OECD capital flows decline/stagnate. Regional
investment patterns become more pronounced—Chinese FDI in the Association of Southeast
Asian Nations (ASEAN), South African in the Southern African Development Community
(SADC), and Russian in the “Stan” republics. Remittances from the EU stagnate or fall, but
remittances from middle-income countries to LICs increase. And regional migration expands in
“growth centres” such as Beijing, fluctuating with growth in those centres.
TABLE 12
South by Southeast: Variables and Trends
Variable Direction of variable Trend details
Fuel prices " Rising steadily.
Non-fuel commodity prices Higher prices because of robust BRIC
"
growth.
Size of aid flows Falling because of declining influence of
#
West. Shift to non-traditional donors.
Size of private capital flows Overall, stagnating. Fall in OECD private
# capital flows offset somewhat by rise in
non-OECD private capital flows.
What does the South by Southeast scenario mean for different types of countries?
Table 14 provides an overview.
! For fuel exporters this is again a potentially positive scenario as rising fuel prices
spur growth and public spending. Labour demand might benefit in a limited way
from fuel-led growth and/or from robust demand from the BRIC countries, but be
constrained by a lack of private capital. As a result, income poverty, education and
health indicators have the potential to improve steadily.
! For fuel importers, things are more mixed. For fuel importers with neither primary
commodity export dependency nor aid dependency, the outlook is potentially
positive because robust growth in the BRIC countries fuels growth and labour
demand. Again, as a result, income poverty, education and health indicators have
the potential to improve steadily.
Working Paper 19
! For fuel importers with commodity dependence but without aid dependency, this is a
potentially positive scenario because higher non-fuel commodity prices would
support growth and healthier public budgets, and thus underpin income poverty
reduction and improved education and health indicators.
! For fuel importers with commodity dependence and aid dependency, this scenario is
potentially more negative. Although rising commodity prices would support
growth and public spending, the impact of drastically declining aid budgets could
have greatly influenced income poverty, education and health.
TABLE 13
South by Southeast: Medium-Term Prospects for Each Country Grouping
Significant fuel Net fuel importer Net fuel Fuel importer and
exporter with neither aid importer and commodity and aid
or non-fuel commodity dependent
commodity dependent
export
dependency
FUEL EXPS FUEL IMP FUEL IMP + FUEL IMP + AID +
COM COM
Nigeria, South Bangladesh, Kenya and Ethiopia, Ghana,
Africa, Sudan, India, Nepal, Jamaica. Malawi,
Indonesia, Pakistan, and Mozambique,
Vietnam, and China. Rwanda, Sierra
Yemen. Leone, Tanzania,
Uganda, Zambia,
Afghanistan, and
Guyana.
Macroeconomic prospects
Strong economic growth GREEN GREEN GREEN ORANGE
Strong labour demand ORANGE GREEN GREEN ORANGE/RED
Healthy public budgets GREEN GREEN GREEN ORANGE/RED
Poverty reduction prospects
Reduction in the dollar-a-day poverty GREEN GREEN GREEN ORANGE
headcount ratio
Improvement in primary school GREEN GREEN GREEN ORANGE/RED
enrolment/completion ratios
Improvement in child and infant GREEN GREEN GREEN ORANGE/RED
mortality rates
Code: GREEN = positive prospects; ORANGE = mixed prospects; RED = negative prospects.
6 SCENARIO 2: WESTERN (RE)INVENTION
6.1.1 US and EU Reinvention

Policies introduced to prevent the worst excesses of the recession prove successful in
developed markets and many return to robust levels of economic growth by 2013, their
economies proving resilient, flexible and adaptive. Financial institutions taken into public
ownership during the depth of the financial crisis are quickly returned to the private sector
with their capital ratios strengthened and their investment banking and securities operations
broadly intact. The US dollar and the euro have fallen against a basket of international currencies,
increasing the competitiveness of exports, and US bond yields remain low and stable. Equity, oil
and commodity prices have risen, creating challenges for exporters such as China, while stock,
bond and currency prices in emerging markets have increased by even greater proportions.
The push for renewable energy in the EU and the United States slowly lowers their demand
for fossil fuels, reducing trade surpluses with Russia and with Middle Eastern countries. Moreover,
the greater focus on developing a more sustainable national infrastructure provides a further
economic stimulus in developed economies, shifting from the consumption-led growth of the
1990s to investment-led growth.
The EU, meanwhile, reasserts the Lisbon goal of becoming a dynamic and competitive
knowledge-based economy by 2020. The United States, emboldened by the success of its
stimulus spending and re-assertive financial sector, appears ready to continue its leading
role in developing and managing global financial architecture.
6.1.2 Challenges in Developing Countries

One significant outcome is that, while emerging economies continue to grow, the differences in
the levels of growth are smaller than in previous decades. Infrastructure bottlenecks, resource
shortages (including water shortages), as well as limits on the productive capacity of the land
and an increase in the rate of desertification, all prove a drag on the pace of development, as
does a global carbon trading system that penalises energy-inefficient production. The steady
increase in the price of oil finally reduces the comparative advantage of export-oriented
economies as the cost of shipping goods increases with the cost of oil, and there is a parallel
decline in levels of FDI in emerging markets.
In China, there is social unrest following the succession of the fifth-generation Chinese
leaders in 2012. While the immediate causes are clear (a slowing economy and alarm over
the effects of environmental damage), the protesters are increasingly middle class,
concerned to hold Chinese officials and politicians to account for how they spend tax
revenues and for their political choices.
6.1.3 A New Variant of Multilateralism

The speed of contagion of the 2008–2009 global financial crisis concentrates the minds of
many policymakers with regard to the interconnected nature of many global challenges.
One of the most significant impacts of this is a reassessment of many assumptions about
multilateralism. While the view among many experts had been that a multipolar world would
lead to more representative international institutions, in reality the G20 proves too complex a
structure for significant breakthroughs, as amply illustrated by the grindingly slow progress of
the Copenhagen talks. Instead, many policymakers (and particularly those from the developed
world) argue that, given the scale of the global financial and environmental challenges,
effectiveness and efficiency are more important than pure representativeness, and
negotiations tend to involve “The Quartet” of the EU, the United States, Japan and China.
One of the most significant impacts of this new multilateralism is a global agreement
on a common framework for regulating carbon emissions, including some asset transfer from
wealthy to poor countries by means of a carbon-credits system. Centred in London and New
York, the trading system effectively provides a subsidy to LICs with small carbon emissions.
Working Paper 21
6.1.4 Green Technologies

Both the EU and the United States pour significant funds into the development of green
technologies, with generous subsidies for research and innovation, while the steadily
increasing oil price pushes the drive for energy independence up the agenda.
Green technologies lead many commentators to refer to the new world order as “the
hourglass world”: LICs at the bottom benefit from asset transfer through carbon credits and
the growth of new “green” manufacturing and energy generation, while developed countries
at the top maintain their global share of GDP and their significant influence over global
institutions. It is the developing and middle-income countries that are squeezed.
6.1.5 Storing up Future Problems?

Fundamental reform of the banking system remain elusive, leading some commentators to
warn of the dangers of a second and more damaging financial crisis in the years to come.
Concentration in banking is even greater than before the crisis, and attempts at a more
coordinated response to risk prove unsuccessful.
Moreover, a new generation of leaders in middle-income countries increasingly
came to question the failure to undertake fundamental reform of the global financial
architecture, as well as their continuing relative lack of influence over major decisions.
Brazilian Premier Heloísa Helena, an outspoken critic of the new arrangements, comments
that the new system represents “the new face of colonialism”.
In LICs, such concerns are heard less often. Carbon trading has been a boon and there
has been significant asset transfer through carbon credits, contributing to higher levels of
economic growth and improved living conditions for many—though the poor do not always
benefit from these transfers. Many LICs have high hopes for development strategies that
involve “clean” manufacture and energy generation, “leapfrogging” countries with older and
less efficient industrial bases. Finally, one of the most striking developments has been reverse
technology transfer, from South to North, of more versatile and low-impact technologies—
from passive building design to water treatment.
TABLE 14
Western Reinvention: Focus and Flow Questions
What are the major Patterns of manufacturing are shifting in this world. While the story for much of the 1990s and
patterns of production in 2000s had been about the huge growth of manufacturing in China, the combination of a higher
this world? oil price and carbon trading reduces the comparative advantage of countries reliant on exports
of low-value goods. Instead, some production is moved back to developed economies, while
LICs are able to profit from the higher market in carbon through “leapfrog” development.
What are the major One of the major trends in consumption in this world is the increasing move towards more locally
patterns of consumption produced goods. The cost of transportation, driven both by a rising oil price and the cost of
in this world? carbon, means that there is less comparative advantage in producing goods on one side of the
world and transporting them to the other, and more production is based closer to consumers.
This development provides a relative boost for economies (particularly Western economies) with
large numbers of wealthy consumers, though the net effect is an absolute loss of welfare.
How do people connect to The global ICT boom continues, albeit with a greater focus on the energy efficiency of servers
one another in this world? and less waste in materials. The continuing spread of mobile technology in Africa has
transformed information systems (and financial systems), and has improved the visibility of the
poor areas in the North.
"
What are the institutional Institutional structures in this world are remarkably unchanged. The World Bank and IMF retain
structures which support significant Western influence, while less influence is assigned to middle-income countries.
this world? Institutions that were able to act as conduits of carbon trading, especially the IMF, gain
particularly in influence, while the development of an International Carbon Trading Exchange in
London is also important.
Which groups are Middle-income and developing countries are particularly marginalised in this world, as Western
marginalised in this nations continue to dominate most global institutions. In the longer term, this marginalisation
world? leads to significant resentment among rulers and populations, and thus the institutional
structures in this scenario may not be stable in the longer term.
Which groups are heard? Many “traditional” voices continue to be heard in this scenario: the World Bank, IMF and WTO all
retain influence. Outcomes for LICs are also relatively positive, as they benefit from the asset
transfer afforded by the global carbon trading system and from investment in new “green”
technologies.
Who gains from this LICs are one group that gains in this world. Asset transfer via carbon credits, plus significant
world? investment in green technologies, provide a boost to economic growth, while the cost of carbon
emissions reduces the comparative advantage of other primary manufacturers (such as China).
Developed nations also gain, as they manage to maintain their share of GDP and their
dominance of many international institutions.
Trends in non-oil Overall direction of the trend: increasing.
commodity prices The return of strong economic growth in the West (about 3–4%) drives an increase in non-oil
commodity prices.
One result of this is greater FDI into LICs with natural resources.
of aid flows Traditional aid flows, especially from Western powers, decline (albeit relatively slowly) as asset
transfer through carbon trading comes to be viewed as an appropriate substitute.
Note: a strong feature of this scenario is that trade and aid flows are increasingly difficult to
disaggregate. While traditional flows are in decline, there is a combination of resource transfer to
poorer countries via carbon trading and continued FDI (driven primarily by high-priced
commodities).
Trends in size and form of Overall direction of the trend: increasing.
private capital flows Private capital flows to LICs grow in this world, as a result of high commodity prices and of asset
transfer via carbon trading.
In addition, some LICs are able to capitalise on the demand for low-carbon technologies,
and to “leapfrog” countries with legacy dirty infrastructure (such as through significant
investment in solar).

