It has become clear in recent years that current trends of globalization often adversely affect the developing world. The integration of world markets has resulted in the struggle of poor countries to keep up with the technological gains of wealthier nations and compete with multinational producers, both domestically and abroad.
However, recent innovations in global finance offer the opportunity for globalization to help, not hurt, the world's poorest populations.
In the last decade or so, the global financial sector has become the primary beneficiary of economic growth, and the current volume of foreign exchange transactions is about US$3.6 trillion per day. It occurred to some that the developing world should benefit from this staggering volume of financial trade, and in 2002 at the Monterrey economic summit, the concept of innovative development financing first made its way into international discussions. In the years to come this concept expanded, and starting in 2006 the first innovative finance mechanisms were implemented.
Today, three mechanisms exist to raise funds for development: UNITAID, which uses a small levy on international airline tickets to bring affordable HIV/AIDS and malaria treatments to developing countries; the IFFIm, which uses revenue from bonds to establish immunization programs worldwide; and the Advance Market Commitment, a pilot program that connects donors with pharmaceutical companies to increase funding for vaccine research and secure fair pricing for consumers.
Since 2006, these mechanisms have generated more than US$3 billion in aid, which has gone to 80 recipient countries. (These funds supplement official assistance from nations and international institutions.) Their legitimacy and effectiveness have gone largely uncontested. Surprisingly, however, less than a dozen countries are currently participating in these efforts, the United States not included. The Millennium Development Goals Summit in NYC next week will hopefully bring greater exposure to development finance and its potential.
The forces of globalization and its often harmful byproducts will not be reversed anytime soon. However, innovative development finance shows that through international cooperation, the connections globalization fosters can benefit our whole world, and not just a privileged few.
-Elizabeth Newton
SOURCES: Leading Group on International Financing for Development, The Christian Science Monitor
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