Humanitarian Economics

I was pleased to be asked recently to address the Economist’s Society at University College London. My subject was “Humanitarian Economics” and this blog post is based on that talk. This was not an attempt to deal with the economic aspects of humanitarian aid, but rather a broader effort to imagine a new approach to economics guided by humanitarian principles. I am not an academic economist but I don’t believe that such an approach has been considered before. My thoughts are, I’m sure, open to criticism but I hope perhaps I can start a debate, among economists and others.

My thesis is that economic thinking and policy making over the last couple of centuries, while helping to make the world wealthier and in many ways better, has failed to achieve sustainable, equitable and environmentally secure benefits for the poorest people on our planet. The persistence of poverty, hunger, conflict, forced displacement and deep inequality means that our economic policies have failed the humanitarian test. In this respect, economics itself may be said to have failed – or perhaps its goals have been the wrong ones?

Of course I can’t post this blog today without mentioning the US election. Donald Trump is challenging much economic orthodoxy, especially in respect of free trade and globalisation. I don’t think he is a humanitarian! So perhaps my ideas will not find fertile ground in Trump’s America. His policies are also likely to set back progress on climate change if he fulfils his promise to bring back the coal and steel economy to the rust belt. He plans to reduce taxes too, which will surely mean austerity budget cuts – unless he plans even more debt. These may well hit foreign aid as well as reducing access to healthcare for poor Americans. But I am old enough to have seen the political pendulum swing many times. After Nixon and Ford came Carter; after Reagan and Bush came Clinton; after Bush came Obama. The underlying reality is that Trump’s policies, just like Brexit, are unlikely to deliver what supporters are looking for – essentially secure jobs and livelihoods backed up by good public services. The supporters who want to give the establishment a shock will feel betrayed and the pendulum will swing once more – hopefully in just 4 years’ time. But what alternatives will be on offer from leaders with a more progressive outlook? We are in desperate need of new radical ideas that can appeal to the voters at the next elections – in the UK and the US and elsewhere. Trump is right on one thing – the current economic policies have not been working well for many who have been left out and see little hope of a better future for their children (and not only in America – we are all connected now more than ever). So my thoughts on humanitarian economics may contribute to the debate that needs to start now about a new proposition for the future.

As a student of Economics in the late 1960s and early 1970s, I quickly became disillusioned. Surely the science of economics should offer society the opportunity to improve the livelihoods of its members across the world? But it seemed to me that it was not serving that purpose. If we are engineers, we can use our understanding to design better weapons or better wheelchairs. Similarly, economists can work to design economies that are equitable and sustainable, that relieve poverty and suffering, or those that maximise profit for a few. Of course, many economists have worked for the former and the blame may well lie with politics rather than economics. But I would argue that economists also have a responsibility to be more assertive in pursuing humanitarian objectives. I also argue that humanitarian economics could also be more successful in achieving other economic goals. The world has adopted the global Sustainable Development Goals and we have only 14 years to achieve them. Unless the economics profession focuses on these goals I doubt that they will be reached – by 2030 or indeed ever.

The great economist Dudley Seers persuaded me to continue with my economics degree and then to study international development. I am glad I took his advice. He said that development was the forum in which economists were working for a better world, but that this also required a multi-disciplinary approach. I looked at the connection between environment and development in 1973 and was surprised at the almost complete lack of study in this field, which was to become a key focus for much of my subsequent work and indeed is now at the heart of the global discourse.