Western Reinvention is a scenario in which trade and aid flows are increasingly difficult to
disaggregate. While traditional flows are in decline, there is a combination of resource-transfer
to poorer countries through carbon trading and continued FDI (driven mainly by high-priced
commodities). Carbon credits tend to displace other flows of aid. As a result, there is an
increase in influence for organisations that become involved in brokering those flows or
buying/selling credits (such as a new “International Centre for Carbon Trading”, the EU, the
African Union), and a decline in influence for organisations that are less involved (such as the
IMF and bilateral donors).
In this scenario, fuel prices are rising steadily. Non-fuel commodity prices rise, driven
by the return of strong economic growth in the West (about 3–4 per cent). Aid flows rise
dramatically and their composition changes. Traditional aid flows are dwarfed as
carbon/climate aid and trading come to be viewed as appropriate substitutes. And private
capital flows increase as a result of high commodity prices and of asset transfer through
carbon trading. In addition, some LICs are able to capitalise on the demand for low-carbon
Working Paper 23
technologies and to “leapfrog” countries with legacy dirty infrastructure (for example,
by means of significant investment in solar energy). One result of this is greater FDI into
LICs with natural resources.
TABLE 15
Western Reinvention: Variables and Trends
Fuel prices " Rising steadily
Non-fuel commodity prices Higher prices because of robust
"
global growth
Size of aid flows Rising significantly because of
" western recovery and climate change
asset transfers
Size of private capital flows " Rising because of western recovery
What does the Western Reinvention scenario mean for different types of countries?
Table 16 provides a colour-coded quick reference. The table is a sea of green. This scenario is
reminiscent of the period between the late 1990s and the 2008 global crisis. The only cloud on
the horizon is the speed of fuel price rises.
For fuel exporters this is a potentially positive scenario because steadily rising fuel prices
support growth and fund healthy public budgets. Labour demand is buoyant because of
global growth and private capital flows. Hence income poverty, education and health
indicators are all likely to improve.
For fuel importers things are generally positive, with a caveat related to the speed
of fuel price rises.
For fuel importers with neither primary commodity export dependency nor aid dependency,
this is largely a potentially positive scenario because growth is led by global recovery and
private capital flows. Public budgets are healthy as a result, and thus income poverty,
education and health all improve.
For fuel importers with commodity dependence but without aid dependency, this is also
largely a potentially positive scenario because non-fuel commodity prices are rising, thereby
supporting growth. Labour demand is buoyant because of global growth. Hence public
budgets are healthy and income poverty, education and health all improve gradually.
For fuel importers with commodity dependence and aid dependency, again this is largely a
potentially benign scenario, with the same caveat on fuel-price trends.
This group of countries benefit hugely from climate aid and trade, as well as from rising
non-fuel commodity prices. Consequently growth is strong, as is labour demand, and public
budgets are healthy. As a result there is real progress on income poverty, education and
health indicators.
TABLE 16
Western Reinvention: Medium-Term Prospects for Each Country Grouping
Significant fuel Net fuel Net fuel Fuel importer and
exporter importer with importer and commodity and
neither aid or commodity aid dependent
non-fuel dependent
commodity
export
dependency
FUEL EXPS FUEL IMP FUEL + COM FUEL IMP + AID +
COM
Nigeria, South Bangladesh, Kenya and Ethiopia, Ghana,
Africa, Sudan, India, Nepal, Jamaica. Malawi,
Indonesia, Pakistan, and Mozambique,
Vietnam, and China. Rwanda, Sierra
Yemen. Leone, Tanzania,
Uganda, Zambia,
Afghanistan, and
Guyana.
Strong economic growth GREEN GREEN GREEN GREEN
Strong labour demand GREEN GREEN GREEN GREEN
Healthy public budgets GREEN GREEN GREEN GREEN
Reduction in the dollar-a-day poverty GREEN GREEN GREEN GREEN
headcount ratio
Improvement in primary school GREEN GREEN GREEN GREEN
Improvement in child and infant GREEN GREEN GREEN GREEN
mortality rates
7 SCENARIO 3: THE ODD COUPLE
7.1.1 The Rise of “Chimerica”

In this scenario the fragile economic relationship between the United States and China, in
which China’s trade and capital surpluses support America’s continuing debts, remains the
house of cards on which the global economy is built. But the United States is vulnerable in the
wake of the global financial crisis, and thus China takes the opportunity to turn its economic
leverage into greater political and diplomatic influence.
Chinese corporations and diplomats are much more active on the world stage, not least in
a continuing search to satisfy China’s increasing energy and food needs. These moves are not
uncontroversial, especially because resource deals are often reached with autocratic or violent
states. But international (and American) reaction to these moves is more muted than it has
been in the past: US politicians realise the extent to which China has continued to underpin
the dollar, while Chinese policymakers recognise the importance of maintaining the dollar’s
value and hence their reserves.
Working Paper 25
The big gain for China is its increasing power and influence over international
organisations, gained with American support. The 2016 agreement on a new constitution
for the IMF, which provides emerging economies with significantly more power to influence
the direction of the Fund (along with the non-too-subtle symbolism of building a new
headquarters in Hong Kong), is simply the most visible of a growing number of reforms to the
international system geared to rebalancing representativeness towards emerging economies.
At the same time, Chinese investment in US corporations continues to grow; the acquisition
of one of the big three US carmakers in 2015 is seen as a decisive moment.
The reaction to these shifts in developed economies is muted. Staggering under the
weight of significant banking losses and refusing to accept that their aggressive reflationary
policies and focus on industry-led manufacturing could once again prove counterproductive,
their recovery from the recession is slower than many had hoped. Many find it difficult to argue
that they continue to deserve additional voting rights. By the end of the decade, even the most
hubristic and nationalist of American commentators has to admit that America’s period as the
sole superpower seems to be over, the country’s freedom of movement being increasingly
restrained by the closeness of its ties with China.
Closeness with China, however, increases the distance between the United States and
Europe, with ever widening trans-Atlantic splits on a broad range of issues including trade
policy, intellectual property rights, defence and human rights.
Driven by steadily rising energy costs and slower demand, the level of global trade flows
fails to reach the heights of 2005/6, consistently remaining at about 15–20 per cent below
their peak. Under pressure from domestic voters, many politicians in developed countries are
tempted to re-introduce old trade barriers, often under the rubric of environmental legislation.
7.1.2 A Framework for Tackling Emissions

In 2010 an agreement is reached on a common regulatory framework for significantly cutting
carbon emissions by 2050, the result of huge diplomatic efforts by players from a wide range
of countries. Though the deal is seen as a triumph by those who were party to the tough
negotiations preceding it, campaigners and activists are quick to point out a number of
weaknesses. Foremost among these is that neither the United States nor China fully subscribe
to the common agreement on emissions reductions. Rather, both choose to implement carbon
cuts outside of the internationally agreed framework.
One unexpected outcome of this agreement’s partial nature is that NGOs, especially in
Europe and Latin America, are energised by the extent of the agreement reached in the
months after Copenhagen, and by the fact that the United States and China go their own
way. American and Chinese corporations find themselves boycotted elsewhere in the world
because of their sustainability policies or their poor labour conditions.
For LICs, the picture is mixed. The relative recovery of global prosperity means that levels
of international donations to LICs recover. China’s increasing role in the IMF leads to a new-
found pragmatism about approaches to structural change in countries that find themselves
in difficulties, while the World Trade Organisation (WTO) tends to concentrate on the more
blatant cases of trade dumping. The World Bank finds itself caught between competing
models of development, and is all but paralysed as a result. At the same time, because of the
extent of the agreement on climate change, NGOs are effective in aligning funds from
European governments and private foundations with sustainability projects that have good
outcomes for development.
7.1.3 Storing up Future Trouble

By 2020, many commentators are predicting future instability. The US-China partnership has
held for a decade, but questions are increasingly being asked about the extent to which
Chinese creditors are willing (or indeed able) to continue to buy American debt and, in effect,
support the dollar. In China, many say that the country’s prominence in important global
organisations has been earned by its economic performance, and some argue that China
needs more concessions from the United States in return for continuing to underwrite the US
economy. More assertive members of the Politburo are reported to be saying—in a coded way,
of course—that there is only a limited future in being America’s bagman, or (depending on the
translator) its butler.
TABLE 17
The Odd Couple: Focus and Flow Questions
What are the major More green technologies produced. More trade within regions than across regions.
patterns of production in
this world?
What are the major More efficient consumption of all goods and services, with penalties for breaching stipulated
patterns of consumption standards.
in this world?
How do people connect to Using online conferencing facilities mainly, which are a standard feature of any large or small
one another in this world? organisation.
What are the institutional National governments, regional specialist trade and economic committees, US congressional
structures which support political system, continuing presence of the International Monetary Fund and climate change
this world? management institutions put in place after Copenhagen.
Which groups are World Bank.
marginalised in this
world?
Which groups are heard? China, United States, NGOs.
Who gains from this Regional governance institutions, national governments/states, regional and national NGOs.
world?
Trends in non-oil Overall direction of the trend: declining.
commodity prices Food, other non-oil commodities fall in price because of reduced volumes of trade.
Trends in size and volume Overall direction of the trend: decline of traditional aid.
of aid flows Aid is tied to trade deals, foreign policy, and technological assistance to go green. Volume of aid
is down for LICs without natural resources or carbon quotas to sell.
Trends in size and form of Overall direction of the trend: declining.
private capital flows With overall trade volumes down, capital flows will also be lower. But greater regionalism also
boosts regional investment, which maintains the level of private capital flows within regions.

In the “Odd Couple” scenario, fuel prices rise steadily and non-fuel commodity prices
stagnate because of the stagnation of growth and trade volume, as well as sluggish recovery
(commodity price declines perhaps being slowed by protectionism). Aid flows fall and their
composition changes because of a lack of multilateralism. Traditional aid in particular
declines, but non-traditional aid increases. There are changes in the way aid is measured
Working Paper 27
and defined: it is more typically tied to trade and investment. But if climate-change aid is a
result of a climate agreement, this could dwarf other flows and thus reverse the overall trend
on aid. Private capital flows are static/declining and their composition is changing
(as a result of protectionism). If trade volumes fall, capital flows will probably fall too,
though not necessarily. Increased regional investment could be more significant.
TABLE 18
Odd Couple: Variables and Trends
Fuel prices " Steadily rising.
Non-fuel commodity prices Stagnation because of growth and
trade volume stagnation, as well as
# sluggish recovery (with commodity
price declines perhaps slowed by
protectionism).
Size of aid flows Declining because of lack of
#
multilateralism.
Size of private capital flows # Falling as a result of protectionism.
What does the “Odd Couple” scenario mean for different types of countries?
Table 19 summarises the implications of the scenario for the different country-groupings
across macroeconomic and poverty-reduction indicators, using the colour coding
explained above.
For fuel exporters such as Nigeria, South Africa, Sudan, Indonesia, Vietnam and Yemen,
this is a world of good prospects: good growth prospects because of fuel-price rises; labour-
demand prospects are weak because growth is fuel-led with stagnating commodity prices,
aid, and private capital inflows. Assuming the fuel revenue is used productively, public budgets
should be healthy (one might question that food prices may rise because of fuel-price rises,
which will have an impact on poverty through households that are net food consumers:
the urban poor and the rural poor who have little or no land). These impacts may be mitigated
by creating fiscal space for public expenditures, which could also maintain education and
health budgets and secure some progress on the education and health MDGs. The key
policy issue is whether the fuel revenues are channelled into social spending.
For fuel importers, things are more mixed.
For fuel importers with neither primary commodity export dependency nor aid dependency,
such as Bangladesh, India, Nepal, Pakistan and China, this scenario is potentially not too bad
because, although the fuel-price rise slows growth, there may be better prospects for non-
commodity exports (manufactures and services) from these countries, as well as other sources
of finance. Thus growth, labour demand and public budgets may not be impacted as much as
in other groupings. Because of this, moreover, income, education and health poverty may not
come under such significant pressure. This, however, depends on the impact of food-price rises
on consumption poverty and health.
TABLE 19
Summary of Odd Couple and Medium-Term Prospects for Each Country Grouping
commodity dependent
export
dependency

