Achieving the Global Sustainable Development Goals: An Economist’s perspective

Achieving the Global Sustainable Development Goals: An Economist’s perspective

Abstract

As a financial economist assessing policies in diverse sectors of the economy, I undertake to explain how we can traverse governance, cities, clean energy, gender equality, education, food security as well as finance to create a perfect planet. The description of subjects, their current performance, necessary adjustments to transform them to their ideal best through a provision of scenarios, academic research as well diverse econometric models such as regression models enables us to realize outcomes including but not limited to; promoting professionalism and independence of institutions, creating sponge cities to preserve our ecosystem in the cities, adoption of renewable energy, promoting gender equality, education and finally sustainable financial institutions with a case study of the 2010 Andhra Pradesh Microfinance (MFIs) crisis in India. Though the sustainable development goals are a juggernaut, they are too big to fail because the happiness of the future generations of humanity is pegged on them.

Strong Institutions

Every country must endeavor to build autonomous, independent, authoritative legal and administrative organs (Hanouz, 2015, as cited in Crotti, Hanouz, Bah, Chouchane & Hoffman, 2017). Strong institutions not only create an appropriate environment to create wealth, but their lack builds mistrust (Hausmann 2014, as cited in Cabolis, 2020). When the public and private institutions fail to collaborate, the economy is rendered dysfunctional as senior executives gluttonously pursue supernormal profits while disregarding consumers. The Global Competitiveness Report, which is sourced from the World Economic Forum, endeavors to measure the level of association between the public and private institutions for economic growth in over 140 economies. It has 12 pillars and the first pillar is dedicated to diverse characterizations of institutions including; ethics, matters of corruption, realizing efficiency in government as well as accountability. Strong institutions enable; diverse research across industries and disciplines as well as provision of social amenities which are essential for human well-being. Nordic countries usually rank among the top on the Global Competitiveness Report; usually, they are characterized by strong institutions (Crotti et al., 2017). African economies register concerning performance in the Global Competitiveness Index (GCI) report, and reality has their characterization with inefficient policies and weak institutions to implement them (Klaus Schwab, 2019). The weakness regarded here is comprised of, among others, poor leadership and lack of resources.

African economies need to diversify their potential, from agriculture to manufacturing and services of high value (Ighobor, 2020). Leaders in Africa should first ensure the well-being of the citizens, then craft transformative policies that enable equitable development, decent jobs, and affordable healthcare. These economies can effectively utilize domestic resources and finally encourage technological innovation and business. The collaboration between public and private institutions enables partnership, thus avoiding coercion as was the case with the forced and failed structural adjustment programs of the World Bank to African countries in the 1980s and 1990s.

Sustainable cities

The cities are significant as they are where 80% of the GDP comes from (UNEP, n.d). Most cities are consistently encountering the challenges such as; deficiencies in finances for development, pollution of air, ineffective treatment of wastewater, management of solid waste, emissions from greenhouses, and landslides. To tackle these challenges, the government, the private sector, and civil society need to collaborate. The collaboration involves integrating challenges, the well-being of human beings, knowledge, resources as well as economic activities to design cities that are economic, political, and socio-cultural centers.

Urban development involves realizing an artificial environment from a natural one (Peach, 2018). A large city that is densely populated has a high cost of development. In a water system, for example, 70% of the cost is spent on piping and the remainder on pumping and management of wastewater. A small area of land has lower operational costs. Urban developments that are concentrated, mixed-use, and highly populated reduce; movement, energy and change of land use are minimal. Whereas buildings utilize freshwater at 12%, they are responsible for 40% of waste. The high demand for goods and services can lead to economic as well as environmental exploitation. Therefore, there is a need for sustainability in consumption through technology, water purification, lifestyle changes, mitigation of floods, and creating local ecosystems.  China has created sponge cities where concrete buildings have green spaces that retain and filter the water. In Italy, there are vertical forests where trees cover the tops of residential buildings (Dunn, 2020).  Melbourne, Australia, has realized the ambitious 20-minute neighborhood where anyone can get what makes them happy in 20 minutes from foods, shops, education, and leisure. The ecosystems that surround cemeteries, shrines, and other protected areas also help respond to climate change.

