Truck and Barter

Accounting and Condoms from the World Bank

The World Bank likes to call itself the Knowledge Bank. The wealth of material on its website is truly amazing. From accounting to sustainable development to condom procurement you will find material on its website. Below you will find some links from the World Bank to prove to you it truly is a Knowledge Bank.

International Accounting Standards - A Practical Guide

In response to the global financial crisis in 1998, an initiative was launched to strengthen the global financial structure, and, although the International Accounting Standards (IAS) have been in existence for some time, it is believed such initiative will help promote transparency in financial reporting, and acceptance of its wide range of international best practices. This publication provides guidance, and summarizes each IAS, while each chapter contains a simple case study, emphasizing the practical application of key concepts in a particular standard.....A conscious decision has been taken to focus on the needs of the executives and financial analysts in the private and public sectors who might not have a strong accounting background...

Beyond economic growth : an introduction to sustainable development

This book is designed primarily to help readers broaden their knowledge of global issues, gain insight into their country's situation in a global context, and understand the problems of sustainable development--both national and global. Because development is a comprehensive process involving economic as well as social and environmental changes, this book takes an interdisciplinary approach. It attempts to describe and explain the complex relationships among various aspects of development, including population growth, economic growth, improvements in education and health, urbanization, and globalization.

Condom Procurement Guide, Vol. 1 of 1
I don’t know why it is identified in the working papers section.

Related Links: Tyler Cowen commented recently about Sebastian Mallaby's book on Wolfensohn referring to it as the best book on World Bank. See also these two reviews of Wolfensohn’s legacy; one by Kenneth Rogoff and the other by Jagdish Bhagwati.

More of This? No, thanks.

Instapundit has a link to an "amazing" story about the IRS:

"In a program intended for employee development, administrative costs exceeded tuition paid by almost two to one," said Max Baucus (Mont.), the ranking Democrat on the Senate Finance Committee, which oversees the IRS. "As Congress considers the IRS budget for the upcoming year, we must be confident that the IRS is using its money responsibly."

(I say "amazing", since I don't find this kind of waste out of line with my expectations, but simply fascinating in the numerous and varied ways that the government can find to make a mess of even basic functions.)

An internal employee program of the IRS spent 60% of its funding on administering the program, turning away people seeking to use the benefit because of a lack of funds. Of course, these benefits are often considered part of an employees's overal compensation package -- something they consider having when weighing the value of a federal job versus, possibly, the private sector.

This should be a reminder for those who suggest that the key to fixing efficiency problems in the private sector is...more government.

The fact is that in health care, the private sector is often bloated and bureaucratic, while some government agencies - notably the Veterans Administration system - are lean and efficient.

I think it wouldn't be a stretch to believe that the efficiency of a governmental organization decreases as the number of people it is required to serve increases. In fact, I might suggest that this is one of the reasons that the VA can be considered "efficient' (relatively speaking). What I find more interesting, however, is that the VA is the third largest civilian consumer of energy in the federal government. They are behind the USPS, which delivers mail to everyone (ostensibly) in the US, and the DOE, which is the central agency for energy matters and thus concerns everyone again. The VA used 48.6 billion Btus compared with the USPS's 78.5 billion in 2002; this loosely compares the hospitals caring for those who fall under the VA's purview versus delivery vehicles to get mail across the 50 states . How would that ratio change if the VA suddenly had the role of administrating the health care for everyone in the US? Or even if their current number tripled?

The fact is that in health care, to avoid the loss of clients fed up with bad service, the private sector would have motivations to monitor its effciency, even if it wasn't perfect at it, while no government agency -- saddled with the potential care of every person in the US -- would have any reason to count "efficiency" among its primary concerns.

Bono Yet to End Poverty, Still Wears Sunglasses Indoors

Despite credentials clearly polished enough to have been considered for the World Bank's top post, not everyone agrees that his view of free trade economics and countries like, say, Ghana, are the best for all involved. Including someone from Ghana:

Rock stars and charities can be powerful advocates for good causes, and they generally have good intentions - but in many cases their lyrics do not genuinely rhyme with the silent hum of the very poor they seek to protect. Their economics are just plain wrong. They ignore history, peddling the misguided belief that poverty, famine and corruption can be solved with foreign aid, debt relief and other policies that have already failed Africa.