COM
Nigeria, South Africa, Bangladesh, Kenya and Ethiopia, Ghana,
Sudan, Indonesia, India, Nepal, Jamaica Malawi,
Vietnam, and Yemen Pakistan, and Mozambique,
China. Rwanda, Sierra
Leone, Tanzania,
Uganda, Zambia,
Afghanistan, and
Guyana.
Strong economic growth GREEN ORANGE RED RED
Strong labour demand GREEN/ORANGE ORANGE RED RED
Healthy public budgets GREEN/ORANGE ORANGE RED RED
Reduction in the dollar-a-day GREEN/ORANGE ORANGE RED RED
poverty headcount ratio
Improvement in primary school GREEN/ORANGE ORANGE RED RED
Improvement in child and infant GREEN/ORANGE ORANGE RED RED
mortality rates
For fuel importers with commodity dependence and without aid dependency, such as Kenya
and Jamaica, there is potentially a “double whammy” in fuel and commodity prices, and thus
growth, labour demand and public budgets are all likely to stagnate while food prices rise.
These countries may become aid-dependent as a result. Income poverty is hit by lower growth,
and education and health are under pressure because of the loss of fiscal space.
Finally, for fuel importers with commodity dependence and aid dependency, such as Ethiopia,
Ghana, Malawi, Mozambique, Rwanda, Sierra Leone, Tanzania, Uganda, Zambia, Afghanistan
and Guyana, there is potentially a “triple whammy” of fuel prices rising, commodity prices
stagnating, and declining aid. Income poverty may be severely impacted by lower growth, and
education and health may come under pressure because of the loss of fiscal space.
8 SCENARIO IV: ROLLER COASTER
8.1.1 A Financially Unstable World

In the Roller Coaster scenario, the world moves away from the dollar as a reserve currency.
After a period of financial instability, the euro replaces the dollar and the economic
and political stability that this creates rumbles on, becoming the overwhelming feature
of the scenario.
Working Paper 29
The headlines for LICs are poor: none of the actors is looking out for the interests of LICs,
and the overall level of aid declines. With the decline of multilateral organisations and of
regional groups, there are no political processes into which countries can be “co-opted” to
support a development agenda.
The catalyst is a rise in the level of hostility towards the United States among younger
Muslims in the Gulf. Faced with greater militancy (and sympathy), Yemen decides to start
migrating oil contracts to euro-pricing as the opportunity arises. Iran begins to follow suit.
The US sabre-rattling that follows makes the decision far more visible than it would otherwise
have been. Attempts by governments to shore up the dollar’s decline are washed away by the
wall of speculative money that bets against the dollar, and the currency plummets. Suddenly
the United States, long used to the domestic financial benefits of being the world’s reserve
currency, is living on empty.
Shifts in reserve currencies are turbulent affairs. They are protracted and disruptive.
One early price of instability is a quick contraction of the influence of multilateral institutions,
as countries turn to traditional allies and trading partners to help them through the crisis.
Bilateral and other local regional arrangements rapidly replace larger-scale regional and
multilateral arrangements in the face of economic contraction.
8.1.2 Decline in the Dollar, Rise in the Euro

The most immediate casualty is the United States, which suffers heavy exchange-rate decline
despite the best efforts of economic allies, especially in Asia, to support it. Many countries
that were surprised by the switch from the dollar still have substantial dollar holdings and
have a strategic interest in ensuring that the currency stabilises. American exports are more
competitive than ever as a result of the currency decline. And in a world where large countries
are now net food importers, America’s grainbelt is a strategic asset. Nonetheless, the shock to
the United States is psychological as well as economic; its politics turns in on itself.
Despite longstanding calls for a new reserve currency based on a basket of global
currencies, the speed of the transition leaves no opportunity for this. The euro is the only
currency with a large enough economic base to take the weight. One of the advantages of the
euro’s new-found seigniorage is that it can reflate the struggling EU economies. Frankfurt, as a
result, has become an increasingly important financial services centre and has been bolstered
by the decision to move the European Bank of Reconstruction and Development to the city,
and into the Eurozone, from London. It is surely only a matter of time before the United
Kingdom decides it should join.
One medium-term non-economic consequence is the US withdrawal, for budget reasons,
from many of its former military bases, and a general reduction in the capability of the North
Atlantic Treaty Organisation (NATO). In a world of increasing tensions, skirmishes tend to flare
up more quickly and persist for longer. There is recurrent border fighting in the Himalayas
between India and China, partly caused by disputes over the mountains’ increasingly
important water resources.
8.1.3 International Institutions Lose Influence

International institutions traditionally regarded as sympathetic to the United States have
become less influential. The World Bank, marginal at the start of the crisis, is more marginal
afterwards. The WTO and associated bodies have found their judgements on trade disputes
ignored and unenforceable. The IMF gained some credibility by issuing special drawing
rights to ease the global economy during the transition from the dollar, but is regarded with
suspicion. Russia, for example, now a global creditor because of the size of its energy reserves,
has not forgiven the Fund for the disastrous policy conditions it attached to the loans of
the 1990s, while the Middle Eastern states have long been suspicious of its close links to
Washington’s policymakers. Its proposed move in 2022 (Singapore and Abu Dhabi are
candidates) is seen by some as a last throw of the dice to make the institution more credible.
In the Arab world, the question of how an Islamic Monetary Fund might be designed is active.
Good international relationships are not helped by the unreliability of electronic
communications. In a volatile economic world, volumes of spam and electronic fraud and
theft have soared, to the point that it is unsafe to use the Internet without encryption.
Simpler applications for this are emerging, but the days of sending a quick email or logging on,
unsecured, to a social networking site seem distant. One of the Asian “Stan” republics, widely
regarded as a centre for electronic crime, finds its electronic links to the rest of the world
severed, probably by the Russians, in a move that is simultaneously decried and applauded.
In a world where the significant economic players have a strong interest in oil production,
environmental issues are less prominent and harder to articulate, since global institutions are
fragmented and ever more lacking in influence. The main factor behind the reduction of
carbon emissions is simply the lower levels of economic activity.
At the same time, however, the instability of oil prices in uneven markets has its own cost,
since it makes it difficult for businesses and national finance departments to plan. Renewables
start to acquire a “security premium” against oil, which increases investment in their
development. As economic instability continues, governments find themselves squeezed
between their poor financial position and increasingly vociferous populist domestic pressure
to take action to improve economic performance. Some have already ignored the advice of
their economists and have simply started to print money. Where there is spare capacity, the
inflationary risks are not great. And even if there is inflation, the winners outnumber the losers.
For the LICs, aid flows generally decline, although there are some increases in aid tied to
political and diplomatic objectives. Outcomes for LICs without natural resources are poor.
TABLE 20
Roller Coaster: Focus and Flow Questions
What are the major Production becomes more local (and there is less of it) as the global economy becomes more
patterns of production in fragmented and energy prices become more volatile.
this world?
What are the major Consumption falls in general. There is less international trade, so consumption tends to be of
patterns of consumption more regional goods, or of goods produced by traditional trading partners (e.g., Britain buys
in this world? bananas from the “old Empire”).
How do people connect to Use of electronic connections declines because of increasing crime and identify theft in the
one another in this world? electronic sphere. Providers that can offer secure connections and gateways prosper (e.g.,
mobile operators) but the cost of such provision is higher than internet-based systems, so
communications become more expensive as a share of income—also leading to reductions.
"
Working Paper 31
What are the institutional Institutions generally are in retreat. There are few credible global organisations. Instead, this
structures which support world seems like a return to a form of mercantilism in which governments promote their own
this world? commercial interests, backed with judicious application of military power as necessary.
The EU benefits because the euro has become the reserve currency and because it manages
to maintain its large internal market.
Which groups are The United States; environmental activists; internationalists.
marginalised in this
world?
Which groups are heard? Energy producers; Muslims; the EU.
Who gains in this world? Gainers include: the Eurozone countries; economic elites in resource-rich countries. Islamic
social movements become more influential; pirates (and mercenaries) become more widespread.
Trends in non-oil Overall direction of the trend: declining.

commodity prices This is a scenario of decline and instability, with obvious consequences for economic
performance and trading relationships (both contract). Hence the impact on industrial
commodities will be that prices fall (declining demand); the impact on commodities that
represent stores of value (gold, diamonds) are likely to rise, especially gold; instability over
the reserve currency likely to migrate towards the euro no matter how well organised Europe’s
bankers are. Lower trade will probably exacerbate food shortages where they have started
(food reserves are likely to represent political and diplomatic leverage) and hence prices
will probably be higher.
of aid flows Increasing bilateralism, probable recession and increased global mistrust are likely to mean that
multilateral aid flows fall. There may be an increase in bilateral flows, especially where these are
linked to diplomatic, strategic or political objectives. It is also likely that there will still be multi-
millionaires in this world, although they may be more anxious than at present. Hence we expect
aid flows from private foundations, but these will also fall.
There may be an increase in regional aid (e.g., resource winners helping neighbours).
Trends in size and form of Overall direction of the trend: mixed.
private capital flows This is complex, but it seems unlikely there will be an early rebalancing of global capital
reserves, and energy exporters will be the big winners. Hence their reserves will be looking
for a home, almost certainly in Europe (the only location apart from the United States with
the scale and robustness).China’s investments will depend on how well it has played
the dollar decline and the extent to which it uses resources to improve internal
infrastructure and demand. The euro question: will it use new-found reserve
status to spend without responsibility?