Clean Energy

Fossil fuels, including coal, petroleum, diesel as well as gasoline, have driven the economic system through the 19^th and 20^th centuries. They have been regarded as the “biggest market failure in history” (Charfeddine & Kahia, 2019) as the cost of carbon emissions is never a component of market prices. This is concerning its’ significant contributions towards climate change. Fossil fuel subsidies promote inequality as a large percentage of subsidies associated with it go to the top income earners. Concerns about; degradation of the environment, destruction of the ozone layer by carbon emissions, price as well as technological change of alternative sources of energy triggered the transition to renewable energy in the 21^st century.

Renewable energies, including solar, hydro as well as wind power, are environmentally friendly and future secure with regard to the adaptability of the rapidly changing developing countries as well as the developed ones. Soon, it could account for beyond the current 26% of global electricity (Holmes, 2020). South Africans can adopt renewable energy in place of nuclear energy, whose sources require new infrastructure from 2040. Besides, renewable energy is expected to create an additional 1 million jobs, enable low costs of production, thereby increasing the purchasing power of consumers. The poor have access to renewable energy as the solar can always be placed above their roofs for charging. Insurance funds, lifetime investments, sovereign wealth funds, profiles of risk-return, pension funds as well as business models can be used to finance renewable energy across key sectors of the economy. Adoption of renewable energy requires; policy intervention to promote shifting, system integration to ensure sufficient power in the grid, alternatives due to unpredictability of when the wind will blow or when the sun will shine. Gas has been identified as a worthy substitute as well as storage of extra energy to compensate for outages.

Gender Equality

This partly involves creating capacity for both men and women to utilize resources as well as opportunities available. This has been made achievable through; affirmative action, perspectives on the labor market, among other methods such as STEM education (Maceira, 2017). Continued promotion of gender equality has led to an increase in; the number of women in employment, productivity as well as GDP per capita. As a result of this equality, 10.5 million more jobs are expected across Europe by 2050, while GDP per capita will rise from 1.95 trillion pounds to 3.15 trillion pounds. More women are also expected to graduate in science, technology, engineering, and mathematical disciplines. Increased working populations can swiftly take over as well as improve previous tasks performed by retirees. These increases are factors of positive legislative, societal as well as cultural adjustments to accommodate women in work.

Multilinear regression analysis can be used to explain the factors influencing gender equality as shown below;

This model is used to assess the degree of associations across variables. It can be run on ms excel or Statistical Package for the Social Sciences applications (Santiago, Guo & Sigman, 2018). Assuming the above table is a representation of the Gender Equality Index;

Y – Dependent variable; Gender Equality Index

X1 – Independent variable; Economic participation

X2 – Independent variable; Health and care

A correlation of 0.7 and above signifies the presence of multicollinearity between the variables that are independent. X1 and X2 have a correlation of -0.6813, which is below the absolute value of -0.7, thereby, we can proceed to utilize both variables to test the Gender Equality Index.

An R squared of 0.430643 indicates that only 43% of the components of Y can be verified by the two independent variables X1 and X2.

The F test with a value of 0.754557 is above the determinant outflow of 0.05. Therefore, we do not reject the null hypothesis. This means that there is no significant relationship defining X1 and X2 variables as well as Y. This means that we cannot proceed with the individual T test.

To realize the predicted economic model, we re-write the model with the coefficients;

Predicted Y = 0.340157 + 0.631057X1 + 0.098644X2

This means that a 1% increase in X1 (Economic participation) leads to a 63.12% increase in Y (Gender Equality Index).

A 1% increase in X2 (Health and care) leads to a 9.86% increase Y (Gender Equality index).

As a policy analyst, using the regression analysis above, I can ensure implementation of structures that promote; economic participation of the sidelined gender, more so women, as well health and care, for example, universal health care and reduced gender-based violence, in their stipulated measurements.

