Truck and Barter

Mexico Facts of the Day

“Mexico is the country of inequality. No where does there exist such a fearful difference in the distribution of fortune, civilization, cultivation of the soil, and population.”
- Alexander von Humboldt, Problems And Progress in Mexico, c. 1800

“In Mexico the law is an aspiration, not the norm. We made many laws to look good, not to obey them. There is no public condemnation of lawbreakers.”- Bernardo León, a lawyer who advised Mr Fox on judicial reform.

- By most estimates, as many as 80 percent of Mexicans do not have bank accounts.

- Compared with countries that have similar levels of development, World Bank figures show that Mexico is well behind Brazil and Chile in an important measure of banking activity — private credit as a percentage of total output. In Mexico that figure was 18 percent in 2003, compared with almost 40 percent in Brazil.

- Mexican workers are only a third as productive as those in the United States. Foreign direct investment, apart from a couple of big bank takeovers, has fallen from 3.5% of GDP in 1994 to less than 2% a decade later.

- The Inter-American Development Bank estimates that remittances from Mexicans abroad will total $24 billion this year, about a third more than the flow of foreign direct investment

- Mexico has fewer phones per person than any other OECD country or Brazil, which privatised eight years later but encouraged competition

- Informal sector accounts for slightly more than half of total employment in Mexico

- Drug-related killings last year were running at twice the rate in 2004, and numbers have been rising further this year, to 1,500 in the first eight months.

- Over the past decade the locus of power in the drug trade, as in so many other businesses, has moved closer to the final consumer. That means it has shifted from Colombia to Mexico, which is now the gateway for up to 90% of cocaine entering the United States, as well as ever-increasing amounts of marijuana and methamphetamine.

- Mexico has some 400,000 police in hundreds of different forces. On average policemen have spent just six years at school, have received only two weeks' training and are paid just $370 a month for the job. Some 35% of them use drugs, and two-fifths leave each year.

- Official figures show that one Mexican in two still lives in some degree of poverty; in much of the south that figure rises to three in four.

- Since 1960 the number of years the average Mexican child spends at school has gone up from 2.6 to nearly eight. But that still means some 35m adults have failed to complete the nine years of basic primary and lower secondary schooling.

- At present 95% of education spending goes to the producers and only 5% to the consumers in the form of scholarships.

- Total tax revenues in 2004 (excluding oil income) amounted to only 11.4% of GDP. That is not only much less than the average for the OECD countries (36%), but also below the average for Latin America (13.7%)

- Most railways and roads were built in a radial pattern, with Mexico City as the spider in the centre of the web. That pattern met the needs of centralised political control and the policy of import substitution pursued until 1982. At the peak in 1970, half of the country's industrial production took place in Mexico City alone

The above data are from recent survey of Mexico in The Economist and from the article on Wal-Mart in Mexico which Bob referred to below- it’s also on the NYT.

Related;

A discussion with Michael Reid, the author of the Mexico survey in The Economist (podcast)

Mexico - Poverty in Mexico : an assessment of conditions, trends, and Government strategy

Mexico : Income generation and social protection for the poor

Doing Business in Mexico

Ukraine and fiscal space for growth

A recent World Bank report on Ukraine- Creating Fiscal Space for Growth: A Public Finance Review;

“Recent economic and fiscal trends in Ukraine, combined with the financing requirements of the reform agenda, have brought fiscal pressures to the fore. Ukraine’s economy grew by more than 50 percent between 1999 and 2004, but growth decelerated from 12.1 percent in 2004 to 2.6 percent in 2005. Contributing to this slowdown were less favorable terms of trade dynamics (in particular for metal prices)1 and a substantial deceleration in investment demand (partly as a result of uncertainty about government policies and cutbacks in public investment). Despite the recovery of the economy in the first semester of 2006 (5 percent growth y/y), the short term outlook is still threatened by potential further increases in energy prices in 2007. At the same time, increasing public spending threatens to crowd out the private sector. Driven by hikes in pensions and public sector wages, public spending soared from 39.4 to 44 percent of GDP in 2005, placing significant pressure on public finances. This high public spending and its consumption orientation risks generating inflationary impulses and higher interest rates, and eroding household wealth. Ukraine also has a high tax burden which discourages the private sector.”

Related;

The Ukrainian Economy

Ukraine's politics-The birth-pangs of democracy, or an unseemly power struggle?

Back to Basics -- Fiscal Space: What It Is and How to Get It;
“What is fiscal space? It can be defined as room in a government´s budget that allows it to provide resources for a desired purpose without jeopardizing the sustainability of its financial position or the stability of the economy. The idea is that fiscal space must exist or be created if extra resources are to be made available for worthwhile government spending. A government can create fiscal space by raising taxes, securing outside grants, cutting lower priority expenditure, borrowing resources (from citizens or foreign lenders), or borrowing from the banking system (and thereby expanding the money supply). But it must do this without compromising macroeconomic stability and fiscal sustainability—making sure that it has the capacity in the short term and the longer term to finance its desired expenditure programs as well as to service its debt.”

Ukraine-Doing Business

The Chile Story

The secret behind Chile’s macro-economic stability and robust growth over the past 20 years.

- Strong fiscal discipline. Over the last two decades, only in Chile were years of fiscal deficits roughly offset by years of surpluses; most other Latin American countries displayed a bias toward deficits. Fiscal discipline was reinforced by the introduction of the structural surplus rule in 2000. The reward has been a vastly lower debt-servicing burden, as fiscal discipline resulted not only in lower government debt but also in lower real interest rates.

-A credible inflation targeting framework has helped anchor inflation expectations at a low level. Under this framework, the central bank aims at keeping inflation within a 2–4 percent target range. In recent years, the central bank has also let the peso float freely.

-The financial system was strengthened and capital markets deepened. Financial liberalization was a mainstay of policy reform in Latin American in the 1990s, mainly focusing on deregulation and privatization. Chile took strong actions to strike the right balance of market discipline and sound banking supervision, while its capital market rapidly deepened.

- Trade integration, in conjunction with a broad financial opening, was significant. Chile’s export sector, one of the most open and diversified in Latin America, has proven an important buffer against current account shocks, while also boosting Chile’s growth potential.

- Institutional arrangements were set to create a more certain macroeconomic environment. Sound economic policies and reforms have been carried out within a stable institutional framework to avoid reversals. These institutional arrangements have helped reduced the incentives problems that have led to a lack of fiscal discipline, complex and distorted trade polices, and moral hazards in the financial system see elsewhere in the region.

Source;
Sustaining Latin America's Resurgence: Some Historical Perspectives, Singh, Anoop | Cerisola, Martin D (IMF Working Paper), p.8

Related
Macroeconomic Volatility: The Policy Lessons from Latin America, Singh, Anoop

Occasional Paper No. 231 Chile - Institutions and Policies Underpinning Stability and Growth (June 2004)

The Four Big “I”s needed to achieve growth in Africa

Haiti Fact of the Day

“Haiti’s income distribution is among the world’s most inequitable with a Gini coefficient of 0.66. Nearly half of Haiti’s households are trapped in absolute poverty and live on less than a dollar a day. Social indicators such as literacy, life expectancy, infant mortality, and child malnutrition show that poverty is extensive. About 40 percent of people cannot read and write; some 20 percent of children suffer from malnutrition; nearly half the population has no access to healthcare; and more than four-fifths have no clean drinking water. However, indicators suggest that non-income poverty has declined in recent years. Access to assets such as education, infrastructure, and basic services is highly unequal and strongly associated with poverty.”