As well as environmental sustainability, I have during my career had the chance to work on  many issues that are at the heart of a humanitarian approach to economics – fair trade (I was part of one of the first fair trade initiatives, importing instant coffee from Tanzania 40 years ago); corporate social responsibility (from my work on the international trade in hazardous chemicals at Oxfam in the early ’80s to my involvement with the FTSE4Good index more recently); and human, and especially children’s, rights (with Amnesty International and Unicef UK)

During 17 years at Unicef UK I saw a global picture of staggering, upsetting and tragic violations of children’s rights. The UN Convention on the Rights of the Child combines economic, social and cultural rights with the protection of children’s absolute rights not to suffer violence, abuse, torture, unjust detention and exploitation. The latter are routinely violated as we can see every day in Syria, Iraq, Yemen, South Sudan, Central Africa and many other areas of conflict. But even in the UK we have seen abuse of children on an unacceptable scale which the police and social services have been unable to prevent. The economic rights include social security and education and these are denied to at least a billion children who live in poverty. These rights are denied because societies do not give sufficient economic priority to caring for their children. It is not acceptable for millions of children, even in the richest countries, to continue to live in poverty. Economics based on humanitarian principles would not allow this.

Development is happening in terms of GDP growth but children are still going hungry, even in rapidly developing middle income countries. The humanitarian system meanwhile is struggling to respond, with grossly inadequate resources, to a continuous, and growing, catalogue of humanitarian disasters: natural disasters and conflicts impacted by climate change, and conflicts driven by greed, dictatorship, dangerous ideology, power struggles or desperation.

Something is seriously wrong!

240 years after Adam Smith’s Wealth of Nations and 80 years after Keynes General Theory we have an age of unprecedented prosperity in which we are trashing the planet, leaving billions destitute, allowing nearly one in 4 children to be stunted by malnutrition, with wars causing a greater flow of refugees than at any time in history, and facing accelerating global inequality. Regardless of the politics – economics isn’t working!!

And yet…

  • we have adopted an ambitious set of Sustainable Development Goals that hope to put all this right – and in the next 14 years!
  • The Paris Agreement has finally put some strength behind the need to tackle climate change, though there is still a very long way to go.

So what kind of economics do we need to turn things around? What is the new economics that can work in a climate changed, globalised, interconnected world? Could we invent a Humanitarian Economics? What would it look like? How would our thinking and our actions, our economic decisions, change if we made humanitarianism the cornerstone of economic thinking and policy making?

There is no such thing as a free market and that is almost universally recognised as a good thing. There is a reason for that – the market doesn’t distribute access to livelihood in a way that protects the vulnerable and the economically excluded and marginalised. Governments, or other institutions (such as charities and social enterprises, and responsible businesses), have to act to constrain the action of the market and to compensate for its deficiencies through welfare provision and cash transfers, provision of universal healthcare and education, and laws to protect and implement international human rights norms. This already happens in every country to varying degrees. These actions by Governments cost money, which is raised largely through taxation. So far so much is broadly accepted, but there are arguments about the degree and nature of intervention that is appropriate.

In an earlier blog, I suggested that this argument essentially boils down to market-led philosophies (where the size of the state is minimised and intervention is seen as being at the margins and otherwise damaging to wealth creation) versus state-interventionist approaches (where the state may undertake economic activity itself through nationalised industries and run tax-funded services directly as well as regulating the activities of private enterprise and providing welfare safety nets). I have argued that there is a third way – an economy in which more economic activity is undertaken by mutual entities – social enterprises, worker or consumer owned businesses, mutual societies and charitable organisations. These often have purposes and strategies designed with humanitarian and social dimensions at their heart alongside goals of profitability and market share. There are many familiar and successful examples from John Lewis to the Co-op to Oxfam, from credit unions to trade unions, from local community-owned shops and pubs to small producer co-operatives, to large Foundations such as Wellcome Trust, the Children’s Investment Fund Foundation or the Gates Foundation. Even the UN itself could perhaps be conceived of as a mutual organisation where the members are the world’s population, represented by their governments (“we the peoples…” begins the UN Charter). Large parts of the global economy are already managed by mutual institutions which are far more likely to focus on humanitarian goals and principles.