One pillar of their current campaign is to eliminate farm subsidies in western countries, a noble goal which indeed would help to achieve a level playing field for agricultural producers around the world. Yet this view is rife with hypocrisy: the same organisations promote subsidies (what they call "fair trade") for farmers and businesses in poor countries to shield them from the effects of competition.

Coldplay frontman Chris Martin has said that Ghana's rice, tomato and poultry farmers need to be protected from cheap imports. Yet the problems of Ghana's farmers lie elsewhere: they and other entrepreneurs are stifled by punitive tax regimes and the high cost of capital, not to mention our disarrayed land tenure systems which lead to low crop production.

Here's a particularly interesting bit:

Protection for local producers also means that African countries trade very little with each other, as illustrated by the World Trade Organisation's 2001 statistics. Africa's share of intra- and inter-regional trade flows to western Europe alone was 51.8pc, while it was a paltry 7.8pc within Africa.

The author's suggestions for change?

The solution to all that ails us is not aid, debt relief or "fair trade". It is to adopt institutions to harness the entrepreneurial spirit that exists in every African country, to enable Africans to trade with each other and anyone else in the world.

Establishing property rights would be an important first step; an effective, transparent and accountable legal system is another. Combined with respect for private property and the rule of law, these broad reforms would encourage entrepreneurship, trade, innovation and even environmental protection because they empower people - rather than the politicians.

Choice Under Uncertainty: Policy Selection

Edmund S. Phelps of Columbia writes in the Bangkok Post:

There is a movement in medicine to require that applications for licences to sell a new drug be evidence-based. By contrast, trained economists view their discipline as having already achieved this scientific standard. After all, they express their ideas with mathematics and arrive at quantitative estimates of implied relationships from empirical data.

But economics is not evidence-based in selecting its theoretical paradigms. Economic policy initiatives are often taken without all the empirical pre-testing that could have been done.

I'd suggest extending it even further. A good deal of all policy is put into place without sound evidence to suggest that it really might work. I think it comes from a tendency to believe (rightly or wrongly) that some initiative is "unique", or at least very unlike anything that has gone on in the past. Further, explaining that generazliations from a similar, though not perfectly analagous, policy enacted elsewhere are applicable despite cosmetic differences would be, for most people, less thrilling than whatever's on CSPAN-3 at 4am.

I've remained rather agnostic on the whole Social Security reform debate because I've heard a good deal of sound arguments from both the pro- and anti- camps. I have to balance my own preference for returning decision making back to the individual with the reality that making personal accounts "add-ons" is really just another expansion of a system I have grave concerns about already. That said, neither side is swaying me with actual evidence supporting its theoretical arguments (or refuting the other side's).

My suspicion is that this is where status quo bias in most policy decisions gains a good deal of strength. No matter how messed up a system or program is now, the chance that it could be made even worse will bring out in force those people for whom things are "not too bad". It's hard to get people into the streets when a lot of the beneficiaries of a change either don't understand the change, aren't convinced of the change, or, frankly, don't exist yet. Why, to some people, are future benefits of intangibles enough to cover the present costs of things like war when the potential, tangible future economic growth of generations is not enough to restrain economic interference and protectionism?

Just Putting a Toe into the Social Security Water...

I'm four-sqaure behind Kevin's policy prescription. (And I'll here note that a similar notion was advanced over at Division of Labour some days later. Advantage, Kevin!) I also, unfortunately, agree that the idea simply has no political legs. Seems to me there's going to be some tiny marginal change coming, one side claiming it a resounding victory for the ages, the other side calling it the onset of national collapse. And the world will go on.

That said, I did want to toss out one notion that I think is pertinant. Whenever the idea of SocSec comes up, someone invariably jumps to point out that the real problem is, of course, US national savings rates for individuals. Here's an example from Steven Landsburg:

In other words: If you want to address the Social Security crisis of the future, you must adopt laws that encourage saving in the present. There's nothing else you can do.