The “ Roller Coaster” is a scenario of decline and instability, with clear consequences for
economic performance and trading relationships. Fuel prices are volatile and rising. Non-fuel
commodity prices are falling because of declining demand and recession. However, the
impact on commodities, which represent stores of value (gold, diamonds) usually rise in these
periods. Prices for food and water increase as less trade exacerbates food shortages. Aid flows
decline because of recession, and global mistrust increases. There may be an increase in some
bilateral flows, especially where they are linked to diplomatic, strategic or political objectives.
Aid flows from foundations also fall. Regional aid may become more important. Private
capital flows decline overall, particularly from OECD countries, because of recession, which
might be partially offset by non-OECD flows as China’s investments take advantage of non-fuel
commodity price trends.
TABLE 21
Roller Coaster: Variables and Trends
Fuel prices " Volatile and rising significantly.
Non-fuel commodity prices # Lower prices because of global
recession.
Size of aid flows # Fall because of global recession impacts
on aid budgets in traditional and non-
traditional donors.
Size of private capital flows # Fall because of global recession and
volatility prevents investments.
What does the Roller Coaster scenario mean for different types of countries? Table 22
provides a colour-coded quick reference. For fuel exporters, this is potentially a world of good
prospects because of rising (albeit volatile) fuel prices. Growth will be spurred by the fuel-price
rise (though price volatility may lead to stop-start growth). Labour-demand prospects are more
mixed if growth is fuel-led and the prolonged global recession leads to depressed export
markets for manufacturing and services. The outlook for public budgets is good, but again it
could be a volatile picture if fuel prices rise erratically. The prospects for income-poverty
reduction are mixed if growth is fuel price-led, but health and education budgets could be
expanded as a result of oil revenues.
For fuel importers things are much less positive.
For fuel importers with neither primary commodity export dependency nor aid dependency, the
high fuel prices will dampen growth, which is unlikely to be offset by other export markets
because of a global recession. Hence labour demand will be weak and public budgets under
pressure, probably leading to potentially adverse impacts on income poverty, education and
health indicators.
For fuel importers with commodity dependence but without aid dependency, things are
potentially worse because of the stagnation of non-fuel commodity prices as a result of the
recession, in addition to the fuel-price rise. Both will dampen growth and labour demand, as well
as depress fiscal space, potentially leading to adverse impacts on income poverty, education and
health indicators.
For fuel importers with commodity dependence and aid dependency, this scenario is
potentially even worse than for the grouping above. The triple shock of fuel price rises, declining
non-fuel commodity prices and falling aid budgets overall (even with rises in non-traditional aid)
make this scenario particularly bleak for this group of countries.
Working Paper 33
TABLE 22
Roller Coaster: Medium-Term Prospects for Each Country Grouping
commodity dependent
export
dependency

COM
Nigeria, South Africa, Bangladesh, Kenya and Ethiopia, Ghana,
Sudan, Indonesia, India, Nepal, Jamaica Malawi,
Vietnam, and Yemen. Pakistan, and Mozambique,
China. Rwanda, Sierra
Leone, Tanzania,
Uganda, Zambia,
Afghanistan, and
Guyana.
Strong economic growth GREEN/ORANGE RED RED RED
Strong labour demand GREEN/ORANGE RED RED RED
Healthy public budgets GREEN/ORANGE RED RED RED
Reduction in the dollar-a-day GREEN/ORANGE RED RED RED
poverty headcount ratio
Improvement in primary school GREEN/ORANGE RED RED RED
Improvement in child and infant GREEN/ORANGE RED RED RED
mortality rates
9 CONCLUSIONS
One of the striking implications from the country typologies is the extent to which developing
countries mainly fall into one of two types. On the one hand, there is a small group of net fuel
exporters; on the other, there is a much larger group of fuel importers that are also primary-
commodity export-dependent and aid-dependent. (Kenya and Jamaica sit between these, as
commodity-dependent but not aid-dependent.)
Because one of the strong outcomes from the initial drivers scan was that energy prices
were likely to rise over the decade (the uncertainty was more related to the patterns associated
with this increase), these two groups have strongly divergent futures and the scenarios are
strongly patterned.
The point of scenario work, however, is not just to understand and interpret the world and
its future uncertainties. It is designed to create the space in which it is possible to adapt and
respond. Thus each group has very different implications for policymakers and aid organisations.
9.1 NET FUEL EXPORTERS

At a macro level, future outcomes for the oil-producing countries are positive in all scenarios
except Roller Coaster, where they could be unstable. Fuel-exporting countries generally
produce good outcomes at the level of the MDGs in the model, although there are risks in the
distribution of benefits, and governance becomes even more important for these countries.
It should be remembered, however, that the scenarios here are primarily economic in
nature; while fuel exports will create additional income, questions remain about how that
additional income is distributed. Much work has been done on the dangers and upheavals
faced by countries (in Africa and further afield) that suddenly discover hitherto unidentified
natural resources.
Hence the need here is for governance and institutional frameworks that are sufficiently
robust to ensure that the revenues are distributed effectively. One can imagine that NGOs will
continue to be active in this regard, although their leverage may be limited. Only in one of the
four scenarios can they mobilise governments or corporations that are likely to be concerned
about governance, and even then the demand for oil and the enthusiasm for profits may
overwhelm the better instincts of managers or shareholders. In this case, an additional focus
on institutional capacity building from the international development community will also
become increasingly important.
9.2 NET FUEL IMPORTERS

In sharp contrast, outcomes for net fuel importers are much more negative. Outcomes are
particularly poor for countries such as Ethiopia, Sierra Leone, Malawi and Mozambique, which
are net fuel importers and are also dependent on both primary commodity exports and aid.
For these countries, concentration on the delivery of essential aid to the poorest will
continue to be important, as will institutional capacity building. Over the longer term, a key
challenge for many of these countries will be the development (not surprisingly) of a more
diversified economy, away from reliance on primary commodity exports.
More broadly, the fuel importers have a chance to escape from their oil dependency
through a form of African “green deal”. Reading the scenarios, there is a “leapfrogging”
opportunity in which these countries can develop skills and technologies to build their own
energy infrastructure, just at the point where the output/cost ratio of solar photovoltaic starts
to become competitive. Given the paucity of their own resources, this will require external
investment from aid partners—investment that is not focused solely on poverty reduction, but
more broadly on promoting shovel-ready projects that bring affordable and environmentally
sustainable energy to African communities.
Outcomes for countries that are net fuel importers, and that have neither commodity
export dependency nor aid dependency (a group that includes both India and China) are more
benign. This is partly because robust growth in the BRIC countries spurs export growth and
labour demand, and because of the better prospects for non-commodity exports such as
finished goods and services.
For these countries, the challenge is related more to promoting continued economic
diversification and development in order to foster continued growth. In particular, countries in
this category continue to have relatively high levels of energy intensity (that is, they consume a
lot of energy per unit of GDP produced), which is a significant challenge as we move into an
environment where the cost of energy is rising.
Working Paper 35
ANNEX
FUTURE-PROOFING THE MDGS: WHAT ARE THE CRITICAL

UNCERTAINTIES FOR 2010–2015 AND BEYOND?
Andy Sumner*, Tom Mitchell* and Thom Tanner*
1 THE IMPACT OF THE ECONOMIC CRISIS ON THE MDGS

As global economic recovery begins, the short- and medium-term impacts of the crisis on the
MDGs are beginning to become clearer. There were large falls in exports, FDI and remittances,
but these declines were very variable and not all the expected impacts materialised.
TABLE A1
Macroeconomic Impacts of the Crisis
Emerging and developing
2007 2008 2009 2010
economies
GDP, constant prices (annual
8.323 6.139 2.385 6.346
% change)
Investment as % GDP 29.216 29.733 29.044 30.215
Gross national savings as %
33.49 33.589 31.04 32.509
GDP
Export volume of goods and
9.737 4.023 -8.163 8.304
services (annual % change)
Current account balance %
4.24 3.742 1.799 2.078
GDP
Private financial flows, net
689.345 179.193 180.156 209.794
(US$ bn)
Official flows, net
-98.437 -116.92 80.209 -2.256
(US$ bn)
Change in reserves (US$ bn) -1,226.03 -666.561 -538.768 -632.36
External debt, total debt
165.289 164.405 141.847 134.636
service, interest (US$ bn)
Sub-Saharan Africa
GDP, constant prices (annual

6.932 5.541 2.112 4.716
% change)
Investment as % GDP 21.489 22.015 21.716 22.605
Gross national savings as %
22.648 23.311 20.288 21.572
GDP
Export volume of goods and
7.301 0.264 -7.022 7.004
services (annual % change)
Current account balance %
1.235 0.918 -2.05 -1.681
GDP
Private financial flows, net
26.343 24.822 18.166 40.551
(US$ bn)
Official flows,
-3.776 -3.33 6.199 7.918
net (US$ bn)
Change in reserves (US$ bn) -29.195 -17.099 8.193 -12.793
External debt, total debt
7.65 8.201 8.669 9.11
service, interest (US$ bn)
Source: IMF WEO database (April 2010) at:
<http://www.imf.org/external/pubs/ft/weo/2009/02/weodata/index.aspx>.
* Institute of Development Studies.

Growth slowed but there were few outright recessions. The impacts were highly nuanced
by country. Recovery is clear enough globally and regionally in Asia and Africa, but the regional
average masks major differences across regions.
Given that macroeconomic impacts and recovery have been highly variable, we can
expect poverty estimates to be similarly so. Precise estimates of MDG poverty impacts to date
have been wide-ranging and have largely focused on growth elasticity estimations or research
from previous crises (given the time-lags in real data collection). There is much data at the
country level, and in May–June 2010 the UN Global Impact and Vulnerability Alert System
(GIVAS) will start reporting new data based on numerous UN agencies’ contributions.
The most recent global estimates (March 2010), based on the latest growth data, revise
earlier estimates and are relevant for MDG 1, given that an additional 50 million people were
estimated to be living on less than US$1.25/day in 2009 (or 57 million on less than US$2/day)
and an extra 15 million in 2010 (19 million on less than US$2/day). This creates a cumulative
impact of 64 million on less than US$1.25 (or 76 million on less than US$2/day)
(Ravallion and Chen, 2010).
In terms of MDG 1 (nutrition), MDGs 2 and 3 (education) and MDGs 4, 5, 6 (health), there
are several conclusions from previous crises (see Table A2): infant and under-five mortality are
significantly worse during economic downturns; completion rates in primary education,
especially for girls, also deteriorate rapidly during economic downturns; and female enrolment
in primary and secondary education drops during contraction (Conceição et al., 2009;
Conceição Namsuk Kim and Mendoza, 2009).
TABLE A2
Human Development and Gender Outcomes during Crises in Sub-Saharan Africa
(Sample Averages during Growth Deceleration versus Otherwise)
Indicator During deceleration Otherwise Significance
Life expectancy female (years) 52.26 55.02 **

Life expectancy male years 48.87 51.86 **
Life expectancy total years 50.52 53.40 **
Infant mortality rate 106.62 85.61 **

Under 5 mortality rate 161.3 139.40 *
Primary completion females 33.83 50.37 **

Primary completion males 48.44 56.55 *
Primary completion total 40.95 53.55 **
Ratio female: male in primary enrolment 77.86 87.27 **