At the same time, many of our most successful businesses are defining their strategies with a clearly stated social purpose as a central element of the objectives against which they are held to account by Boards, shareholders, customers and employees. Two leading examples are Marks and Spencer’s Plan A (https://corporate.marksandspencer.com/plan-a) and Unilever’s Sustainable Living Plan (https://www.unilever.co.uk/sustainable-living/).

So what could be some principles and ideas for Humanitarian Economics:

  • I believe mutual organisations with a social purpose are the economic actors of choice for a humanitarian economy. These could be encouraged by tax incentives.
  • Enterprises that are not mutual should be legally required to define their social purpose objectives and be held to account and audited for the achievement of these (social audits are currently optional but could become a statutory requirement). Again incentives or penalties could be applied (eg a higher corporation tax rate if social goals are not met).
  • External costs of corporate impact on the environment should be internalised, ie paid for by the company. Carbon taxes are one means of doing this, at least in terms of environmental costs. The health costs of tobacco, sugary drinks etc should be borne by the producers.
  • Governments should ensure that it makes sufficient revenue available (whether from tax, borrowing or external assistance) to meet the basic needs of its population, to deliver the rights specified in the relevant international human rights treaties and to meet international obligations in respect of aid programmes and the Sustainable Development Goals. These expenditures should be defined constitutionally or in law as the first call on Government funds.
  • One means of achieving the elimination of absolute poverty could be the introduction of a universal basic income. Experiments and research indicate that, where poverty is high, this can increase economic activity by facilitating investments in small enterprises and generating a multiplier through local expenditure of the minimum income. Even in wealthier societies, reductions in working hours seem to be small (and probably helpful as robotics and automation replace more and more jobs).
  • Climate Change targets should be met and exceeded and funds made available to assist developing countries to adapt.
  • Conflict prevention and resolution needs to be given higher priority at the global level as it is highly destructive to economies as well as to immediate human wellbeing. Perhaps, to prevent armed conflict, an international court for arbitration of disputes could be established (or greater powers given to the International Court of Justice in The Hague) whose decisions would be binding, and perhaps enforceable ultimately by the UN through international military co-operation? Ideally, this would remove the need for individual countries to maintain their own defence forces, thus releasing enormous funds for economic development and social welfare? Maybe more countries could follow the positive example of Costa Rica?
  • Equality targets could be set internationally for Gini coefficients (a measure of economic inequality) to be reduced over a defined period. Why was this not one of the SDGs? The current global figure is 0.52. An initial goal (say by 2030) could be for no country to fall below 0.4 or for any existing figure to worsen. This would have the potential to change fundamentally much national economic policy in a humanitarian direction.
  • There should be a global fund for disaster risk reduction and resilience, perhaps funded by a levy on all states based on national income, or based on carbon emission levels, to be invested to support the most disaster-prone countries to reduce risks and increase resilience. This would save money relative to the cost of responding to disasters that could have been prevented or mitigated.

I’m sure readers and economists can think of many other elements that could contribute to Humanitarian Economics. I look forward to your thoughts and comments.

The world faces increasing population, the inevitability of climate change impacts on livelihoods, the environmental effects of new consumption patterns in emerging middle and high income countries as their incomes rise, unprecedented levels of conflict and displacement, increasing frequency and severity of natural disasters, and the persistence of widespread poverty, hunger and disease. At the same time we live in a global society that is increasingly connected and informed, we have more data on the human condition than ever before, science and technology are continuing to advance and we have a clear roadmap in the SDGs. How can we take advantage of the latter to overcome the former? The application of economic theory and policy, over the centuries since economics became a subject of study, has not achieved, and so almost certainly will not achieve, the humanitarian outcomes the world so desperately needs. We clearly need something new and different, focused on goals that are not primarily about growth, profit and increasing consumption (though those may still be achievable), but are primarily about addressing poverty elimination, an end to hunger, avoidance of conflict, minimising the impacts of climate change and protecting the environment, greater national, global and intergenerational equity, human rights, mutuality, social cohesion and responsible business practices. That would be economics that could change the world. Humanitarian Economics.

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