Well put, Steven. And a fair point. But how do we address the fact that SocSec itself seems to be a considerable contributing factor to the reduction in private savings? Might I suggest, it this case, that a reduction in government control, rather than a reliance on ever-accreting legal regulation might be a sound policy choice?

LATER... Just to clarify, this is an example of the "history provides no counterfactuals" kind of argument. It seems odd to me to argue that the low savings rate of people in the US is of primary concern, knowing that the very presence of guaranteed retirement income almost certainly reduces people's incentives to put additional money aside on their own. If we are interested in having a system that provides a measure of safety for those who were unable to save adequately, or face a circumstance that forces expenditures at a rate faster than they -- or anyone -- had anticipated (catastrophic health care issues, for instance), then perhaps the fact that this system drive people towards under-savings should be addressed at the source, rather than looking elsewhere for ways to correct the problem.

Restaurant Prices and the Minimum Wage

Just received notice about an interesting Chicago Fed working paper, and thought I'd pass it along."The Minimum Wage and Restaurant Prices" by Daniel Aaronson, Eric French, and James MacDonald has the following abstract:

Using both store-level and aggregated price data from the food away from home component of the Consumer Price Index survey, we show that restaurant prices rise in response to an increase in the minimum wage. These results hold up when using several different sources of variation in the data. We interpret these findings within a model of employment determination. The model implies that minimum wage hikes cause employment to fall and prices to rise if labor markets are competitive but potentially cause employment to rise and prices to fall if labor markets are monopsonistic. Therefore, our empirical results appear to provide evidence against the hypothesis that monopsony power is important for understanding the small observed employment responses to minimum wage changes.

I'll reserve judgment until I can read the whole thing.

North Korea Free Trade Zone

Marmot's Hole has tranlated an article about North Korea's free trade zone:

The Chinese tourism bus passed over the border bridge. “I’ll have to give North Korean girls a look tonight,” said a Chinese from Shanghai by the name of Kong. The middle-aged Chinese men who made up most of the tour group looked like they were enjoying themselves. After the bus out of Yenji, China entered North Korea, it followed a rough road for about two and a half hours. Along the way, we passed haggard-looking farmers and half-dilapidated wood-board houses. Our destination was the Rajin-Sonbong Free Economic and Trade Zone’s Emperor Hotel.

There more in his post. For those of you who want non-work safe material, check out his post on Japan.

Computers for Free & No Accountants!

Looking up a quote from Marx, I came across worldsocialism.org's proposals for economic reform. And not a moment too soon, because now I know the truth:

The time has come in the history of our species when it can get everything it wants for free. Yes, you heard me right, for free!

Technology has evolved to the point where there is no reason why food, clothes, housing, medical care, education, transportation, computers, books, CDs, digital connections, cannot be freely available to all human beings on the planet. It is time for such a change.

You say that, given their current human capital, billions and billions of people cannot possibly afford all these goodies? Why, didn't you know that capitalists maximize their profit by wasting resources coordinating private plans? Why, all we have to do is eliminate the coordinators!:

There are many other examples of employment which is necessary for the profit system but would be immediately redundant in a socialist society of common rather than private ownership and production for use instead of for market sale. The list is a long one - legal workers, chartered accountants, cost accountants, estimators, valuers, claims assessors, underwriters, brokers, taxation workers, marketing and sales personnel, advertisers, social security workers, cashiers and check-out assistants, police, prison workers, security guards, charities, armies, navies, air forces, armament workers, defence establishments etc.

Thankfully, I do not have to live in a world where these views are serious contenders for popular ideology.

Russia's Putin-Duma: Welfare to be Paid in Cash

One of the major barriers to economic reform in Russia is the in-kind welfare benefits given to veterans, who are generally perceived as deserving. These in-kind benefits are housing, medical care, public transportation passes, etc.

