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First remove the beam out of your own eye, and then you can see clearly to remove the speck out of your brother’s eye.

There has been a recent shift in narrative over the purpose of impact investing.    In the past “Solving the world’s most intractable problems” was a common tag line.  Now you are much more likely to hear that impact investing seeks to mobilise the $2.5 trillion dollars per annum “funding gap” that must be bridged if the SDGs are to be realised. If this is to be achieved, we are told then impact investing must be mainstreamed so that this unimaginable shortfall in funding can be achieved through the capital markets.

The scope of ambition has not changed.  Nor has the structure of the proposition which is essentially: “We over here are OK but there is a sea of problems over there requiring solutions (the SDGs).  We are going to find the funding and solve those problems for you.  We start with the proposition that this is additional funding that needs to be injected by the markets to fix the world where the markets don’t yet work properly”. Which implies that where “we” are everything is fine because the markets work well.

The ambition and the intentions are admirable – but the perspective misses a great deal of the economic and political realities of our time, obscuring (and giving legitimacy to) a major part of the problem.   It is my view that a large part of the problem is the global economic system which impact investors want to gently seduce into funding the achievement of the SDGs.  Let us count the ways.

Tax evasion and transfer pricing

In an excellent recent article in the Guardian George Monbiot (1) quotes Global Financial Integrity estimates that “$1.1tn a year flows illegally out of poorer nations, stolen from them through tax evasion and the transfer of money within corporations. This practice costs sub-Saharan Africa around 6% of its GDP.”  This is not just nearly half of the estimated shortfall.  The cumulative effect of this pillage has contributed enormously to creating the conditions which made the SDGs so important.

The price not paid

Just this week I found this from Frank Aswani, CEO of the African Venture Philanthropy Alliance on LinkedIn (2)  It shows that if you pay £2-50 for a cup of coffee in London, 1p of that money ends up in the hands of the farmer who grew the coffee.  1p???  There are no doubt similar graphic representations for cocoa, and many other primary products.  If you consider that a ten fold increase in the price paid to farmers would completely transform the economic (and therefore development) landscape of the farming areas and make hardly a dent in your average coffee drinker’s pocket, you have to wonder about where the priorities for achieving the SDGs should lie.

Tax Havens and Hidden Treasure

In good old fashioned pirate style, much of the ill-gotten gains get hidden – these days in tax havens many of which are indeed Treasure Islands, although some are also to be found in mainland Europe, amongst the most admired social democracies of our time.

The International Monetary Fund describes it as follows:

“Tax havens collectively cost governments between $500 billion and $600 billion a year in lost corporate tax revenue, depending on the estimate (Crivelli, de Mooij, and Keen 2015; Cobham and Janský 2018), through legal and not-so-legal means. Of that lost revenue, low-income economies account for some $200 billion—a larger hit as a percentage of GDP than advanced economies and more than the $150 billion or so they receive each year in foreign development assistance. American Fortune 500 companies alone held an estimated $2.6 trillion offshore in 2017.”

The article goes on to suggest that the money stashed by individuals in tax havens could range from $8.7 trillion to $37 trillion.  One has to wonder where that kind of money comes from, and how much of this should be recovered in full or properly taxed and available for international development efforts.

Perhaps there is no gap.  Just theft and rapacious pirate capitalists.

Other assorted villains

There are countless other ways that the powerful players in the global economy help to create the conditions that the SDGs are intended alleviate.  Climate Change of course looms largest and needs its own focus.  But we can add destruction of the commons by land grabs and reckless forms of commercial farming,  and strip mining; oil and gas drilling that pollutes water resources and a Pandora’s box full of other harms that poor communities are blighted with.

Corrupt and incapable states

Much of what I have described results from the restless and reckless pursuit of ever more profits by the largest companies in the world and those who invest in them.  We must of course recognise that they are both enabled by, and contribute towards, corrupt local leadership who benefit in many ways by turning a blind eye, or by actively supporting the twenty first century version of the pillage of the third world.    These are real obstacles to achieving growth that requires political action on the one hand, and a steadfast refusal to literally “buy in” to corruption by business at all levels.

Sooo…

Before we define and try to fill a funding gap can we recognise that we are dealing with:

• The misappropriation and misdirection of funds rather than an absence.  This must change.
• Large companies and investors who have benefitted from and contributed to the terrible social conditions the MDG are designed to fix.  If we are to sup with them, we had better bring a long spoon; we cannot simply seek to dish up more of the same. 
• The structures of trade, of local economic development, of what constitutes reasonable profit.  These must be addressed, here in the heart of the global economy, not out there where we think the problems lie.
• The absence of a global mechanism for taxation and repatriation of capital which would make distribution of resources “fairer”.
• A political, as much as an economic deficit, and so we must ally ourselves with progressive global, national and local movements tackling the sources of inequality.

Our purpose must be to build an entirely different global economy – not simply extend the reaches of the current one while increasing the profits to be made at the “bottom of the pyramid”.

i. If you think The UK isn't corrupt you haven't looked hard enough. George Monbiot, Guardian, 10/09/2020

ii. https://linkedin.com/posts/frank-aswani-3080303118_look-at-the-economics-of-coffee-activity-6710463072386994176-aSEq/