**Ratio female: male in secondary enrolment 63.57 79.88 **
Ratio female: male in tertiary enrolment 32.52 62.31 **
Source: Conceição et al. (2009); Conceição and Namsuk Kim (2009).
Notes: ** difference significant at 1 per cent level; * difference significant at 5 per cent level; under-five mortality
average rises to 172 when three countries in conflict are included.
Impacts on infant mortality (MDG 4) have also been estimated on the basis of growth
declarations. The results range from 30,000–50,000 more infant deaths per year in Africa
(Friedman and Schady, 2009) to 200,000-400,000 more infant deaths globally (Friedman and
Schady, 2009; World Bank, February 2009; World Bank, August 2009). A gendered aspect
was also noted in the estimation of an additional 1.5 male infant deaths per 1,000 live births
Working Paper 37
and 7.4 female infant deaths per 1,000 live births per 1 per cent growth deceleration
(Baird et al., 2009; World Bank, February 2009).
Indeed, much research on previous crises suggests that they have highly gendered
impacts: women are more likely to lose employment than men because women dominate
export sectors for garments, electronics and agricultural exports (Buvinic, 2009). Furthermore,
girls are more likely to drop out of school in both low- and middle-income countries (Skoufias
and Parker, 2006; Schady, 2004) and, as noted above, the infant mortality rates for girls exceed
those for boys during a downturn (Baird et al., 2007). Given that the key focus of many MDGs is
child poverty, a particular concern is that the poverty impacts of the crisis have long-term
effects on children (and future generations) via lesser height, delayed school enrolment and
reduced grade completion (Alderman et al., 2006; Yamano et al., 2005). There is also cross-
country evidence of impacts of severe psychological distress and mental health (for example,
Das, 2008), and of elevated levels of community and intra-household conflict during and after
a crisis (for example, Friedman and Thomas, 2007; World Bank, 2008). Cross-country, rapid-
appraisal qualitative research during the crisis (for example, Hossain et al., 2009; World Bank,
2009) has also uncovered such non-material impacts.
As regards recovery and the fiscal outlook, there are various MDG concerns related to
the speed of the recovery, fiscal space and effects on public expenditure in general, social
spending in particular, and debt service, which differ considerably across countries. Global
growth is clear enough, judging by the estimates of the IMF World Economic Outlook (February
2010), and recovery is very much V-shaped in developing countries (see Table A1). However,
there was a distinct slowdown in the pace of global recovery towards the end of 2009 (judging
by global trade data, for example) and much depends on when the monetary and fiscal
stimulus is withdrawn. In short, sustained recovery is not guaranteed.
There is further evidence that the crisis might have longer-lasting MDG impacts into
2010–2015 via social spending, albeit differently across countries (see Tables A5 and A6).
TABLE A3
Public Expenditure Indicators/Projections, 2007-2010, Selected Sub-Saharan African Countries
(fragile states bolded: green = positive; red = negative)
Public expenditure Government revenues
(in % of GDP) (in % of GDP)
2007 2008 2009 2010 2007 2008 2009 2010

Ethiopia 17.07 14.48 13.27 15.48 14.11 11.94 11.23 13.43
Ghana 37.34 41.03 36.56 37.39 28.85 27.47 29.86 29.15
Kenya 22.05 23.09 24.35 26.61 19.78 20.49 20.54 21.43
Malawi 27.11 30.09 31.25 28.81 28.23 27.49 26.17 24.94
Mozambique 23.39 24.43 25.61 29.63 19.87 21.87 23.33 24.58
Nigeria 24.11 25.04 28.42 25.46 30.35 24.14 32.01 18.13
Sudan 21.26 20.08 22.56 15.75 17.66 15.92 21.16 12.61
Uganda 21.36 21.08 22.93 26.97 17.62 21.07 18.37 21.92
Zambia 15.24 15.60 14.70 15.78 15.30 14.67 13.00 13.64
Zambia 19.82 20.38 20.57 20.56 36.84 19.32 19.30 18.45
Source: IMF WEO Database.

TABLE A4
Trends in Debt Service in Selected African Countries
(US$ m. Red = significant rise; green = static or fall; fragile states bolded)
2007 2008 2009 2010
Ethiopia 0.14 0.07 0.09 0.31
Ghana 0.18 0.33 0.58 0.45
Kenya 0.39 0.39 0.38 0.48
Malawi 0.02 0.01 0.02 0.02
Mozambique 1.31 0.68 0.82 0.83
Nigeria 1.27 0.60 0.63 0.54
Sudan 0.17 0.33 0.49 0.67
Uganda 0.08 0.08 0.07 0.10
Zambia 0.07 0.10 0.11 0.13
Source: IMF WEO Database.
TABLE A5
Estimated Impacts on Total Education Spending, 2008 and 2009, Selected Countries
(red = significant decline; green = significant rise; fragile states bolded)
% of GDP % of total budget
2008 2009 2008 2009
Burkino Faso 2.3 4.2 9.4 11.8
Benin 5 4.6 18.8 17.9
Ghana 9 5.9 21.8 17.4
Kenya 5 5 17.2 17.4
Mozambique 6.3 7.1 18.5 19.3
Rwanda 3.9 4.4 16.6 16.4
Sierra Leone 1.2 1.4 8 11.3
Tanzania 5.6 5.6 19.7 18.3
Uganda 2.9 3 15.3 15.3
Zambia 4.1 4.4 15.4 17.2
Source: Martin and Kyrili (2009).
TABLE A6
Estimates of Impacts on Total Health Spending, 2008 and 2009, Selected Countries
(red = significant decline; green = significant rise; fragile states bolded)
% GDP (09-08) % Budget (09-08)
Kenya -0.1 -0.2
Rwanda +0.4 +0.4
Tanzania -0.5 -2.7
Uganda +0.06 -0.2
Source: Martin and Kyrili (2009).
Fragile states in particular have been badly hit by the crisis as a result of slowing growth
and the fiscal squeeze stemming from the economic downturn. Falls in per capita GDP growth
were projected in 27 fragile states in 2009 and, on the basis of 2009 data estimates,
government revenues were also expected to fall as a percentage of GDP in 21 of 32 fragile
states (OECD, 2010). At the same time, aid is under pressure as a result of the crisis. Irish and
Italian aid has already been cut and the OECD (2010) estimates only half of the Gleneagles
promise of 2005 to raise aid levels by US$50 billion by 2010 will be met. Although official
development assistance (ODA) will reach a record high in 2010, several G7 countries are not
meeting their Gleneagles commitments, much less the European Commission’s 0.51 per cent
aid commitments.
Working Paper 39
2 THE FOOD AND FUEL CRISIS

In 2007–2008 there were some drastic increases in food and fuel prices. Although food and fuel
prices in general have fallen in 2009–2010, they remain higher than before 2007.
The 2010–2015 outlook is for higher food prices. The OECD/FAO estimates are 10–20 per
cent higher food prices over the next 10 years (compared to 2010), with fuel prices (vegetable
oil) 30 per cent higher. This is because of expected higher oil prices. Climate change is also
likely to play a role in food-price rises because of changes in the weather and drops in yields
in South Asia and Southern Africa. There could be another global price spike if oil prices rose
suddenly again or if droughts, floods or conflict led to higher food prices. In late 2009 there
were such concerns in the Horn of Africa and South Asia.
Jaspars and Wiggins (2009) argue that the price spike was due to increased demand from
China and India; a slowdown in the growth of cereal production since the 1980s and a series of
harvest failures from 2005 onwards; the rising price of oil, which increased fertiliser costs and
thus stimulated biofuel production; and various countries’ restrictions on grain exports. Food
prices fell in late 2007 and 2008 because of increased production in the OECD countries and a
drastic fall in oil prices. Although wheat and maize fell to pre-crisis levels, rice remains 80 per
cent higher. It is important to track food prices, not least because domestic prices of staples in
many countries are higher than changes in the global grain price as a result of local factors
such as conflict, supply disruptions and weather.
This has implications not only for the nutrition-related MDGs; across the MDGs, nutrition
matters. It matters not only in its own right and as regards the nutrition- and health-related
MDGs, but it also plays a large role in education and other MDGs. Even before the food crisis,
one in three infants in South Asia and Sub-Saharan Africa were chronically malnourished. In
South Asia, the number of children under five who are low weight-for-age or low height-for-
age is steadily declining (though still rising in several countries), but in Sub-Saharan Africa the
number is steadily increasing even at the regional level. Child malnutrition is responsible for
half of all child deaths, and infant and maternal malnutrition are leading causes of disease.
Indeed, the Lancet series on Child Survival (2003) and on Maternal and Child under-nutrition
(2008) identified the main cause of death among children younger than five years from
preventable causes (diarrhoea, pneumonia, measles, malaria, HIV/AIDS), identifying the
underlying causes of under-nutrition (Jones et al., 2009). At a national level, the higher costs of
imported food can drain foreign exchange, lead to inflation and reduce economic growth.
Food accounts for 50–90 per cent of poor families’ budgets, so changes in food prices
matter. When food prices rise, poor families adjust the quantity and quality of the food they
consume (as well as healthcare and schooling). The nutritional impacts on young children and
pregnant women can be severe. The priority period is while the child is in the womb and up to
18 months of age. Malnutrition losses incurred during this period cannot be retrieved by
interventions after the first 18 months of life; they are losses that the child will carry
throughout life. Of the female babies that survive, those that remain malnourished in
adolescence are more likely to give birth to malnourished children.
Although one might think that higher food prices will help poor farmers, a surprising
number of rural households are net buyers of staple foods (about 60 per cent in Bangladesh,
Kenya and Mozambique, for example). In many countries, only a minority of farmers have land
and capital to sell surplus food, and many African countries have gone from being net food
exporters in the 1970s to being net importers in recent years. The food-price increases have
been well documented and assessed in research. The food riots in more than 20 countries were
a highly visible consequence. There was a severe price spike in 2008, but food prices had been
rising since 2000 (see Table A7).
TABLE A7
Price Rises in Key Caloric Food Items, 2008–2009
Price increase Price increase
Country Food item Caloric contribution
2008-9 Jan-Oct 2009
Mozambique Cassava 33% 61%
Dem. Rep. Congo Cassava 55% 60%
Sudan Sorghum 26% 38%
Kenya Maize 36% 21% 16%
Chad Sorghum 18% 18%
Burkina Faso Sorghum 27% 15%
Tanzania Maize 27% 14% 23%
Source: World Bank, Feb 2010, Food Price Watch.
There are numerous estimates of the nutritional impacts of food-price increases, such as
Tiwari and Zaman (2010), who concluded that their preferred estimate relates to a 35 per cent
price-increase scenario (average food-price change 2007–2008) and a partial pass-through of
prices (the price shock faced by domestic consumers is 80 per cent of the price shock in the
international markets). This implies 64 million more undernourished people. A 50 per cent
increase implies 146 million more undernourished people (see Table A8). Tiwari and Zaman
have also estimated country impacts on the basis of actual increases in the prices of food
staples (see Table A9).
TABLE A8
Food Price Scenarios in 2008 and Impact on Global and Regional Undernourishment (millions)
35% increase food prices 50% increase food prices
Baseline
2007-8 and “partial pass 2007-8 and “full pass
(FAO, 2007)
through” through”
Sub-Saharan Africa 236 246.4 253.4
Asia and Pacific 583 628.6 695.5
Latin America and Caribbean 51 57.0 63.2
Middle East and North Africa 37 42.5 48.5
Total 923 986.5 1069.4
Source: Tiwari and Zaman (2010, forthcoming).
TABLE A9
Food Price Scenarios in 2009 and Impact on Undernourishment in Selected Countries
Increase in price Change in undernourishment
domestic staple 2009 incidence (millions)
Mozambique 61% 763,291
Kenya 21% 453,897
Burkina Faso 15% 149,592
Tanzania 14% 444,599
Tiwari and Zaman (2010, forthcoming).
There have been several global meetings to discuss policy responses to the food crisis,
and in April 2008 the United Nations established the High Level Task Force on the global food
security crisis, which led to the Comprehensive Framework for Action. In June 2009,
representatives of 180 countries met in Rome. The emerging consensus is a “twin-track
approach”, which Sanogo (2010) notes is based on:
Working Paper 41
1) Measures to meet the immediate food needs of the vulnerable, via:

! emergency food assistance;
! safety nets;
! the provision of agricultural inputs and services;
! adjustments in trade and tax policy; and
! steps to manage the macroeconomic implications of price rises.
2) Measures to build long-term resilience, via:

! increased food production, especially by small farmers;
! managing food stocks more effectively;
! adopting less ambitious targets for biofuels production; and
! systematic social protection.
Social protection systems—the real insurance for future crises—are essential. The good
news is that the crisis and the post-crisis context have created greater policy space for those
advocating social protection systems. Social protection programmes such as cash transfers
have attracted international attention because of the strong evidence that they have positive
benefits for the educational, health and nutritional MDG outcomes of millions of poor children,
especially girls, by targeting cash payments at the caregiver (usually the mother) and providing
greater incentives for girls’ schooling.
Social protection is a set of actions and policies that partly reflect existing social policy,
but that add some new components (such as cash transfers) and are specifically directed at
helping households to manage risk and to reduce the incidence and impact of shocks. Bapu
Vaitla et al. (2008) and Davies and McGregor (2009) go further to develop a notion of
transformative social protection and “graduation” out of poverty (see Table A10).
TABLE A10
Types of Social Protection (SP) Instruments and Role during Current Crisis
Type of SP SP instruments Role in Crisis
Short term Protective (social assistance) Social transfers Immediate protection and
Disability benefit relief from poverty and
Pension schemes deprivation
Social services
Preventive (insurance and Social transfers Prevents damage to coping
diversification Social insurance (pensions, health strategies
mechanisms) insurance, unemployment benefit)
Livelihood diversification
Savings clubs; funeral societies
Promotive (economic Social transfers Promotes resilience through
opportunities) Access to credit livelihood diversification and
Asset transfers/protection improves security
school feeding
Starter packs
Access to common property resources
Public works programmes
Long-term Transformative (addressing Promotion of minority rights Transforms social relations
underlying social Anti-discrimination campaigns To reduce exclusion
vulnerabilities) Social funds
Source: Davies and McGregor (2009).
What is new about social protection is treating exposure to various risks by means of a
systems approach. Social protection thus allows poor/vulnerable families to take more risks
and invest; helps poor/vulnerable families to develop human capital; and allows families to
avoid negative coping mechanisms.
For LICs, and indeed for all countries, periodic crises are likely to be the ”new normal”.
These crises will be compound: climatic, economic, fragile states and so on. Key to these crises
is uncertainty over who will be hit and when. We thus need to think of social protection as a
system, not as components. Addressing each crisis as it comes is ineffective and inefficient, and
the crisis may have passed by the time there is a response. A systems approach does not mean
one single, universal programme; it means viewing the collectivity of programmes as a system.
Social protection has developed extensively in LICs during the last ten years. In Africa, the
largest programmes are in Ethiopia and South Africa but pilot schemes, some large, are
emerging in Kenya, Zambia and Ghana.
Moreover, there is a lot more evidence now about what sorts of programmes are most
effective and how to target and improve the livelihoods of different groups. There is also
strong evidence linking a range of social protection interventions to the nutrition, education
and health MDGs in a wide range of countries (see review of Sumner, 2010). It is still the case,
however, that few of these schemes are long-term or at scale. This is due to various factors, in
particular that the schemes have large administrative start-up costs, that capacity to
implement them is limited, and that the domestic demand from governments evident in Latin
America is less visible elsewhere. One proposal to overcome these impediments is a “resilience
compact/contract”. Donors might pay the upfront start-up costs on condition that
governments agree budget lines to fund annual spending; civil society organisations could
monitor and evaluate effectiveness in reaching the poor and the poorest, and prepare an
annual “MDG resilience report”. Although some countries will face fiscal constraints over the
next few years, various mechanisms of “new aid” are evolving.
3 MDGs AND CLIMATE CHANGE

Climate change presents a range of MDG challenges (see Tables A11 and A12).
TABLE A11
Selected Examples of Current and Projected Climate-Change Impacts on Industry, Settlement
and Society, and Their Interaction with Other Processes
Climate driven Evidence for current Other processes/ Projected future Zones, groups
phenomena impact/vulnerability stresses impact/vulnerability affected
a. Changes in extremes
Tropical cyclones, Flood and wind Land use/population Increased vulnerability in Coastal areas,
storm surge casualties and density in flood-prone storm-prone coastal settlements and
damage; economic areas; flood areas; possible effects on activities; regions and
losses; transport, defences; institutional settlements, health, populations with
tourism; infrastructure capacities. tourism, economic and limited capacities and
(e.g. energy, transportation systems. resources; fixed
transport); insurance infrastructure;
insurance sector.
"
Working Paper 43
Extreme rainfall, Erosion/landslides; Similar to coastal Similar to coastal storms Similar to coastal
riverine floods land flooding; storms plus drainage plus drainage storms.
settlements; infrastructure. infrastructure.
transportation systems;
infrastructure
Heat- or cold-waves Effects on human Building design and Increased vulnerabilities in Mid-latitude areas:
health; social stability; internal temperature some regions and elderly, very young
requirements for control; social populations; health and/or very poor.
energy, water and contexts; institutional effects; changes in energy
other services (e.g. capacities. requirements.
water or food storage);
infrastructure (e.g.
energy transportation)
Drought Water availability; Water systems; Water-resource Semi-arid and arid
livelihoods, energy competing water challenges in affected regions; poor areas
generation, migration, uses; energy areas; shifts in locations of and populations;
transportation in water demand; water population and economic areas with human-
bodies demand constraints. activities; add. induced water
investments in water scarcity.
supply.
b. Changes in means
Temperature Energy demands and Demographic and Shifts in energy demand; Very diverse, but
costs; urban air quality; economic changes; worsening of air quality; greater vulnerabilities
thawing of permafrost land-use changes; impacts on settlements in places and
soils; tourism and technological and livelihoods depending populations with more
recreation; retail innovations; air on meltwater; threats to limited capacities and
consumption; pollution; institutional settlements/infrastructure resources for
livelihoods; loss of capacities. from thawing permafrost adaptation.
meltwater soils in some regions.
Precipitation Agricultural livelihoods; Competition from Depending on the region, Poor regions and
saline intrusion; water other regions/sectors; vulnerabilities in some populations.
infrastructures; water resource areas to effects of
tourism; energy allocation. precipitation increases
supplies (e.g. flooding but could be
positive) and in some
areas to decreases.
Sea-level rise Coastal land uses; Trends in coastal Long-term increases in Same as above.
flood risk, development, vulnerabilities of low-lying
waterlogging; water settlements and land coastal areas.
infrastructure uses.
Source: IPCC (2007).
TABLE A12
MDGs 1–7 and Climate Change-Relevant Poverty Impacts
Millennium Development Goals Climate change relevant poverty impacts
Goal 1: Eradicate extreme poverty and hunger Climate change is likely to impact on poor people’s livelihoods and
food security by:
1. Reducing poor people’s livelihood assets
2. Altering path and rate of economic growth
3. Undermining food security
Goal 2: Achieve universal primary education 4. Destruction of schools/other assets by extreme events
5. Loss of livelihoods – reduced school attendance
6. Disaster-related migration of families
Goal 3: Promote gender equality and empower women Reduced agricultural productivity/disasters can:
Burden women’s health; Limit women’s time to participate in
decision-making/income generation activities; Reduce livelihood
assets for women
Goal 4: Reduce child mortality Climate change-induced extreme weather events are likely to result
Goal 5: Improve maternal health in higher prevalence of vector- and water-borne diseases, declining
Goal 6: Combat HIV/AIDS, malaria and other diseases food security and decreased availability of potable water
Goal 7: Ensure environmental sustainability Climate change will directly impact on natural resources,
ecosystems and the earth’s natural cycles. This is predicted to
reduce the quality and quantity of natural resources and
ecosystems.
Source: Urban and Sumner (2009).
Stern (2009a: 75) suggests thinking of “development in a more hostile climate”.