Source; En Breve No. 94 - Social Resilience and State Fragility in Haiti: Breaking the Conflict-Poverty Trap (NewsletterIssue), World Bank

Related;
Online game about struggling to survive in Haiti-
Have a look at the comment made by one;
"What an interesting concept! Though, the game is amazingly difficult... Is it really this tough out there in the developing world?

Haiti- Data Profile

How Egypt implemented a flat tax

"Since 2005 all businesses have paid a 20% corporate income tax – rather than 32% or
40%, depending on the sector. All sector-, location- or business-specific tax holidays and exemptions were eliminated, about 3,000 in all. Businesses can file and pay taxes electronically. As a result two million Egyptians filed taxes in 2005, double the number in 2004."

- Paying Taxes- The Global Picture

Related;
Tax reform: a holistic view

How to Reform the Business Environment
Mahmoud Mohieldin, Minister of Investment for Egypt, spoke on the economic reforms currently being undertaken there. He noted that changes had overcome resistance by proceeding on many fronts, including exchange rates and privatization, with the end result of streamlined business processes and removal of delays.

The Egyptian Center for Economic Studies

Egyptian Investment Portal

Private schooling in Pakistan

A recent working paper from the World Bank;

A dime a day : the possibilities and limits of private schooling in Pakistan- This paper looks at the private schooling sector in Pakistan, a country that is seriously behind schedule in achieving the Millennium Development Goals. Using new data, the authors document the phenomenal rise of the private sector in Pakistan and show that an increasing segment of children enrolled in private schools are from rural areas and from middle-class and poorer families. The key element in their rise is their low fees-the average fee of a rural private school in Pakistan is less than a dime a day (Rs.6). They hire predominantly local, female, and moderately educated teachers who have limited alternative opportunities outside the village. Hiring these teachers at low cost allows the savings to be passed on to parents through low fees. This mechanism-the need to hire teachers with a certain demographic profile so that salary costs are minimized-defines the possibility of private schools: where they arise, fees are low. It also defines their limits. Private schools are horizontally constrained in that they arise in villages where there is a pool of secondary educated women. They are also vertically constrained in that they are unlikely to cater to the secondary levels in rural areas, at least until there is an increase in the supply of potential teachers with the required skills and educational levels.

Micro health insurance

An interesting article on health financing among the poor in India;

“India is a world leader in this emerging field, with 5 to 10 million people enrolled in micro health insurance nationwide. Fewer than 10 percent of India's 1.1 billion people have any sort of health insurance, much of which covers only government employees. Poor people usually work in informal jobs or are self-employed, so they are extremely unlikely to be included in employment-related plans.

Consequently, health financing poses an acute problem for India. About one-fourth of hospitalized Indians fall below the poverty line as a direct result of their hospital expenses, according to a 2002 World Bank report. Many people take out steep loans or sell their homes in order to pay. And for the poor, losing even a day's wages while waiting in the hospital can be devastating.”

Related;
UpLift India Association
News Roundup: Risk-Reward Edition
Micro-insurance: Extending Health Insurance to the Excluded
Healing Fields Foundation
Community-Based Health Insurance in Rwanda
Public Health Services in India

Thinking of a deposit insurance system- delay it!

A World Bank working paper surveying deposit insurance schemes;

Deposit insurance design and implementation: policy lessons from research and practice- This paper illustrates the trends in deposit insurance adoption. It discusses the cross-country differences in design, and synthesizes the policy messages from cross-country empirical work as well as individual country experiences. The paper develops practical lessons from this work and distills the evidence into a set of principles of good design. Cross-country empirical research and individual-country experience confirm that, for at least the time being, officials in many countries would do well to delay the installation of a deposit insurance system.

Via Spontaneous Order

Related;
What Deposit Insurance Can and Cannot Do
Protecting Bank Deposits
Deposit Insurance Around the Globe: Where Does it Work? ," (with Asli Demirguc-Kunt) Journal of Economic Perspectives
Financial Development and Economic Growth: Views and Agenda." Journal of Economic Literature, June 1997
Does Deposit Insurance Increase Banking System Stability?
Deposit Insurance - A Survey of Actual and Best Practices
Deposit Insurance - Obtaining the Benefits and Avoiding the Pitfalls
Deposit Insurance -Actual and Good Practices

Multimedia
Global Dialogues: Pricing of Deposit Insurance

The Story of Transparency International

Ashoka’s video, ‘Champion of Accountability; The Story of Peter Eigen and the founding of the Transparency International’ is available for download on Google Video. The interview gives an interesting overview of how the anticorruption agenda came to the forefront of international development agencies and reflects a personal story of courage and commitment to making this world a better place. A must see.

Related;
Q & A with Peter Eigen
Clean sheet: Transparency International’s new chapter
West failing to curb bribery overseas
Bribe Payers Index 2006
Fukuyama, Indrawati join the WB anti-anti-corruption corps
Corrupting practices
Using the Right to Information as an Anti-corruption Tool
Governance matters V

Multimedia (Radio National- Australia);
High Court decides on FOI and conclusive certificates; The High Court decision upholding the government's use of a conclusive certificate to snuff out a Freedom of Information request for tax figures on bracket creep and the first home buyer's scheme is being criticised as a dark day for democracy.

Inside Indonesia's media

The Debates

Miscellaneous interesting links;

Bastiat vs. Krugman

Will Microcredit reduce poverty

Philanthropy Smackdown-GOOGLE VS. GATES

Citywide Minimum-Wage Rules: Living Wages or Killing Jobs?

Department of Economic Illiteracy: Special Victim's Unit

Aid: Can It Work?

Should we abolish the IMF?

Drink to success?

'A man with little sympathy for other faiths'
See a response at TCS; The Pen, the Sword and the Pontiff

Marriage and Coal Mining

Poverty is so Hot for Fall (and Why That's a Good Thing)

Making tracks through policy space

Podcast of the Day- Doing Business 2007

Book forum from Cato is now online How Nations Prosper: Economic Freedom and Doing Business in 2007;

“Nations that are more economically free outperform less free nations in growth and levels of prosperity. James Gwartney, coauthor of the annual Economic Freedom of the World report, will review current trends and the latest research on the impact of regulations, the rule of law, and other aspects of economic freedom on the whole range of development indicators. Simeon Djankov will show how excessive bureaucratic procedures and government fees make it prohibitively expensive for the world’s poor to join the formal economy. Reform can make it easier for entrepreneurs and businesses to create wealth. Djankov will show which countries are making progress, how they are successfully reforming, and the potentially large growth opportunities they can expect.” Listen to the podcast.

Related;
Simeon Djankov and the Doing Business Database
Discussing Doing Business
The Road Less Traveled of Business Regulatory Reform

How Should we Develop Human Resources and Institutions?

Asian Development Bank is running an essay competition for youth on the theme of sustainable development. The deadline is 31 October 2006.

Iranian Economy

All’s not well with the Iranian economy;

“But not all the developments since 2003 have strengthened Iran. Despite the oil price bonanza, Iran's economy is in poor shape. With roughly the same population, its GDP is half that of Turkey. Even the official unemployment figures have risen to 12.4 percent (a massive understatement) under Ahmadinejad and what few jobs have been created are in the public sector. The Tehran stock market lost 25 percent of its value last year and another 12 percent so far this year.

In June, 50 of the country's leading economists wrote an open letter saying that Ahmadinejad's economic policies lacked "expertise and scientific basis." Inflation is officially running at 12 percent, but most economists reckon it to be close to double that level. There are credible reports of large-scale capital flight to Dubai and elsewhere, fueled by Ahmadinejad's fatuous decree to state and private banks to cut their interest rates, whose main impact has been to dry up bank lending.”