The Russian system is geared not just to finance such welfare benefits but to directly allocate and provide them. One result is a two-tiered system: 1) a privately-run Western system of medicine ("American doctors"), new apartment buildings, and Mercedes for those young, adaptive, and perhaps unscrupulous, and 2) a publicly-run network of 1930's-1970's quality medical system, decrepit apartment houses, and creaky transportation options available to the State-dependent. In my opinion, almost everybody tacitly recognizes that the latter are horrendously inefficient and welfare-reducing (subject to bribery, graft, fraud, ineptitude, rudeness, dirtiness, etc.). But these systems are not wholly independent; you can't sustain a sea of prosperity within a ghetto, and the public systems are holding back the advance of the private system...

Hence, I applaud the Putin-Duma's initial attempt to create a schism between finance and production in welfare, in the hope that the public systems can eventually be absorbed into a quasi-private sector:

The new system will also increase transparency, and crack-down on those who use fake ID to abuse the system.

But many genuine claimants see losing their automatic benefits as an insult. Millions of Russians are entitled to state help in recognition of their role fighting or working for their country. They see that as a mark of respect.

Some pensioners say they will suffer serious financial implications...

''Our benefits have been paid for by the blood of our fathers - by our own hard labour," her letter read.

"Keep your paws off them, or face the curse of the nation. You still have time to change your mind - use it! Signed - Lidiya Malokeeva, Murmansk, a victim of your repressions."

Analyst Stanislav Belkovksy believes opposition to the reform is as much emotional as economic - a hangover from Soviet times.

''For this nation, the role of the state as a father and mother is of paramount importance," he explains.

"It's much more important than any money, and especially in the sort of amounts suggested by the new law."

I tend to perceive such moves as sacrificing Russia's poor at the altar of hope for its future generations. Russia's government is no longer letting them get in the way. Some--probably many--invalids, veterans, etc. will find their purchasing power severely eroded, as has happened with the disproportionate increases in the regulated prices of public transportation. As a result, how will the poor respond? Nobody is suggesting that they will starve to death, but only those with children and grandchildren they haven't alienated will probably see little difference in living standards.

Congressman Moran: CUT SPENDING!

As a resident of the district represented by Democratic Congressman Jim Moran, I've just received an email from his office. The email includes a survey with the following multiple choice question:

1-Which statement best fits your views on our country's fiscal situation?

The President's tax cuts should be fully repealed in order to reduce the deficit and pay for the war on terrorism.

The portion of the President's tax cuts that benefit the wealthiest two percent of Americans should be repealed in order to reduce the deficit and pay for the war on terrorism.

We should keep the current tax cuts intact and continue deficit spending required by the war on terrorism.

We should cut taxes further and continue even more deficit spending required by the war on terrorism.

Notice the missing option: I would like for you to cut federal spending on everything but defense issues.

Iran Learning Lessons From China?

Interesting read from Global Insight on the potential reforms in Iran.

Some prominent conservative leaders not only support domestic economic reforms, but are also interested in increasing Iran’s economic ties with Europe. There are also indications that “pragmatic” conservatives are interested in reducing the tensions between Iran and the United States. To the extent that these initiatives will help improve economic conditions and boost living standards, they can help the Islamic regime enhance its domestic popularity. These developments give some merit to the economic thrust of Iran’s pursuit of the China model.

Is it possible to sustain an authoritarian regime with a liberal economy? Uncle Milty Friedman didn't think so. And I'm not sure China's really proving him wrong. That the political reforms are slower than the economic ones in China doesn't seem, to me, a refutation of the idea that economically free people won't ultimately start pushing hard for political freedoms as well; only that concentration on solidfying economic gains is often time-consuming and important enough that they take precedence. As people progress, and the ability to take some time away from working, I'd wager that we'll start seeing more pressure for reform in the political sphere in China (and, possibly, Iran).

Westernized Saudi Women at Work

Al-Ahram Weekly tells us that some Saudi women are overcoming rather high startup and transactions costs, and are heading into the workforce:

How does a man meet a woman at work in a country in which women are not permitted to drive; where women can only apply for an identification card with the permission of a father or brother; where women are required to remain covered from head to toe in public; and where the law prohibits unmarried women from sharing a room with people other than relatives?...