Fankhauser and Schmidt-Traub (2010) estimate the cost of “climate-resilient” MDGs to be
about a third higher than the conventional cost of meeting the MDGs—about US$100 billion a
year for the next decade, compared to US$72 billion a year for the MDGs alone. Extra costs
arise from having to provide more development support (for example, extra bed nets against
malaria), the same support at a higher cost (for example, more expensive infrastructure), as
well as new measures altogether (for example, adaptive capacity building). Climate change can
also lead to the prioritisation of certain measures compared to the baseline development plan
(for example, disaster management). In one of the better-known estimates of adaptation costs
(UNDP, 2007), about half of the costs arise from social protection programmes that mitigate
the adverse social impacts of climate shocks.
Poor countries and poor people living in them tend to be more seriously affected, but
have reduced assets and capacities with which to cope with and adapt to impacts (Kates, 2000;
Stern, 2007; Mitchell and Tanner, 2009). For example, some of the most widely cited trends for
Africa include: a drop in agricultural yields by as much as 50 per cent by 2020; an additional
70–250 million Africans at risk of increased water stress from climate change; an extra 40–60
million Africans exposed to malaria; and rising sea levels that may severely affect mangrove
forests as well as coastal fisheries, and lead to increased severe flooding (Boko et al., 2007;
Fankhauser and Schmidt-Traub, 2009; Stern, 2007).
Such scenarios have prompted a flurry of activities to integrate adaptation into
development and poverty reduction programmes, often linking to communities of practice
in disaster-risk reduction, sustainable livelihood approaches and vulnerability assessment
(Yamin et al., 2005). The injustice of impacts are felt hardest by those who have done least
to contribute to the problem, framing adaptation as an equity and rights issue
(Mitchell and Tanner, 2009).
As regards the MDGs, although some of the impacts of climate change may not occur
until after 2015, there is a need to “climate-proof” the MDGs so that MDG gains are not wiped
out and the medium-term pathway is consistent with adaptation. Climate change may impact
MDG-related concerns in numerous ways, such as through greater volatility in agricultural
production as a result of a greater variability in the weather, including more frequent and
intense droughts. This will mean changes in wage rates and income, as well as seasonality in
income and consumption. “Hunger seasons” (see Bapu Vaitla et al., 2008) may become more
pronounced and some relatively well-populated areas that already have semi-arid climates
(such as Southern Africa, Northeast Brazil and northern Mexico) are likely to become drier.
Water scarcity in such cases will be exacerbated.
Another climate impact on the MDGs is via more frequent and more severe disasters
such as storms and tsunamis: the poor often live on marginal land with limited resilience to
extreme weather. Homes and other assets such as livestock and possessions may be lost,
and in the aftermath of major events there are high risks of water-borne and insect-borne
diseases. Changed climates, in turn, are likely to affect ecosystems, with shifts in the range
and distribution of flora and fauna. In some cases, this may mean that insects as disease
vectors spread to previously unaffected areas, as may happen with an advance of malaria
into higher altitudes.
Working Paper 45
The likely impact of the above is significant migration, particularly urban migration
(see below). This will have significant implications for the MDG-related concerns, as will
natural-resource conflicts and changing livelihoods.
There is a growing acknowledgment that a process of “adaptation” is central to sustaining
and accelerating MDG progress or “climate-proofing” the MDGs. Although initially secondary
to mitigation, adaptation is now a central strand of national and international climate policy
(UNFCCC, 2007). What does pro-poor or pro-MDG adaptation look like? Mitchell and Tanner
(2009) argue that there is a need to consider pro-poor adaptation by types of poverty
(chronic and transient) in order to build suitable adaptive processes and adaptation options
for the poor to pursue different pathways out of poverty (see Table A13).
TABLE A13
Types of Pro-Poor Adaptation
Chronic poor Transient poor
Type of adaptation
Always poor Usually poor Cyclical poor Occasionally poor
Intra-community
Conflict, crime, sex Seasonal migration Diversify livelihoods
transfers/charity
Autonomous adaptation work Working multiple jobs, Investment in social
Sending children to
Selling of last assets longer hours capital/ assets
work
Promote micro- Weather-indexed Promote micro-
Market-based finance, micro- insurance finance, micro-
adaptation insurance Promote microfinance, insurance
Cattle insurance micro-insurance Selling assets
Ecosystem Social insurance
Community restocking rehabilitation programmes (health,
Assisted migration schemes Improved climate crop, employment)
Policy-driven adaptation
Cash transfers Subsidised seed information (seasonal Irrigation schemes/
banks forecasting) urban service provision
Source: Mitchell and Tanner (2009).
Pro-poor adaptation seeks to assess how climate change may affect routes in and out of
chronic poverty. It also seeks to expose opportunities presented by climate change for those in
chronic poverty. This could include changes to ecosystems that make them more productive
and offer a greater range of environmental assets. Despite food security concerns, transitions
to labour-intensive biofuel crops may provide new employment options. Opportunities are
most likely to emerge through adaptation interventions and institutional strengthening that
target the poorest groups, funded by rising flows of adaptation finance.
Indeed, Davies et al. (2008) have linked social protection directly to pro-poor climate
adaptation in “adaptive social protection”. This entails addressing climate change
vulnerabilities by social protection mechanisms that improve the ability of agriculture to
increase productivity in a changing climate and that support diversification of livelihoods away
from climate-sensitive livelihood activities, particularly in areas prone to severe droughts or
floods. For the latter, adaptive social protection for farmers could mean moving to off-farm
activities, for which social protection measures could include promoting off-farm rural
enterprise and industry, investment in urban services, assisted migration and improved
remittance schemes.
Adaptive social protection is not just a matter of moving people out of agriculture. In the
agricultural sector itself, social protection measures that could build resilience to climate
change and benefit from integrating climate-change adaptation include: weather-indexed
insurance, asset restocking (including direct livestock provision) and cash transfers.
Programmes introducing duck rearing in flood-prone areas or camel rearing in drought-prone
areas can help build climate resilience into livelihood asset building. Breed selection is also a
crucial component of such initiatives. In Bangladesh, for instance, the introduction of a
selection of duck species that are more capable of living with less water, are better suited to
higher temperatures and consume readily available non-aquatic vegetation aims to build
climate resilience.
TABLE A14
Linking Social Protection and Adaptation to Climate Change
Approach to social protection Benefits for adaptation
Provision Prevention of those most vulnerable to climate risks who have
low levels of adaptive capacity.
Prevention Prevents damaging coping strategies as a result of risks to
weather-dependent livelihoods.
Promotion Promotes resilience through livelihood diversification and
security in order to withstand climate-related shocks.
Promotes opportunities arising from climate change.
Transformation Transforms social relations to help address underlying social
and political vulnerability.
Source: Davies et al. (2008).
This brings to light a broader note: climate change and the MDGs need to be seen as the
same policy arena across all development policy, and need to be addressed in an integrated
manner. In much of the discourse the two are still treated as separate, and adaptation is often
seen as an “bolt on” to business as usual, although this is increasingly challenged (Fankhauser
and Schmidt-Traub, 2009; Agrawala and Fankhauser, 2008; Fankhauser, 2010; UNFCCC, 2007;
and World Bank, 2009b on adaptation costs; and World Bank, 2009a on adaptation finance;
Mitchell and Tanner, 2009). This separation of climate change and the MDGs is visible in the
negotiations leading up to the Fifteenth Conference of the Parties (COP15) to the United
Nations Framework Convention on Climate Change (UNFCCC) in Copenhagen, which largely
treated financing for climate-change adaptation as distinct from development finance and as
falling under the purview of Ministers of the Environment (Schmidt-Traub, 2009). The main
practical instruments to advance adaptation planning in least developed countries under the
UNFCCC—the National Adaptation Plans of Action (NAPAs)—are generally developed in
parallel to national development strategies, poverty reduction strategies and associated
medium-term expenditure frameworks (MTEFs) that form the basis for providing and
programming international development assistance (Agrawala and Fankhauser, 2008).
The integration of climate change and the MDGs is essential at an operational level
because if adaptation policy is not integrated into countries’ expenditure and
macroeconomic frameworks, it is difficult for finance ministries and central banks
to manage the increased inflow of foreign currencies.
While it is clear that climate-change adaptation and mitigation need to cut across all
poverty reduction efforts, low-carbon development (LCD) debates to date have been mainly
about high- and middle-income countries. There are good reasons why even the poorest
countries with low emissions might be interested in pursuing LCD (Urban, 2010; Urban and
Sumner, 2009). General discussions about the limits of decoupling growth from emissions are
fraught (for details see Barrett et al., 2008; Ockwell, 2008), but many case studies argue that
Working Paper 47
low-carbon growth is possible—for example, in China (IEA, 2002), India (World Bank, 2008),
South Africa (Government of South Africa, 2008) and Mexico (Project Catalyst, 2008).
LICs have contributed least to climate change. For them, LCD is not about cutting
emissions, but about the benefits and opportunities LCD can bring. For example, fossil fuel
resources such as oil are costly and can lead to a “carbon lock-in”, with infrastructure and
investments bound to a carbon-intensive economy for decades. Relying on those resources,
therefore, can mean greater costs in the long run. Moreover, the emission-trading scheme
under the UNFCCC has introduced a price for carbon. Having a high price attached to carbon
could mean a competitive disadvantage for LICs in relation to global markets.
The types of appropriate policy measures will differ for different country income groups,
as well as by resource availability. Countries with high fossil fuel resources usually tend mainly
to promote so-called “cleaner” fossil energy that emits fewer greenhouse gas emissions than
conventional coal and oil (such as natural gas or fossil fuel power plants with carbon capture
and storage). Countries with low fossil fuel resources usually tend mainly to promote
renewable energy. Forest resource availability can also be important: countries with large
forest resources tend to aim to achieve LCD through climate-friendly forest and land-use
management.
There are several UNFCCC mechanisms for LCD (see Table A15).
TABLE A15
Low-Carbon Development (LCD) Mechanisms
Mechanisms What is it?
Clean Development Mechanism (CDM) Developed countries implement projects leading to emission
reductions in developing countries. Developing countries gain
access to climate-friendly technology, developed countries
gain emission reduction credits to offset their emissions.
Emission Trading (EM) Mechanism that sets a cap on greenhouse gas emissions and
introduces a trading system. Once emission allowances are
exceeded, emission credits must be bought from those that
have emitted less. Emission trading is currently in place for
developed countries only, but might be extended to a global
level in the future.
Joint Implementation (JI) Developed countries can invest in emission reduction projects
in other developed countries as an alternative to reducing
emissions domestically. JI is currently in place for developed
countries only.
Reducing Emissions from Deforestation and Forest Currently under discussion in relation to a future climate
Degradation (REDD) and Land Use, Land Use Change and change agreement. Developing countries could be paid for
Forestry (LULUCF) climate-friendly forest and land use management; developed
countries could gain emission reduction credits to offset their
emission obligations.
Nationally Appropriate Mitigation Actions (NAMAS) The purpose of Nationally Appropriate Mitigation Actions is to
outline national mitigation options that are in line with domestic
policies and are developed in “the context of sustainable
development, supported and enabled by technology, financing
and capacity building, in a measurable, reportable and
verifiable manner” (IEA/OECD 2009).
Source: Urban and Sumner (2009).
Currently, only the Clean Development Mechanism is accessible for developing countries.
The first commitment period of the Kyoto Protocol will end in 2012 and a new climate-change
agreement will be needed for the post-2012 era. Mechanisms for LCD will be a crucial issue for
a new climate agreement. Further, LCD needs to be pursued in a pro-poor or pro-MDG manner.
Key policies for pro-poor LCD can be drawn by linking pro-poor growth debates (see
discussion in McKay and Sumner, 2008; Sumner and Tiwari, 2009) with LCD debates (Barrett et
al., 2008; NIES, 2006; Ockwell, 2008; Urban, 2010). Examples include green redistributive
policies, whereby government revenues made by “green” industries are distributed to pro-
poor sectors such as health and education; support for specific sectors that are crucial for the
poor, such as agriculture and forestry; social protection for adaptation and combining the
synergies between mitigation and adaptation, such as social protection measures to reduce
vulnerability to climate change; community participation opportunities such as rural
electrification with renewable energy; “green” job creation via development of the finance
sector and increased investments in small-scale infrastructure and pro-poor forest and land-
use policies: reducing emissions from deforestation and degradation (REDD) and land use,
land-use change and forestry (LULUCF) are two possible mechanisms whereby payments from
developed countries are directed to developing countries for climate-friendly forest and land-
use management, and thus could benefit the poor by ensuring that smaller farmers and
foresters can engage in the carbon market.
4 THE MDGs AND DEMOGRAPHY/URBANISATION

In 2007, for the first time in history, half of the world’s population lived in urban areas.
Urbanisation is one of the most important demographic shifts worldwide of the past and coming
century. The size, form, structure and function of urban areas, as well as their future growth
trajectories, will be critical elements in pursuing the MDGs in the period 2010–2015. This is
particularly true for developing nations, where urban growth rates are highest (see Tables A16
and A17), and where cities absorb an average of 5 million new residents every month and are
responsible for 95 percent of the world’s population growth (UN Habitat, 2008: xi).
Demographic issues relate to population growth, fertility, ageing, labour-force changes,
dependency ratios and the demographic transition over the medium term. Over the short term
and in the period 2010–2015, urbanisation is arguably the most fundamental demographic
issue. Between 2010 and 2015 there will be an additional 0.38 billion people in less developed
countries (0.74 billion by 2020), of which 0.33 billion will be new urban dwellers (or 0.67 billion
new urban dwellers by 2020).
TABLE A16
Population Indicators, 2005–2020
New New
2005 2010 2015 2020 population population
2010–2015 2010–2020
Population (billions), medium variant
World 6.51 6.91 7.30 7.67 0.39 0.76
Less developed 5.30 5.67 6.05 6.41 0.38 0.74
Least developed 0.76 0.85 0.95 1.06 0.14 0.21
Africa 0.92 1.03 1.15 1.28 0.12 0.25
Asia 3.94 4.17 4.39 4.60 0.22 0.43
Latin America and 0.56 0.59 0.62 0.65 0.03 0.06
the Caribbean
Population growth rate (%)
2000-2005 2005-2010 2010-2015 2015-2020
World 1.26 1.18 1.11 1.00 - -
Less developed 1.47 1.37 1.28 1.15 - -
Least developed 2.36 2.30 2.22 2.08 - -
Africa 2.34 2.29 2.20 2.03 - -
Asia 1.25 1.14 1.05 0.92 - -
Latin America and 1.31 1.12 0.99 0.86 - -
the Caribbean "
Working Paper 49
Dependency ratio (%)