Related:
United States, Iran Trade Barbs at UN
The George and Mahmoud show
Iranian minister urges World Bank to back nuclear energy investment
Iranian Economy- Crony Capitalism in Islamist Garb
Recent publications from IMF
Inside Iran
Iran in Maps

Thomas Schelling on the Iran nuclear issue;

“I don’t think the U.S. has a convincing argument against this Iranian charge of nuclear apartheid — especially since we’ve been allies of Israel for many decades knowing they have nuclear weapons. Although, the Iranians should recognize clearly the limits on Israel — even when it had the perfect target for tactical nuclear weapons of Egyptian troops as sitting ducks out in the Sinai desert in 1973, Golda Meir didn’t use them.

I don’t know if there is any way to stop the Iranians from acquiring nuclear weapons. If they do, we should try to persuade them to declare — as the Indians and Pakistanis have done — that they are for deterrence and defense, not for offensive use.

Further, we should assist the Iranians in making sure custody of their weapons are secure in any time of disruption. In the case of a riot in the streets, will the weapons be safe? Who might grab them in case of civil war?

It is important for the Iranians to understand — and have access to — technology like we have in the U.S. that disables bombs if they get into the wrong hands. U.S. weapons, for example, have “permissive action links”— a radio signal code that arms weapons but that will also automatically disarm them it if launched at an unauthorized target.

This will be a big dilemma for the U.S. If the Iranians get weapons, will we be willing to share the technology to ensure the security of their use? That is where the debate is heading.”

Pocket Guide to Asian Think Tanks

From Asian Development Bank Institute;

“This is a handy guide to the leading Asia-Pacific think tanks working on development and economics. Each entry
- provides web links to the think tank and its research staff,
- describes the current research program,
- lists if visiting researcher or internship programs are offered, and
- states whether online publications are freely available."

Related; Think Tanks and Policy Advice in Countries in Transition

Trying hard to be a darling of IMF/World Bank

News from Sri Lanka;

“Sri Lanka said Tuesday it was moving towards eliminating oil subsidies that are threatening to blow a hole in the nation’s budget and asked lenders for financial help to tide over oil shocks.

Public Administration minister Sarath Amunugama said the government “has responded appropriately to the sustained sharp rise in oil prices,” by adjusting domestic prices and moving towards oil futures to hedge future risks.

“Oil subsidies, which had been an enormous burden on the budget, have been eliminated,” he told delegates during the IMF World Bank annual meetings here.

Sri Lanka consumes around 30 million barrels of oil a year, buying 2.2 million metric tones oil light crude from Iran, Saudi Arabia and Malaysia.

The country’s oil bill is expected to climb to about 2.0 billion dollars this year, up from 1.6 billion dollars in 2005, due to surging global fuel prices.

“We reiterate our call for the creation of a special medium term oil facility to assist countries that have been adversely affected by the sharp increases in oil prices,” he said in an appeal to some of the world’s biggest financial backers…”

Related;
World Bank hates Philippines
Sri Lanka to lead South Asian initiative to study impact of oil prices
The boom in bank deposits (India)
Port Infrastructure, High Costs Seen Hampering India's Progress
South Asia conference to address sanitation
Weathering the Storm So Far: The Impact of the 2003-05 Oil Shock on Low-Income Countries

Events, Interviews, Discussions- Making Globalization Work

Making Globalization Work; Lee C. Bollinger, Tina Rosenberg, Nancy Birdsall, George Soros, and Joseph E. Stiglitz discuss solutions for some of the world's most pressing problems, such as debt, unfair trade, the "resource curse", the need to curb harmful emissions and world poverty at Columbia University.

Clinton Global Initiative 2006

IMF-World Bank Program of Seminars at annual meeting –Singapore (not yet online)

New Foundations of Cost-Benefit Analysis (not yet online)

How Nations Prosper: Economic Freedom and Doing Business in 2007 (tomorrow)

James Galbraith, an economist at the University of Texas, talks on the outlook for the U.S. economy (podcast)

Related;
Discussions about the IMF-World Bank annual meetings issues at PSD Blog;
Private sector public goods
Business takes on the poverty penalty
Can the World Bank fight corruption?
Economists debate financial sector in India and China
Reforming collateral laws

Roubini has a couple of posts on the IMF-World Bank annual meeting

FT Interview with Clinton

FT special coverage of Clinton Summit

The latest Foreign Exchange show;
“The World Bank and the IMF are getting together for their annual meeting in Singapore. This year it's not just talk of exchange rates and balance of payments - the United States is pushing hard to give greater weight to Asian and other emerging market economies. To help us understand the dynamics at play, we're joined by Zanny Minton-Beddoes, Washington Economics Editor from The Economist.”

Angry Arab on Thailand coup

“There was a coup in Thailand. I am jealous. Very jealous. When was the last time we had a coup in the Arab world? Wait. We had one in Mauritania and it was pretty lousy. Never mind. Just day dreaming.”

-Angry Arab

IMF Statement on the Thai coup;

"We are following the situation closely. Thailand's economy is fundamentally strong and financial market reactions have been limited. Regional financial markets have also been little affected thus far.

"On the whole, Asian economies are resilient to external shocks, having strengthened their macroeconomic frameworks, increased exchange rate flexibility, and reduced external vulnerabilities in recent years."

Related;
Thailand in crisis
Like Old Times in Bangkok
Thai coup leader unveils PM plans
Thai king 'endorses coup leader'
Q&A: Thailand's coup impact

Multimedia
Postcard: Thailand Coup (podcast)
Politics of economic reform in Thailand- Tarrin Nimmanahaeminda, Chairman of Siam Pithiwat and former Thai Minister of Finance

How to Make Money – from War

The Guardian reports;

“Armor Group International, the security firm that makes most of its profits in Iraq, reported a drop in earnings for the first half of the year because of increased competition for business and the loss of a major training contract in Iraq.

The London-based company reported a 30% rise in sales to $134.4m in the six months to June 30. Armor generated more than half of its revenues from business in Iraq - $70.3m - although its non-Iraq business grew by 57%.

However, pre-tax profits slipped to $3.7m from $4.7m for the same period a year ago. Analysts had expected profits to be only 10% lower than last year's.

Armor is chaired by Sir Malcolm Rifkind, the former Conservative foreign and defence secretary. It is one of the UK's leading providers of private security for reconstruction workers in Iraq.

"The group has achieved strong revenue growth over the first half, and we are encouraged by the significant growth outside Iraq," said Dave Seaton, the chief excecutive officer.

The main hit to sales was from the loss of a $7.8m contract with the United States for training staff at the ministry of justice in Iraq, the company told Reuters. "It was a one-off programme funded by the US," Mr Seaton said. "The Iraqi government does not have the funding for its own training needs."

Armor is diversifying and has new or extended contracts providing security at the World Bank headquarters in Kabul, Afghanistan; clearing land mines in southern Sudan, and doing security work for oil and gas companies.”

I wouldn't be worried so much as Failed States in the world seems to be increasing according to this World Bank report.

Related;

World Bank Lists Failing Nations That Can Breed Global Terrorism;

“The number of weak and poorly governed nations that can provide a breeding ground for global terrorism has grown sharply over the past three years, despite increased Western efforts to improve conditions in such states, according to a new World Bank report.

"Fragile" countries, whose deepening poverty puts them at risk from terrorism, armed conflict and epidemic disease, have jumped to 26 from 17 since the report was last issued in 2003. Five states graduated off the list, but 14 made new appearances, including Nigeria and seven other African countries, Kosovo, Cambodia, East Timor, and the West Bank and Gaza. Twelve states, including Afghanistan, Somalia and Sudan, made both lists.”

What is effective aid?

A working paper by Charles Kenny, “What is effective aid? How would donors allocate It?”