In the United Kingdom, women are still disadvantaged with regard to readiness for a future world of technological careers (Crotti, Gelger, Ratcheva & Zahidi, 2019). Most of them are only engaged in people and cultural careers, therefore unprepared for the fourth industrial revolution, unlike their male counterparts who are strongly in the STEM careers as shown below in the United Kingdom professional cluster.

Source: Global Gender Gap Report 2020

In leadership and governance, women leadership after the 4^th World Conference on Women (1995) in Beijing remains elusive (Denmark & Paludi, 2018). Only 37 of the 500 CEOs of fortune 500 companies are women. There are approximately 20 women globally who are heads of state or government, a slight improvement from the 12 in 1995.

Education

The more educated workers an economy has, the higher the GDP as such talents can engage critical thinking as well literacy (Pastor, Peraita, Serrano & Soler, 2018). There should be a careful emphasis on STEM fields besides traditional careers. Developed economies are always formulating policy debates on schooling. Factors such as the salaries of teachers, the number of students in a class as well their capacity to realize high rates of returns are normally debated and implemented (Viennet & Pont, 2017). A high rate of return is a factor of quality. Cognitive skills are a parameter of quality (Goldhaber & Ozek, 2019). Test scores are also a factor of parents as well as neighborhoods (Hanushek, 2002b, as cited in Hanushek, 2019). These factors are rarely introspectively addressed in developing economies due to weak policy formulation and implementation. Salaries are a factor of years of schooling as well as test performance as well as years of schooling. The high school class of 1972 had a 15% salary increase for males and a 10% salary increase for females per standard deviation of a final mathematics test performance (Murnane, Willet, Duhaldeborde & Tyler, 2000, as cited in Goldhaber & Ozek, 2019).

It is important to keep polishing the capacities of employees. The government can develop employees with skills through tax breaks to provide resources as well as through providing training facilities (Pastore & Pompili, 2020). Training employees provides a comparative advantage for quality output as well as returns in comparison with competitors without training programs. The human capital development policy should address diverse issues relating to the training program (Kim and Lee, 2020). For example, a provision for an employee who has undergone the training program to provide services for a given minimum period before leaving the organization and expected output targets upon completion of the program.

Food Security

Food security involves providing assurance to human beings on their capacity to physically and economically have access to basic foods that they need (FAO, n.d., as cited in Alam, Siwar, Talib & Wahid, 2017). At the household level, the Committee on World Food Security explains that members of the family have achieved food security if they have food at both economic and physical levels and they have no risk of losing these capacities. At the national level, food security involves achieving equilibrium of food supply as well as food demand at affordable prices. This equilibrium does not propose food security for all households in the country. In case of food insecurity, such a household is said to suffer a deficiency in food entitlement or rather effective demand. That is to say, they have negligible ability to find food in the market. An individual attains food security if their spending on food is way above the need.

How do macroeconomic policies affect food security for both individuals and households? To explain this, linkages across macro as well as microspheres are used. In between are the markets and infrastructure that make up the meso economy, (FAO, n.d, as cited in Taylor, Roberts, Milligan & Ncwadi, 2019). The meso markets are characterized by; markets for labor, food, production inputs, quantities demanded, consumer goods, credit, price as well as quantities supplied.  Infrastructure, on the other hand, encompasses; institutional infrastructure as well as food and nutrition programs. Both markets and infrastructure have a significant degree of interaction. The effective demand of a household depends on its’ level of income. The linkage between the market demand for food and the food market is a factor of; production as well as demand determinants. Subsistence production directly contributes to the entitlement for food.  The domestic market outputs, as well as food imports, pass in the market, providing market supplies that are then absorbed as per food entitlement.

(FAO, n.d, as cited in Taylor, Roberts, Milligan & Ncwadi, 2019)

Non-market transfers, which include relief food, pass through the supply side. If a household has subsistence productions as well as non-market transfer increases, it means effective demand in the market declines. Sometimes the household may sell the non-market transfers increasing its’ income, and the market supply ends up increasing too.