Salwa appears around the corner, hand outstretched, a 26- year-old Saudi Arabian woman, unveiled, relaxed and professional. Registering the baffled look on my face at her uncovered state, she rushes to explain: "As you can see, all windows and doors are made of glass; it would be ridiculous to spend the day taking your abaya on and off depending on who comes into the office," she explained...

Her initial fears of not being accepted at work turned out to be unfounded. "The opposite turned out to be the case, in fact; my most conservative, bearded colleagues -- the ones whose abaya -wearing wives walk behind them on the street -- are the ones who appreciate my work the most."

Women like Salwa are still an exception in the conservative kingdom. Women make up half of the population, and more than half of all high-school graduates are girls, yet women represent only five per cent of the workforce, most of whom work in the teaching profession. But this trend is increasing...

This month, the Chamber of Commerce in Riyadh launched a special women's department, the aim of which is to provide support for Saudi Arabian business women....

During the time of the petro-dollars in the 1970s and 1980s nobody had to work. But today, where even the land of the black gold is in the grips of unemployment and wages are sinking, more and more women are forced to work to support their families....

As they say, read the whole thing. Even with recent cultural adaptations, this all sounds too optimistic to me... but one can hope.

Slovakia's Economic Reforms

This morning, while watching the market absorb the latest employment numbers, I perused some recent issues of Institutional Investor. The February edition talked about some of the reforms coming out of Slovakia recently. The list is fairly impressive. From what it says in the article, other countries in the region have taken notice and Slovakia's actions may drive reforms in the region. The results have been good so far:

An economic turnaround is now evident. In 2002, GDP grew by 4.4 percent--twice the rate of that in the Czech Re public--and expanded by an estimated 4 percent in 2003. In 2002, Slovakia drew $3.7 billion in foreign direct investment--six times more than Hungary. From 1998 to the end of 2003, foreign investment totaled an estimated $9.3 billion. A hefty share of this investment is going into auto manufacturing, an industry in which Slovakia is emerging as the regional powerhouse, much to the chagrin of Czechs, Hungarians and Poles (see box, page 70). "Slovakia is becoming the biggest recipient of FDI per capita in the region," says Nora Szentivanyi, a London-based economist for J.P. Morgan Europe.

Most noted here in the U.S. has been the introduction of the 19% flat tax on individuals and corporation. Some of the others haven't received the same attention but are just as important. One is pension reform:

Yet another key economic shift under way is pension reform. Up until now, the pension system has operated as a state-run, debt-ridden, pay-as-you-go scheme, with all retirees receiving the same income. "Over the next three years, the system will basically reflect what a contributor puts into it," says Bank ING economist T6th, who follows pension reform closely. Moreover, the retirement age, which was 55 for women and 60 for men, has been raised to 62 for both sexes.

Beginning in January 2005 the state-run system will be supplemented by a second pillar--a privately funded system administered by foreign and domestic asset management companies, including financial firms and insurers. Of the 19 percent of an employee's income slated for pension contributions, half will go into the state-run system and the other half into the private system. Under the private system, money will be invested in three types of portfolios, ranging from a stock-heavy one more appropriate for younger contributors to a government-bond-dominated one for older people, with a more balanced mix of equities for those in between. Initially, at least, half of all funds must be invested in Slovak stocks and bonds, says Economy Minister Rusko, "because we want to strengthen the local capital markets."

To help pay for the transition, they have sped up privatization of state-owned industries. This aspect is particularly impressive, that is if they follow through, in that there are few restriction placed on minimum bids and country of origin of the bidders:

The government is spending about half the revenue from the privatization of state companies, or about $1.6 billion thus far, to help cover the transitional costs of pension reform. Privatization revenue is expected to rise sharply in the next few years because of the passage in August of yet another key economic reform. Previously, the government had to maintain at least a 51 percent interest in strategic enterprises, such as the fixed-line telephone, gas and electricity monopolies. Now up to 100 percent of those companies can be sold to the private sector.