"Abstract: There are significant weaknesses in some of the traditional justifications for assuming that aid will foster development. This paper looks at what the cross-country aid effectiveness literature and World Bank Operations Evaluation Department reviews have suggested about effective aid, first in terms of promoting income growth, and then for promoting other goals. This review forms the basis for a discussion of recommendations to improve aid effectiveness and a discussion of effective aid allocation. Given the multiple potential objectives for aid, there is no one right answer. However, it appears that there are a number of reforms to aid practices and distribution that might help to deliver a more significant return to aid resources. We should provide aid where institutions are already strong, where they can be strengthened with the help of donor resources, or where they can be bypassed with limited damage to existing institutional capacity. The importance of institutions to aid outcomes, as well as the fungibility of aid flows, suggests that programmatic aid should be expanded in countries with strong institutions, while project aid should be supported based on its ability to transfer knowledge and test new practices and support global public good provision rather than (merely) as a tool of financial resource transfer. The importance of institutions also suggests that we should be cautious in our expectations regarding the results of increased aid flows."

Related;
Aid: Can It Work?
Owen’s posts on aid

Deepak Lal on the World Bank

“The major benefit the developing countries derive from the operations of a number of the multilateral aid institutions, such as the World Bank, is the technical assistance built into the process of transferring the aid money to the recipient countries. Though often sound on general economic grounds, their advice is nevertheless resented for political or emotional reasons. In many instances it would not even have been heard, let alone acted upon, had these institutions been unable to provide the recipient governments with a sweetener in the form of financial resources on more favourable terms than were on offer in commercial financial markets. The grant element in the capital transfers classified as official development assistance seems a derisory sum to pay for the opportunity to carry on this form of international dialogue with those responsible for the design and execution of public policies in the Third World. When heeded, the advice has done some good, at the very least in changing the perceptions of bureaucrats and politicians; in some instances it may have had an appreciable effect in making public policies more economically rational.”
-The Poverty of Development Economics, by Deepak Lal, p.108, (the book is online at Institute of Economic Affairs)

Via Catallaxy

Related;
Reviews of some of Lal’s books- at Stumbling and Mumbling, and at Social Affairs Unit

Culture, Democracy, and Development

Multimedia
A Classical Liberal Defends Globalization- interview with Lal

Two Views on Global Development: Revive the Invisible Hand or Strengthen a "Society of States"?- Featuring Deepak Lal, University of California at Los Angeles, Author, Reviving the Invisible Hand: The Case for Classical Liberalism in the Twenty-first Century (Princeton University Press, 2006), and Ethan Kapstein, Center for Global Development, Author, Economic Justice in an Unfair World: Toward a Level Playing Field (Princeton University Press, 2006).
The current era of globalization is only a partial return to a liberal economic order. Renowned development economist Deepak Lal will explain why minimal government intervention, free trade, free capital flows, and the abolition of international organizations such as the World Bank offer the best path for growth and healthy international relations. In his view, attempts to ameliorate the impact of the market threaten global economic progress and stability. Ethan Kapstein believes that countries will shape their own destinies only in an international system that emphasizes the central role of states and the diverse social contracts they represent. Can these two views be reconciled?

The Adolescent Brain and Social Policies

“A decade ago, the prevailing notion was that brain growth ended at about the age of 2 years. Since then, we have learned that brain growth continues well into adolescence (between ages 10 and 19) and into young adulthood (see the figure below). During this period the brain undergoes a series of changes, and parts of the brain associated with social skills, problem solving, and identifying emotions mature only by the early twenties. However, this process of brain development cannot entirely explain adolescent decision making and behavior. Nor does it override the effect of the environment—parents, schools, communities—in which young people live.

Brain development: arborization and pruning
The brain is made up of nerve cells—about 10 billion of them—connected by branches or dendrites. These branches move information from one cell to another, but these connections are not soldered together; rather, there are spaces between the branch of one cell and the body of another. These spaces are called synapses, and information moves from cell to cell across these spaces by releasing tiny packets of chemicals. When there are abnormalities in the chemicals in the synapses, a variety of clinical conditions result, such as depression and attention-deficit and hyperactivity disorders.

Different parts of the brain handle different activities—that much is well-known. What is new is the finding that during adolescence certain areas of the brain grow in size and other regions become more efficient. For example, the area of the brain responsible for language more than doubles in size between ages 8 and 14. Consequently, language acquisition is optimal at those ages. So, too, connections grow and strengthen between the brain stem and the spinal cord, increasing the connections between the emotions and what the body feels. Throughout childhood and adolescence, more and more nerve cells grow sheaths around them called white matter or myelin. This is like building a superhighway, allowing information to be interpreted and recalled much faster than was ever possible as a young child.

These structural changes are only some of the brain’s alterations during adolescence. Another major change is called “pruning.” Throughout early childhood, the number of connections between cells increase, and because the process is much like the growth of branches on a tree, it is called arborization. It allows a child’s brain to be very excitable—which is why children seem to be perpetual motion machines. In adolescence, many of those branches die—through pruning. The brain is less excitable but also more efficient in carrying information.

The pruning follows a consistent pattern throughout adolescence and young adulthood starting at the back of the brain and ending at the prefrontal cortex. The prefrontal cortex regulates impulses, risk taking, planning, decision making, empathy, and insight. Research also shows that the cerebellum, recently discovered to be important for mathematics, music, decision making, social skills, and understanding
humor, continues to grow through adolescence and well into emerging adulthood. The last structure of the brain to stop growing, it develops until the mid-twenties.

Implications for social policies
What does this new brain research mean for understanding adolescent decision making and behavior? Although much more research is needed before defi nitive policies can be recommended based on the new brain research, it suggests some interesting policy considerations:

• The loss of neuronal excitation in adolescence is associated with a rise in depression, especially among adolescent females, suggesting a biological basis for the epidemiological finding that gender differences in depression start around the time of puberty. These biological changes combine with external sources of stress to increase the risk of suicide for youth in many countries of the world.
• As the brain matures during adolescence, alternations in the synaptic chemicals may influence learning (drugs for attention-deficit disorders improve information transfer at the level of the neuronal synapse). For example, antidepressive drugs may allow for certain excitatory neurotransmitters to stay in the space between two brain cells longer than otherwise.
• Learning and teaching strategies should be timed to increase neurodevelopmental capacities. Because neurodevelopmental maturation occurs at different chronological ages for different people, their inability to grasp a concept at one age does not mean that they are unable to learn the material. This speaks to the risk of educational “tracking” based on comprehension or performance examinations at a young age.
• Without a fully mature prefrontal cortex, adolescents may be more impulsive than adults and perhaps more susceptible to peer influences. This impulsiveness—especially in reactive decision making, as when faced with a situation or threatened to make an immediate decision—suggests the value of second chance programs.

It is, however, too early in the research to draw definitive conclusions about brain development and behavior. Also, physical development interacts with the social environments to determine behaviors and outcomes. So parental behaviors and expectations, effective schools, communities that are youth oriented and supportive, all make a difference in determining young people’s behavior and how well they learn complex decision-making skills.”

Source- World Development Report 2007, Box 2.9 ‘Brain development among youth: Neuroscience meets social science’, p.61 (emphasis mine)

Related;
Eye gaze and cognition in children
Glazed looks sharpen the mind
Universities: A social duty
Into the Mystery of the Adolescent Mind
A Study of Interactions: Emerging Issues in the Science of Adolescence Workshop Summary
The 7 Habits of Highly Effective Teens

World Development Report 2007 links;
Graphs from the report
Video and Audio

Wolfowitz’s Second War

NYT reviews Wolfowtiz’s focus on corruption at the World Bank;

“In his first 15 months as president of the World Bank, Paul D. Wolfowitz has made the fight against corruption in poor countries a hallmark issue, waging an aggressive campaign that has led to the suspension of hundreds of millions of dollars in loans and contracts to nations including India, Chad, Kenya, Congo, Ethiopia and Bangladesh.

