This really is the best job in the world

Britain's minister for overseas development now holds one of the most influential of cabinet posts

"On a bad day it is the best job in government; on a good day it is the best job in the world." So says Baroness Chalker, minister for overseas development, though she attributes the original quote to Chris Patten. Yet in the hierarchy of the shadow cabinet, and indeed of the Cabinet itself, there is no doubt that it ranks pretty low. How else could it be a demotion for Clare Short to be transferred from transport to overseas development?

But Lady Chalker and Chris Pattern are right, and I suspect that if Ms Short gets the real cabinet job as opposed to the shadow one, she will, in a few years' time, realise why. Quite simply, she will have vastly more influence on the world in the new job than she would ever have had in the old.

In world terms there are only three aspects of transport where this country is influential. One is running airports. The commercial triumph of Heathrow has enabled BAA, the company that runs it, to go into the business of running other airports in other countries. The second is running airlines, and here it is mainly Virgin and BA that are teaching other carriers how to make a commercial success in a very difficult business. Neither of these, however, have much to do with government, except that government privatised BAA and BA and so created the conditions for this influence.

The third area is very much within successive transport ministries' ambit and that is the decline in road accidents. Along with the Netherlands, we have the lowest death rate from motor accidents in the world. Every accident that happens is, of course, a tragedy, but by curbing the number of such tragedies, UK policy will continue to attract attention internationally.

Now compare this with our position in overseas development. We start from a unique position in that Britain is both a member of the Commonwealth, which encompasses more than a quarter of humanity, and a member of the European Union, the world's largest trade grouping. Add in our historically important role as a founder member of the International Monetary Fund and the World Bank, and you can see how Britain has been pivotal in the relations between the world's "haves" and its "have nots".

It is also a wonderful place to watch, and to promote, the change in ideas about economic development - what works and what does not work. The Commonwealth includes some of the most successful economies on earth (for example, Hong Kong and Singapore), as well as some of the least successful (in sub-Saharan Africa).

But most important of all, London is probably now the most important single place in the world for the allocation of development funds. This is the result of a seismic change in the last decade in the funding of international development, the shift from government to the private sector.

Some numbers show the scale of the change. The average net annual flow of official development finance in 1983-87 was $38.5bn, while the average private sector flow was $31.3bn. By 1994 the official flow had risen to $54.4bn, but the private sector flow had shot up to $172.9bn. The fastest- growing component of the private sector flow is portfolio investment, mostly in what have been dubbed emerging market funds, which are mostly run from London. The City has become the main clearing house for people in the developed world wanting to invest in developing countries.

Does this shift from public sector to private mean that the role of a UK minister for overseas development has become less important? No, for three main reasons. First, some parts of the world are, and will remain, heavily dependent on official aid flows. Indeed, as Sir William Ryrie argued in his recent book First World, Third World, many countries in sub-Saharan Africa suffer from too much aid, rather than too little. So targeting official aid is vital. (Bill Ryrie, by the way, is one of the key people Clare Short should get to know, for after a spell as permanent secretary at the Overseas Development Administration he ran the International Finance Corporation, the World Bank affiliate which specialises in getting private sector finance into economic development.)

Second, while the big money is now private sector, governments play a vital role in buttressing and supporting private sector flows. A good example is in Eastern Europe, where the UK government runs the Know-How Fund, which pays for high-quality people to go out and advise countries on how to cope with capitalist ways. Paradoxically, the shift of the flow of funds to the private sector means that money has become a less crucial element in development than honourable advice: there is plenty of money around, but disinterested advice is hard to come by.

Third, the next 30 years will see a shift in the balance of power from the present developed world to what we still think of as the developing world, but which already rivals the mature developed countries in economic might. By about 2004 the developing world will be clearly larger in economic output; by 2020 much larger. Quite aside from the importance of this shift in human and political terms, it is enormously important to our commercial interest to be sensitive to this new relationship.

So getting the overseas development job right really does matter. On any sort of world view it matters vastly more than transport. There is a fair chance that in five years' time Clare Short will realise that this supposed demotion was an utter liberation. If Tony Blair tries to take this one away she really should kick up a stink.