The most closely watched prospective privatization involves electricity monopoly Slovenske Elektrarne, or SE. Slovakia has approached the sale of this strategic industry with more flexibility than its neighbors. For example, in the Czech Republic the privatization of electricity monopoly CEZ has stalled because the government was dissatisfied with the bids. "But there is no insistence by the Slovak government on a minimum price for SE," says Peter Mitka, the Prague-based lead manager for PricewaterhouseCoopers, which has been hired as the consultant for SE's privatization. "And most important, the government is neutral with respect to any bidder--whether Russian, German, French or even Czech."

These are great reforms to get through especially considering that the ruling government has such a small coalition:

The wonder is that the government has encountered so little opposition as it steamrolls ahead with painful reforms. The coalition of four center-right parties barely has a working majority in Parliament--only 78 out of 150 seats, including three fence-sitters who say they will support the coalition on a case-by-case basis. Issues such as abortion rights and the wiretapping scandal have threatened to tear the coalition asunder. "But most tensions in the government coalition have been due to noneconomic issues," says J.P. Morgan's Szentivanyi. "On the economic reforms all four parties strongly agree."

At the same time, the opposition parties are even more divided than the ruling coalition. The Movement for a Democratic Slovakia, the party of authoritarian former prime minister Meciar, still holds the largest parliamentary bloc--36 seats. But it is in decline, having fallen from 27 percent of the popular vote in 1998 to 19.5 percent in 2002. The center-left Smer, the party with the most public support in recent opinion polls, is uncomfortable with the notion of forming a government with Meciar and rejects outright an alliance with the Communists. Smer officials offer only tepid criticism of the economic reforms. Legislator Igor Sulaj, Smer's leading economic expert, worries that pension reform will force pension savings abroad because local capital markets are too underdeveloped. He calls for public projects to provide jobs in regions where unemployment is high. And, turning to the most controversial of the economic reforms, he decries the unfairness of the flat tax rate for allegedly benefiting only the affluent, but then adds, "We would like to see the flat tax rate introduced more gradually."

Hilton Root was a visiting professor last year at Pitzer College and, unfortunately, I missed the talk he gave us one afternoon on his work. However, somebody summed up an idea he presented which is interesting; the size of the winning coalition is important to economic reform. The Slovokian experience runs counter to this argument especially when one considers that the coalition is shrinking and not growing. I couldn't find any of his articles where he talked about this, but did find an interview with whom he worked to develope the idea, Bruce Bueno de Mesquita. He can explain it better than I:

Q: Why is that so?
A: To understand why countries reform their policies and institutions, we must understand the institutional context of political competition within sovereign nations. The rules by which a country determines its leadership will also determine how the economy is managed and in whose interests it is managed. The key to governmental responsiveness lies in part in the relationship between the selectorate - the subset of the population that chooses the country's political leadership - and the size of the winning coalition that keeps the incumbent in office. The size of the governing coalition will affect how different are the interests of the country's political leadership from those of citizens at large.

Incumbent leaders select and implement public policies that have public or private components. They can put everything into public policy that benefits everyone or into private goods consumed only by members of the winning coalition. They can also provide any mix of public and private benefits to their followers and to the citizens at large.

Q: What happens when the winning coalition grows in size?
A: Then the incumbent is able to offer less in the way of private benefits to particular members of the coalition. To ensure a focus on public policy, the winning coalition must be so large that its members can gain very little from private allocations because those allocations would have to be spread too broadly to be financially attractive. Challengers may come along to offer alternative policies in order to attract voters. Leaders must compete by offering the majority of the selectorate better policies. Policy-based competition in which ideas matter is characteristic of polities dominated by large winning coalitions.

Going back to the original article, it seems like the government had little choice than to enact reforms. More than anything, they were probably pushed into them by desperation than anything. Wages are below any of their neighbors and the countries has a corruption problem. This is something that often pops up when reform occurs; they had no choice; circumstances forced their hand. My guess is that Root and Bueno de Mesquita would argue that 'size of the coalition' enables a government to enact the needed reforms before the siutation gets to the point of pain.