It is a new incarnation for Mr. Wolfowitz, a neoconservative intellectual who was a primary architect of the Iraq war during four years as deputy secretary of defense…..

“Anticorruption efforts are an essential part of development finance,” said Roberto Dañino, a senior vice president of the bank until early this year. “But getting rid of corruption is not a silver bullet. The bank should not overemphasize its anticorruption agenda at the expense of other policies required for development.”….

He has begun firing back at the critics at internal meetings and in public statements. He notes, for example, that the bank’s lending under his leadership actually rose slightly last year, to nearly $23 billion.

Mr. Wolfowitz says he has tried to rebut what he calls the myth that combating fraud is “somehow at odds with development or becomes an excuse not to provide assistance.” While no one knows how much of the bank’s resources have been improperly diverted, informal estimates range from 10 percent to the 25 percent that Mr. Wolfowitz says went to corrupt cronies and family members of Indonesia’s leadership in the 1990’s…..

The doubts center on Mr. Wolfowitz’s role as a leading advocate of the American invasion of Iraq, with many critics contending that his zeal on corruption reminds them of what they say was his messianic but unrealistic faith that installing democracy by force in Iraq, and by other means through the Middle East, would bring stability to the region.

The criticism has been especially sharp among Europeans at the bank, where many officials say that judgments about what constitutes “good governance” could rupture the bank’s delicate relationships with aid recipients, especially if the judgments are based on information gathered from dissidents and other critics in those countries…

Several longtime bank officials say they cannot remember when board members wrangled over the wording of a policy paper with a bank president. At recent meetings, directors demanded that Mr. Wolfowitz agree to a greater role for the board in any future decisions on cutting off aid.

In addition, members forced the deletion of language suggesting that the United Nations’ goal of reducing world poverty 50 percent by 2015 would have to take second place to the bank’s drive against corruption…

“I think some of the board members,” Mr. Wolfowitz said, “are legitimately afraid that as soon as you start criticizing, the next thing you’re going to do is wag your finger and say, ‘You’re not going to get money unless you behave.’ That’s not our objective. Our objective is to make the lending go up.”…

Mr. Wolfowitz’s management style also grates on some bank officials, with a number of them complaining that he has relied on a small coterie of loyal aides. “He presumes,” said Mr. Dañino, the former bank senior vice president and once prime minister of Peru, “that anyone who opposes him is either incompetent or corrupt.”

In his first 15 months as president of the World Bank, Paul D. Wolfowitz has made the fight against corruption in poor countries a hallmark issue, waging an aggressive campaign that has led to the suspension of hundreds of millions of dollars in loans and contracts to nations including India, Chad, Kenya, Congo, Ethiopia and Bangladesh.….”

Via Foreign Policy Blog

Wolfowitz’s focus on corruption should be lauded, it is one of the biggest impediments to the poverty reduction agenda. However pompous releases of reports, (see the latest release of governance indicators ) doesn’t help the poor person on the street. IFIs need to take a broader view of corruption.

Related;
Strengthening Bank Group Work in Governance and Anticorruption
World Bank Releases Largest Available Governance Data Source
Uses and Abuses of Governance Indicators
Rescuing the World Bank
Tackling Corruption is Essential in Making Poverty History
UK withholds World Bank donation

Discussing Doing Business

World Bank is running an online discussion of its recent report Doing Business 2007, via PSD Blog. The discussion questions are interesting particularly the second one. I’ve tried to link to various local news coverage of the report – among the media there seems to be some fundamental misunderstanding of the purpose of the report it seems. World Bank should be doing more for media to understand its publications.

-Of the 10 topics in the Doing Business report, where do you think reforms can most significantly improve the investment climate? -A country's ranking in the Doing Business report has become a well-known indicator. Are countries beginning to "game" the ranking by reforming only those areas of business regulation covered by the report’s methodology? -What are good reform strategies for administrations which have left the "reform window" of the first 15 months? -Have you read earlier Doing Business reports and how would you evaluate this one in comparison to the others? -The next report may address topics like the quality of business infrastructure and the cost of corruption. With this addition to the indicators, what research questions would you like to see in future Doing Business reports?

Some news coverage of the report;

Doing business is still very tough
"How free is India's economy after 15 years of liberalisation? Not very, say two reports released last week. Economic Freedom of the World 2006, published by the Fraser Institute and Cato Institute in North America, ranks India 53rd out of 130 countries in its Freedom of the World Index.

Not too bad. But Doing Business 2007, a World Bank report on how difficult it is to conduct business, ranks India 134th out of 175 countries, deep in the bottom half. The indicators used in the two reports are different."

Chasing the dragon
There is no point belabouring comparisons with China that attracts nine times more foreign direct investment (FDI) than India gets every year.

Time for step two
"Investment Minister Mahmoud Mohieddin was not a happy man. Speaking at the opening of this year's 11th annual Euromoney conference in Cairo, the minister directed his anger at the International Finance Corporation's (IFC) 2006 Doing Business report, which ranked Egypt at 165th worldwide in terms of countries that had improved business regulations and cut red tape. Mohieddin said the experts who put together the report did not appear to "have a full understanding of our economy". The 16 firms that the IFC -- the World Bank's private sector arm -- chose to examine for its report, he said, were not a very representative sample."

Business Scene-GEORGIAN AMBASSADOR Lasha Zhvania is happily circulating a World Bank and International Finance Corporation report that lists Georgia as the top reformer in the Commonwealth of Independent States (CIS). According to the report, Georgia also led the global top 10 reformer rankings on the ease of doing business in 2005-2006.

World Bank says: work 24/7 with no rights;"A new World Bank report calls for the wholesale elimination of workers' rights. The 2007 edition of the ‘Doing Business’ report has declared the Marshall Islands to be the world’s “Best Performer” for its almost total absence of labour regulation, displacing last year’s champion, Palau. According to the International Confederation of Free Trade Unions (ICFTU), both Marshall Islands and Palau have in common that they are tiny Pacific island nations that have no labour code and are not members of the International Labour Organisation. The World Bank’s online Doing Business database explains that it has given top ranking for labour market regulations to these countries because, among other exemplary features, both allow workers to be forced to work up to 24 hours per day and up to seven days per week and require no vacations or advance notice for dismissal."

India, top reformer in South Asia, says World Bank report

China is ranked top ten in reforming business practices

GHANA AMONG TOP TEN BUSINESS REFORMERS

World Bank praises Romanian reforms

SA scores for doing business

99th in business report

Cameroon: Harsh Taxes Impede Business - World Bank

Consultant reiterates obstacles persist for doing business in Dominican Republic

World Bank rectifies report on Dominican business standing

Bettering business environment with ‘iron hands’

Tanzania and Rwanda Lead in Regional Economic Reforms

Hungary slips 6 places on World Bank's “Doing Business" ranking

World Bank's 2007 Doing Business Report ranks Saudi Arabia #1 in the MENA region

Africa is performing better than Latin America

World Bank: CR no. 52
"The CR dropped two spots year on year. Of the 10 indicators of the overall business environment tracked in the study, the Czech Republic had improved only in two categories: starting a business (74), the time period for which shortened to nine months, and the dealing with licenses (110) category, which relates to already-existing business operations. The country fared best in the getting credit category (21) and worst in closing a business (113), that is bankruptcy procedures — which can still take up to nine years, compared to the average 3.5 years in European and Central Asian regions. Creditors receive 18 hellers for each Kč 1 of debt, again less than half the regional average."