2005 2010 2015 2020
World 55 53 52 52 - -
Less developed 57 54 52 52 - -
Least developed 80 76 72 69 - -
Africa 80 78 75 72 - -
Asia 53 49 48 48 - -
Latin America/ 56 53 50 48 - -
Caribbean
Source: World Population Prospects, 2008 revision at <http://esa.un.org/unpp/>.
TABLE A17
Urban Population, 2005 and 2030
New New
2005 2010 2015 2020 population population
2010-2015 2010-2020
Urban population (billion)
World 3.16 3.49 3.84 4.21 0.35 0.72
Less developed 2.26 2.57 2.90 3.24 0.33 0.67
Least developed 0.21 0.25 0.31 0.38 0.06 0.13
Africa 0.35 0.41 0.48 0.57 0.07 0.16
Asia 1.57 1.77 1.99 2.21 0.22 0.44
Latin America and 0.43 0.47 0.51 0.54 0.04 0.07
the Caribbean
Percentage urban (%)
World 48.6 50.6 52.7 54.9 - -
Less developed 42.7 45.3 47.9 50.5 - -
Least developed 27.0 29.4 32.1 35.0 - -
Africa 37.9 39.9 42.2 44.6 - -
Asia 39.7 42.5 45.3 48.1 - -
Latin America and 77.5 79.4 80.9 82.3 - -
the Caribbean
Source: World Urbanization Prospects, 2007 revision at <http://esa.un.org/unup/>.
Available data suggest that in a large number of the world’s poorest countries, the
proportion of urban poor is increasing faster than the overall rate of urban population growth
(Cohen, 2006: 64). This is compounded by the fact that urban poverty is often underestimated,
because official statistics often underreport it. Note that while much of the current debate on
cities focuses on the formidable problems of the world’s largest urban agglomerations, most
urban dwellers continue to live in far smaller urban settlements.
High rates of overall population growth and significant rural-urban migration have
contributed to this rapid urbanisation and to the related, unplanned expansion of low-income
settlements on the outskirts of many large cities or slums, without a concomitant expansion of
public services and facilities. Currently, one of every three people living in the cities of the
developing world lives in a slum (UN-Habitat, 2008: 90). In the developing countries, 0.8 billion
people (in 2005) or a third of urban residents are slum dwellers (defined as those urban
dwellers who lack improved water, improved sanitation or durable housing, or who live in
households with more than three people per room). Prevalence is highest in sub-Saharan
Africa, where 62 per cent of urban residents are slum dwellers (UN-Habitat, 2008: 90).
Despite the challenges urbanisation presents to the MDGs, and the importance of MDG 7d
to improving the lives of at least 100 million slum dwellers by 2020, urbanisation has not
received the attention it requires. The speed and scale of the growth of the world’s largest
cities and metropolitan areas could place enormous pressure on the immediate and
surrounding environment, posing significant challenges for sustainable development and

undermining progress towards MDG 7b on the reduction of biodiversity loss (UNFPA, 2009:
19). The improper planning of urban sprawl adds to environmental degradation, and to farm
and forest loss. This is the case of several Latin American cities, where sizeable damage has
been caused to environmentally sensitive areas. These include Panama City and its Canal Zone,
Caracas in Venezuela and its adjacent coastline, San José in Costa Rica and its mountainous
area, and Brazil’s São Paulo and its water basins (UN-Habitat, 2010).
Cities in many developing countries will also continue to discharge ever increasing
amounts of waste into the air or into bodies of freshwater, threatening water quality and
aquatic ecosystems. Congestion in many large cities poses the severe problem of increased air
pollution. While motor vehicles are the main cause of pollution in cities, increased demand for
energy to run air conditioning systems and electrical appliances will increasingly contribute to
pollution in many cities. Currently, cities generate close to 80 per cent of global carbon dioxide
emissions (Galea and Vlahov, 2005: 346).
Demographic and health-survey data collected between 1990 and 2007 show that serious
malnutrition is widespread in the urban slums of Africa, Asia, Latin America and the Caribbean,
and children in the poorest income brackets are malnourished at twice the rate of their
counterparts in the richest ones (UN-Habitat, 2010). If the issue is not properly addressed, the
growth of cities and thus of urban slums could jeopardise progress towards reducing hunger
and malnutrition, and to meeting MDG 1. Because poorer neighbourhoods can have
dramatically lower levels of basic services (associated with insufficient access to clean drinking
water, inadequate sewerage facilities and insufficient solid waste disposal), the growth of
urban centres will also greatly increase the chance that communicable and non-communicable
diseases will spread.
As mentioned earlier, although the unchecked and unplanned increase in cities could
greatly undermine countries’ progress towards the MDGs, a better-managed urbanisation
could also play an important role in MDG progress and acceleration: cities create jobs, attract
businesses, and bring together the resources to generate new ideas, innovations and the
increasingly productive use of technology.
Recent research shows a positive link between economic development and urbanisation in
most countries in Africa and Asia (Leon, 2007; Brockerhoff, 2000; UN-Habitat, 2010; Arimah,
2010), and people in urban areas generally have greater potential access to jobs and services
than their rural counterparts. In other words, despite the real urban threats to health, on balance
cities in the developing world have advantages that are not available to many rural dwellers. For
governments it is easier and cheaper per head to provide services (however limited) to people
living in cities than to the rural poor who are often dispersed over vast geographic areas.
Furthermore, the growth of urban populations over the past few decades has had a multiplier
effect on the impact of immunisation and oral rehydration therapy, by increasing the proportion
of children who are readily accessible because they live in towns and cities. Cities are also
generally associated with a high level of contraceptive use (Brockerhoff, 2000: 4).
Improved transportation could expand the range of housing and livelihood options for
the urban poor, provide work, and stimulate the private sector. In the past, investments in
infrastructure and basic services for the poorest have drastically reduced urban poverty levels
(UN-Habitat, 2010).
Working Paper 51
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NOTES
1. See respectively <www.edc2020.eu, www.sidint.net/themes-programmes/horizon-scanning-and-trend-

monitoring-report>,< http://www.foresightfordevelopment.org>,<www.sampnode.org.za>, USNIC,
<www.foresight.gov.uk>, <www.dni.gov/nic/NIC_2020_project.html> and <www.ifs.du.edu>.
2. For more detail on “wicked problems”, see J. Chapman, C. Edwards and S. Hampson (2009), ‘Connecting the
Dots’, Demos website, <http://www.demos.co.uk/files/Connecting_the_dots_-_web-2.pdf?1259947418>.
3. For a more detailed overview of one version of morphological based scenarios, see G. Coyle (2000), ‘Field
Anomaly Relaxation (FAR)’, United Nations University Millennium Project.
4. The word “dependency” is perhaps problematic but it is the used extensively in defining commodity and aid
relationships by UNCTAD, and the OECD-DAC.
5. Take for example, the well-known OECD (2003: 111) volume, Harmonising Practices for Effective Aid Delivery, which
defines high aid dependency as aid (net ODA) greater than 9 per cent of GNI and low aid dependency as under 3
per cent. The middle group, apparently, is inconclusive in terms of results. UNCTAD (2008: 26) notes on the (mean)
average ODA as a per cent of GNI in all least developed countries as 7.9 per cent of GNI. Maxwell (2006:1) identifies
“the 20 per cent club” and the “0.2 per cent club”. In the former “aid accounts for around 20 per cent of GDP…
[which is] indicative rather than statistically precise … 20 per cent is the average aid/GNP figure for sub-Saharan
Africa and 0.2 per cent is the aid/GNP ratio for India” [in 2003, according to UNDP 2005]. The best indicator of aid
dependency would be ODA/Final Absorption, (Absorption = Household consumption + Investment spending +
government consumption), which shows the share of total spending on final goods and services effectively
"financed" by ODA.
International
Centre for Inclusive Growth
International Policy Centre for Inclusive Growth (IPC - IG)

Poverty Practice, Bureau for Development Policy, UNDP
Esplanada dos Ministérios, Bloco O, 7º andar
70052-900 Brasilia, DF - Brazil
Telephone: +55 61 2105 5000
E-mail: [email protected] ! URL: www.ipc-undp.org

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WHAT ARE THE IMPLICATIONS

OF THE GLOBAL CRISIS AND ITS

Working Paper number 68 August, 2010

Centre for Inclusive Growth

International Policy Centre for Inclusive Growth (IPC - IG)

E-mail: [email protected] ! URL: www.ipc-undp.org

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Print ISSN: 1812-108X

Andy Sumner**, Joe Ballantyne*** and Andrew Curry***

Keywords: MDGs; futures; scenario planning; poverty reduction.

2 THE POST-ECONOMIC CRISIS CONTEXT

Slowdown in growth rates But no overall developing-country recession

Country/horizon Methodology and key drivers Scenario narratives

East Africa/2040 Scenario paper “I want to be a star”: the region is so

1. Intransigence of the political elite in power and

Sources: Rwanda: <http://www.scenariodevelopment.com/Future_of_Rwanda>;

Tough choices: Africa takes a stand

Traps and legacies: the whirlpool

3 WHAT IS SCENARIO MAPPING?

4.1 GENERATING THE SCENARIOS

Trends in Multilateralism Minilateralism Bilateralism

Polarisation of Continued polarisation Stabilisation at Political action

Nature of aid and Reductions in aid Vertical integration/ Continued

Information flows Continued growth in Greater state control Decline/stagnation

Each scenario included, at core, plausible combinations of the ranges of uncertainties

Polarisation of wealth/ Continued polarisation Stabilisation at Political action taken to Stabilisation at

4.2 THE MODELLING APPROACH AND ASSUMPTIONS

Trends in Strength of Strength of

Fuel Commodity Private capital

Strength of growth n/a x x x x

South by Southeast: Key Drivers

! Rapid shift in wealth from West to East.

! Sharp rise in energy prices.

! LICs excluded from emissions until

Weestern (Re)Invvention: Keyy Drivers

! Steady incrreases in energyy price.

! Frameworkk for emission reductions

Thee Odd Couplle: Key Driverrs

! Steady incrrease in energyy prices.

! A common regulatory fra

! Continued internal polariisation of wealthy/poor

Rolller Coaster: Key Drivers

5.1 OUTLINE NARRATIVE

5.1.3 A Piecemeal Approach to Climate Change

5.1.4 Restrictive Communications

Trends in size and form of Overall direction of the trend: mixed

5.2 IMPLICATIONS FOR POVERTY AND GROWTH

6 SCENARIO 2: WESTERN (RE)INVENTION

6.1 OUTLINE NARRATIVE

6.1.1 US and EU Reinvention

6.1.2 Challenges in Developing Countries

6.1.3 A New Variant of Multilateralism

6.1.4 Green Technologies

6.1.5 Storing up Future Problems?

6.2 IMPLICATIONS FOR POVERTY AND GROWTH

7 SCENARIO 3: THE ODD COUPLE

7.1 OUTLINE NARRATIVE

7.1.1 The Rise of “Chimerica”

Andy Sumner, Joe Ballantyne* and Andrew Curry***

Andy Sumner, Tom Mitchell and Thom Tanner*