Devaluation of the exchange rate occurs when the local currency has been fixed lower than the determined free market rate. It is usually fixed by the government (FAO, n.d as cited in Djuric, Gotz, Svanidze & Glauben, 2017). Devaluation increases local prices as well as local production with respect to both foods as well as tradable goods. Tradable goods are those usually sold across countries or locations. This devaluation leaves food consumers who are pensioners, informal and public sector employees, and the unskilled worse off while producers of tradable goods are left better off. If consumer subsidies are removed, purchasers become worse off, and if the subsidies were unfair to the producer, they are left better off.

Some governments oppose the free market and proceed to set up a fixed exchange rate that is above the free market exchange rate. It is used as a strategy to counter the increased import prices resulting from devaluation. The effects of overvaluation extend across the micro, meso and macro-economic levels. The sector of tradable goods is taxed, leaving it worse off, while the non-tradable is favored. Agricultural tradable goods include cash crops, food commodities that are imported as well as substitutes related to imports. With overvaluation, prices of commodities fall, rippling the effect to the capacity of agricultural production, possible incomes as well as rural employment. Trade liberalization can reduce the price of commodities produced by protected industries. If public expenditure is cut, extension services and agricultural research diminishes, impeding the realization of new crop varieties as well as production techniques.

Microcredit policy

There is a part of people in society characterized by poverty or the risk of getting into it, (Facet, Evers & Jung, 2004, as cited in Khachatryan, Hartarska & Grigoryan, 2017). Some people are both skilled and in the working-age population but are on social welfare, not gainful employment. As they transition to the labor market, more so self-employment, they are required to pay taxes as well as insurance schemes. Traditional banks identify them as “non-bankable,” thereby unable to finance them. Microfinance seeks to provide the required support for self-employment or micro-entrepreneurship as well as eliminate this “moving island effect”. For microfinance operations to succeed, the government and society must;

• Promote self-employment as an alternative and respectable source of generating income
• Lower taxes for fields such as construction as well as gardening in a bid to make them formal
• View failure in business as an equipping experience for future economic undertakings
• Pay employees
• Institute skills development initiatives
• Provide tax holidays for new businesses
• Penalize those unwilling to work
• Formulate a labor market policy that emphasizes on creating a pull instead of a push environment for promoting self-employment
• Ensure legislation of a microfinance act in the constitution. Microfinance institutions should have reduced and flexible capital requirements, low-interest rates and easily accessible to target groups.

A relevant case study is the crisis of micro finances in the area of Andhra Pradesh in India where ten debtors committed suicide leading to institution of measures such as a minimum amount of funds to be owned as well as operational income, qualifying assets, capital adequacy, verification by a credit bureau and corporate governance, (Venittelli, 2017). These measures interfered with the growth strategy of the microfinance institutions; making most of them cease operations. Outside Andhra Pradesh before 2010, money lenders were the main suppliers of credit except in Uttar Pradesh that had a balance. With the 2010 MFI crisis, Andhra Pradesh MFIs increased portfolio and successfully spread to states such as Assam, Bihar among others. Most people in 5 of the states invested in productive business assets while rural farmers from Assam and Bihar engaged in farming. The latter encountered inadequate cash flows and required alternative sources to repay their debt showing that; lending to rural clients lacks sustainability and anticipation of non-repayments by the MFIs is important.

The onset of the Covid-19 pandemic has posed significant threats to the sustainability of MFIs with a 41% increase in loan arrears in June 2019, falling liquidity and increased risk as described below (International Banker, n.d). Though tier 1 MFIs seem to be well-positioned into recovery, other tiers can concentrate on consumables and common use products.

While providing the loans, the MFIs should base their lending on cash flows (Venittelli, 2017). While providing non-income loans such as sanitation and solar items, the MFIs can rent 30% of the qualifying assets. In the same breath, MFIs can design insurance schemes for the items they provide to cushion their clients. The loans provided should have low interest rates and manageable operating margins as well as a repayment schedule. To reduce the cost of operations, MFIs should adopt new technology in various departments. Credit bureaus should also enhance openness in providing credit ratings to the clients.

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