Morocco is top reformer in the Middle East and North Africa

World Bank hails Kenya’s success in tax reforms
"THE World Bank (WB) and the International Finance Corporation (IFC) have praised the Kenyan government for introducing the electronic data interface system in the Customs department. Consequently, Kenya is ranked among Africa’s top nations striving to create an enabling atmosphere to do business"

World Bank reports rank Tanzania among top reformers

Nigeria: World Bank Ranks Nigeria's Economic Climate Low
"We know Nigeria is making efforts to ease the process of doing business" but advised that "there is still room for improvement". She said reforms need to address the whole process, including business registration. She noted there still exists, some complex regulations as against other countries."
The World Bank said early this week that the impact of reforms instituted by the current administration led by President Olusegun Obasa-njo was rather slow.

Dominican Customs is Latin America's 2nd best;Argentina is better than Brazil and Mexico when it comes to customs procedures. And Haiti is generally among the worst in the region.

Cameroon: Harsh Taxes Impede Business - World Bank

Why reform has become a dirty word;“Reform” has been hijacked, even by the World Bank, which should know better, to mean reducing the “burden” on corporations. Te Bank’s index, which has become quite influential and is widely used by governments around the world to set their policies, specifically excludes things like infrastructure, institutions and security, i.e. these pesky things usually provided by good governments and paid by taxes and “forgotten” by businesses when they complain about governmental interference (but not when they choose where to invest, as attests France’s almost permanent presence in the top five favorite destinations for FDI alongside China and the USA). That such issues can be mindlessly excluded from public discourse on this topic via a 3 line disclaimer in their report is profoundly dishonest.
If the logic was to facilitate wealth creation by companies with a later focus on redistribution of that wealth, that might make a little bit of sense, but the goal seems only to be wealth capture by corporations per se, whether out of actual creation of wealth or, increasingly, from the shifting of costs from their P&L to the public purse. Where that wealth goes is obviously no longer a worry of the World Bank, something I find frankly disquieting. Even more, as taxes are seen as a negative thing, any redistributive policy is explicitly considered an obstacle to “reform”. Thus we end up in situations where economies appear to be growing strongly and yet median income (as opposed to average income) is stagnant or even declining, a sure sign of growing inequality rather than growing prosperity."

Malawi drops 14 steps on business ease index

Reforms in Charter to make RP business-friendly, says AdCom
The Philippines' dismal ranking in the latest World Bank (WB) economy rankings of countries worldwide should serve as a wake-up call that the local business environment is not too encouraging to foreign investors.

Pace of business reforms slows-"UGANDA has lagged behind Kenya on the pace of reforms to ease doing business, but a report notes that her effort to ease registration requirements made it easy for companies to operate in the formal sector. Uganda was ranked 107 compared to Kenya’s 83rd position, while Tanzania trailed at 142, a study on tracking reforms done by the World Bank and the International Finance Corporation (IFC) shows. However, Uganda was cited as one of the countries that undertook reforms that eased the burden of doing business in the country"

World Bank study laments red tape in the Philippines

African Countries Emerge as Regulation Reformers, Report Says; World Bank views a push by donor countries as a contributing factor
"China, Number 93 a year ago, moved up 15 places. Like Georgia, Mexico, Tanzania and Ghana, China is among the World Bank’s “top 10 reformers.” Its government has sped up the business-starting process, increased investor protections, reduced red tape in trade, and established a credit-information registry for consumer loans that provides credit histories of 340 million citizens, according to the report.
A separate report on foreign direct investment, released by Columbia University and The Economist publishing group, predicts that until 2010 China will be the top emerging market for business investment inflows, but Africa will not receive much investment any time soon.
Karl Sauvant, director of the Columbia Program on International Investment, which released the investment report, said China will attract $87 billion from U.S. businesses alone in 2006, while sub-Saharan Africa, with 10 percent of the world’s population, gets less than 1 percent of total foreign direct investment flows."

Fiji ranks 31 in World Bank report
"FIJI has dropped back two rankings to 31 on the 2007 World Bank's Doing Business report after being ranked 29 this year.
The drop in ranking comes amid concerns from the bank about some aspects of doing business in Fiji even though it has improved a lot from its previous ranking in previous years."

Bangladesh 3rd best business place in S Asia
"Bangladesh is the third easiest country in which to do business in South Asia, although as a whole is lagging behind other parts of the world when it comes to reforms that could enhance business activity, says a World Bank-IFC (International Finance Corporation) report. The top ranked countries in the region are the Maldives (53) and Pakistan (74), followed by Bangladesh (88), Sri Lanka (89) and Nepal (100). India comes in at 134, Bhutan at 138 and Afghanistan at 162."

Mozambique says to cut red tape in 2007
Mozambique will shake up its ineffective judiciary in a series of radical measures aimed at cutting red-tape and increasing business confidence in its resurgent economy

World Bank: Indonesia Losing Appeal As Invest Destination

Less Foreign Direct Investment forecasted for 2007;In a global context of weaker foreign direct investment, FDI, in emerging markets because of “structural weaknesses”, Latinamerica is also set to suffer, according to a report from the University of Columbia in New York and The Economist group. ..
However another report but from the International Finance Corporation, IFC, the private sector arm of the World Bank shows that doing business became easier worldwide in 2005/06. Two hundred and thirteen regulatory reforms—in 112 economies— reduced the time, cost, and hassle for businesses to comply with legal and administrative requirements.

Meeting with private sector to clarify delivery system..He said Malaysia’s 25th ranking in the recent World Bank’s report on Doing Business 2007 needed to be improved.

Taiwan climbs a spot to become 24th-freest economy; Taiwan is the world's 24th freest economy among 130 nations, one spot up from last year, according to a report released on Thursday by the Fraser Institute, an independent public policy organization in Canada
According to a recent report released by the World Bank and the International Finance Corp, Taiwan ranked No. 47 in ease of doing business, down from 43rd last year.

In what do we trust?The language of business is peppered with the word trust. Trust deed, deed of trust, unit trust, trust account, investment trust, trust fund are just a few of the plethora of trust terms in the commercial world.
That's no coincidence. Without trust, much business activity could not be carried out. There has to be an underlying belief that the other party to a transaction will fulfill his/her obligations. Two reports that came out recently give a seemingly contradictory view of the state of trust in contemporary China.

WB Increases Azerbaijan’s Rating on Favorable Business Environment

Israel 26th business-friendly country

Malaysia Is More Business Friendly Than That Rated By World Bank, Says MB

Caribbean Way Behind as Business Destination

Slovakia offers best business conditions of V4 states

Britain overtaken by Hong Kong in table of best places to do business

Zambian investment environment worsening

ARMENIA LEADER IN CIS AS A COUNTRY WITH TROUBLE-FREE CONDITIONS FOR RUNNING A BUSINESS

Sri Lanka lags reforming nations in South Asia

''The Easiest Place To Do Business In South Asia''-“The Maldives remains ‘the easiest place to do business’ in South Asia, but it is only the best of a bad bunch, according to an influential World Bank report….
The report found that the South Asia region ranks behind all others on the pace of reforms, with only a quarter of countries, making at least one reform that improved the Doing Business indicators.

However, the World Bank’s methodology is fiercely skewed towards liberalization and privatization regardless of context. It does not track variables such as market size, macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates.

The Maldives was therefore criticized in this year’s report for introducing some measure of labour protection. The World Bank condemned the new mandatory two-month notice period before workers can be dismissed, saying it was ‘a move that may especially discourage small business and the hiring of poor, low-skilled, and young workers’.

The Maldives’ high regional ranking reflects its exceptionally laissez-faire attitude to tax and employment protection. It ranked first out of all 175 countries on ‘paying taxes’ – businesses pay back an average of just 9.3% of profit to the state, in comparison to a regional average of 45.1% and a developed world average of 47.8%...”

Australia eighth in easy business survey
Australia has moved up one spot into eighth place in the World Bank's latest ranking of the easiest markets to do business, overtaking Norway.

NZ knocked from top business spot
"New Zealand has been knocked off its perch, at the top of world rankings for ease of doing business….Australia's significant reforms of the last year have helped it improve to 8th place"

How Nations Prosper: Economic Freedom and Doing Business in 2007- an event coming up at Cato later in the month.

Earliers posts- The Road Less Traveled of Business Regulatory Reform, Excessive Anti-Corruption Drive Hurting the Economy?

The Commonwealth on World Bank

The annual meeting of finance ministers of the Commonwealth countries were recently held in Colombo. Their views on the World Bank and IMF from the final communiqué;

- recognised the need to increase the voice and representation of developing and poor countries in the IMF and World Bank, and urged a time-bound conclusion to a process of fundamental reform in a way that would increase the institutions’ credibility and legitimacy;

- welcomed and encouraged rapid further progress in the joint efforts of the Bank and Fund to identify opportunities for significant scaling up in assistance and reforms to help countries meet the MDGs;

- recognised the importance of good governance for development and encouraged the Bank and Fund to support moves to strengthen the various dimensions of governance as an aspect of their support for countries’ development. Emphasised that the current focus on governance should not obscure the Bank’s core focus on poverty elimination. In this context, Ministers stressed the pre-eminent role of states in promoting good governance; the need for the development community to help build countries’ own capacity and to find ways to engage with poor countries even where governance is weak; and the mutual responsibilities of industrial countries to ensure responsible behaviour in this context by their citizens and companies;

- welcomed the Bank’s current emphasis on infrastructure development.

- looked forward to the conclusions of the current external review of Bank-Fund collaboration and called for continued efforts to strengthen this collaboration and to increase the combined efficiency and effectiveness of the two institutions in their support for low and middle income countries;

- stressed the importance of sustaining the Fund’s financial resources so as not to compromise its role, including its role in low-income countries;

- welcomed the creation of the Fund’s new Exogenous Shocks Facility and encouraged flexibility in its scope and use to facilitate timely disbursement of concessional finance;

- welcomed the World Bank’s proposals to become more responsive to the needs of its middle-income country clients, including MDG related needs; to provide more customised and flexible financial and advisory services such as through blending; and to accelerate moves to use country systems and to find other ways to reduce the costs to member countries of doing business with the Bank; and welcomed the Bank’s work on the Clean Energy Investment Framework and urged its rapid implementation, working with other IFIs.

-Urged the parties involved, including the African Development Bank and World Bank, to accelerate progress in implementing the recently established African Consortium for infrastructure development.

Related;
India asks Commonwealth finance ministers to make united push for reform at IMF
Deputy Secretary-General Urges World Bank to Create Youth Investment Fund
Commonwealth Finance Ministers seek new answers to old questions

Some of the papers from the agenda;
Current World Economic Situation and Prospects
Review of IMF and World Bank Issues
An Agenda for Growth and Livelihoods: Public-Private Partnerships for Infrastructure
Toward and Outward Oriented Development Strategy for Small States: Issues Opportunities and Resilience Building
Promoting Investment into Economies with "Endowed" Handicaps: Progress Report
Reform of the International Aid Architecture: A Role for the Commonwealth?

Recent Publications from IMF

Some recent publications from the IMF which are well worth a read;

Global Financial Stability Report- Market Developments and Issues

World Economic Outlook-Financial Systems and Economic Cycles
(analytical chapters)

Doha Development Agenda and Aid for Trade; “This paper summarizes recent developments in the Doha Round negotiations, and aid for trade. As requested by the Development Committee last September, it reviews existing mechanisms for cross-country and regional aid for trade needs. It proposes possible options to overcome the coordination and capacity problems affecting regional cooperation.”

Corruption and Technology-Induced Private Sector Development; “This paper asks whether corruption might be the outcome of a lack of outside options for public officials or civil servants. We propose an occupational choice model embedded in an agency framework to address the issue. We show that technology-induced private sector expansion leads to a decline in publicly supplied corruption as it provides outside options to public officials who might otherwise engage in corruption. We provide empirical evidence that strongly shows that technology-induced private sector development is associated with a decline in aggregate corruption. This suggests that the decline in publicly supplied corruption outweighs the potential increase in privately supplied corruption that could result from private sector expansion.”

Insuring Public Finances Against Natural Disasters--A Survey of Options and Recent Initiatives; “Natural disasters can put severe strain on public finances, in particular in developing and small countries. But catastrophe insurance markets increasingly offer opportunities for the transfer of such risks. Thus far, developing countries have only tepidly begun to tap these opportunities. More frequent and intensive use of insurance markets may be desirable because it could help introduce an important element of predictability in the post-disaster public finances of disaster-prone developing countries. Against this background, the paper surveys the various available insurance modalities and reviews recent initiatives in developing and emerging market countries. It also identifies some key challenges for the insurance community, donors, and international financial institutions (IFIs).”

Prospects for the World Economy-address By Rodrigo de Rato
Economic Policies and Global Prosperity: Challenges for Asia and the IMF- address by John Lipsky

Latest IMF survey

For comment; Why can’t the international financial institutions release a joint economic outlook? IMF deserves credit for putting online most of its publication unlike the OECD, World Bank, or the ADB.

Related;
Chief Economist Jean-Philippe Cotis, OECD on their recent assessment of economic outlook (podcast)
Asian Development Outlook 2006 Update
Labor Markets in Asia: Issues and Perspectives, recent publication of ADB-not available on the web.

Globalization’s Assassin

A discussion with senior World Bank economist, Branko Milanovic, who says there are growing fears in both rich and poor countries about the impact of globalisation. He shifts the focus from economics to migration - from the movement of goods and services to the movement of people. The real hot-spot, he says, is Europe, where the fear of job losses to low-pay countries, coupled with ethnic and cultural dilution from immigration, will rock Europe's welfare state economy to its foundations. Listen to the podcast from Late Night Live, Radio National.

related;
Branko Milanovic's posts
Why Globalization Is in Trouble, Part 1 and Part 2
Worlds Apart: Book Discussion
THE THREE CONCEPTS OF INEQUALITY DEFINED
Branko Milanovic columns at Project Syndicate
What Can Foreign Aid Do For the World’s Poor?
Martin Wolf’s Forum on Globalisation
Income Distribution and Trade Policy
General and Conceptual Discussions of Poverty, Inequality & Globalization
Explaining the Gains from Globalization
Inequality around the world

Singapore keep up to its reputation

IMF/ World Bank released a statement rebuking Singapore government of refusing entry of certain NGOs for the annual meetings of the multilateral banks;

“In the interest of good governance, transparency and accountability, we urge the Government of Singapore to allow all properly accredited civil society representatives to attend our meetings. We have consistently opposed any restrictions on full participation and peaceful expression of views. Open dialogue with civil society is also important for the effective operation of our institutions.

The Singapore Government has informed us of their objection to the accreditation of a number of these civil society representatives, and has stated their intention to block those individuals' access to the Annual Meetings. These individuals have been cleared to attend the Annual Meetings by their respective governments and we have accredited them according to our standard procedure.”

Financial Times notes;

“Some NGOs alleged that the IMF/World Bank, which holds its annual meetings outside Washington every three years, had selected Singapore as the venue for this year's meeting because of its authoritarian reputation. Previous IMF/World Bank meetings have been marred by violent protests.

Among those banned by Singapore were representatives from the UK-based World Development Movement, Thailand's Focus on the Global South, the Freedom from Debt Coalition in the Philippines and the Forum on Indonesian Development (Infid)”

Related;
Singapore to ban outdoor protests at IMF meeting

Podcast of the Day- Diplomats and Parking fine corruption

The Case of the Unpaid Parking Ticket- podcast of the Tim Harford article in Slate.

Or listen to a Tim’s interview discussing the issue online;

“There's a depressing conclusion and there's an optimistic conclusion. The depressing conclusion is there's nothing you can do about corruption because, well, you know, these guys from Chad and Bangladesh, they're just corrupt. That's what a lot of people, I think, have read this paper and thought that. But I take a different view. Because there's a kicker right at the end of the paper, which is what happened when the law changed. There was the Clinton-Schumer Amendment in 2002. It meant that, OK, you couldn't fine people for committing parking violations. But you could, and you would, tow their cars. And you would actually deduct the parking fines from each country's allocation of foreign aid. So they really started to take a stand on this.

And guess what? Personal morality matters, but enforcing the law matters, too. Because when the amendment was passed, all of these parking violations, by all of these ambassadors, immediately fell by 90 percent. So there is hope for improving the world and stamping out corruption after all.”

There was an interesting letter in this week’s The Economist;

“SIR – In international events bronze medallists usually get little attention (“A ticket for corruption”, August 12th). However, when describing a new corruption ranking based on parking violations by UN diplomats you singled out Chad, the third-highest offender, and ignored Kuwait, the gold winner, which had twice as many infractions. I take solace in finding that my country's diplomats committed zero violations. Manuel Navas, Bogotá, Colombia”

Related;

Diplomats and parking fines;

“A study* by Raymond Fisman and Edward Miguel, economists at Columbia University and the University of California, Berkeley, gives a rare picture of how people from different cultures perform under new cultural norms. For instance, between 1997 and 2002 diplomats from Chad averaged 124 unpaid parking violations; diplomats from Canada and the United Kingdom had none. The results from 146 countries were strikingly similar to the Transparency International corruption index, which rates countries by their level of perceived sleaze. In the case of parking violations, diplomats from countries with low levels of corruption behaved well, even when they could get away with breaking the rules. The culture of their home country was imported to New York, and they acted accordingly.

The same applied to high-corruption countries. Their diplomats became increasingly comfortable with parking where they liked; as they spent more time in New York, their number of violations increased by 8-18%. Overall, diplomats accumulated 150,000 unpaid parking tickets during the five years under review.

Yet any moral superiority New Yorkers may feel should be tempered by the behaviour of the American embassy in London. Last year, embassy staff stopped paying the congestion charge—now £8, or over $15—for bringing cars into central London. The growing pile of unpaid charges now stands at $716,000.”

Blogs discussing the above paper; PSD blog, Marginal Revolution, Healthcare Economist

How Did Suharto Steal $35 Billion?

Why Is Chicago So Corrupt?

UN Diplomats Owe $18 Million in Parking Tickets

In The Economist this Week: Katrina, FEMA, and Corruption

The Oil-for-Food Scandal

Adventures in Cheating-A guide to buying term papers online

Some recent columns of Tim Harford;
Explaining the huge rise in teen oral sex
'Product sabotage' helps consumers
Overpaid, underworked and in charge

Free Reads from The Economist

Free reads from latest edition of The Economist;

Climate change- The heat is on; The uncertainty surrounding climate change argues for action, not inaction. America should lead the way. Editorial on a survey of the topic.

A discussion with Emma Duncan, Deputy Editor of The Economist; “We need to think about climate change maybe as individuals think about insuring their houses: you spend maybe 1% of your annual income insuring your house not because you think it's going to burn down, but because if by any chance it did burn down, the consequences for you would be disastrous.” Listen to the podcast

Doing business; Singapore took first prize as the easiest place to do business in the World Bank's “Doing Business 2007” report. The Democratic Republic of Congo is the hardest place. Reform was the theme and Georgia the quickest reformer, leaping to 37th place in the rankings from 112th last year. China became one of the top-ten reformers by improving investor protection, cutting red tape and establishing credit history for loans

Sex and scientists' salaries

India's rupee- A disappointment for those hoping capital controls might ease soon; “THE chapter on the Fall of the Rupee you may omit,” counselled Oscar Wilde's prudish governess in “The Importance of Being Earnest”. “It is somewhat too sensational.” A new work on the rupee, in contrast, has set few pulses racing. A report by a committee set up in March by the Reserve Bank, India's central bank, to “revisit” the question of full convertibility of the currency recommends only slow change—too slow, for two of the committee's members, who have dissented from some of its cautious conclusions.

Business in Africa-Once again, Africa is listed as the most difficult place in the world to do business. So why are some businessmen happy to be there?; Foreign investors are governed by trust. India and China also rank relatively poorly in the World Bank survey, but are nonetheless investment magnets. Mr Klein argues this is because investors are confident that these countries are going in the right direction and they want to tap into their large markets early. Africa will have to prove itself through years of good performance and sustained reform before it can gain such confidence. But if it does, those who are already betting on the continent will be miles ahead.

Globalisation- Joe has another go; But if the writing is crisp, the arguments are a little soggy. Mr Stiglitz assumes the worst of markets, the best of governments—except, of course, his own. Too often, he wants to have it both ways: his distaste for the IMF has made him suspicious of all technocratic bodies, even to the point where he questions the case for independent central banks. But at the same time he wants to set up international tribunals to rule on unfair tax competition, for example, or health standards. He says that debt relief for the poorest countries is “simply a matter of accounting”, because they could not repay anyway. But he also wants to argue that the burden of red ink has crippled them.

Dismal science, dismal sentence-The efficient markets hypothesis can land you in jail

The Swedish model

Can America's farmers be weaned from their government money?

Mexico's presidential election
Japan- The imperial imperative
Qatar-A bouncy bantam
The French presidency

Charlemagne-Europe's tentative reformers; In Germany it has long been customary for the government, in the interests of consensus politics and social stability, to give “the social partners”—the catch-all name for employers' associations, trade unions and other interest groups—special privileges when writing new laws. On occasion, governments have even asked specific groups to draft legislation. But in drawing up health-care and tax reforms, Angela Merkel's grand coalition has tried to shut health insurers and other lobby groups out of the decision-making process, refused to listen to mere objections and demanded that, if a lobby group has a criticism, it must come up with an alternative way of meeting the government's aim (one reason why the lobbies have turned on the government with offended fury). At the same time, two members of parliament who are also heads of employers' federations (and thus personify Germany's close ties between lobbies and government) have had to choose between their business jobs and their parliamentary seats. Oh, the indignity.

Bagehot-The sands run out ; Labour MPs may come to regret their attempt to force Tony Blair from office

Steve Irwin, crocodile hunter, died on September 4th, aged 44

Economic forecasts-The panel now expects America's GDP growth to slow to 2.5% in 2007, compared with August's prediction of 2.7%. The soothsayers think that the euro area will grow by 2.3% this year (up from 2.2% in August), then slow to 1.8% next year. Germany's growth in 2006 has been revised up from 1.7% to 2.0%. But Japan is now tipped to grow by 2.8%, down from August's prediction of 3.0%. The biggest upward revision is in Sweden's growth this year: it is now forecast to be 4.1%, the fastest of all the economies in the table

Government-bond yields

Cancer genetics-Variations on a theme; There are a lot more cancer genes around than were previously known
An explanation of how the Atkins diet works
A promising new artificial heart wins regulatory approval
Pluto fights back

Europe's financial sector is ill prepared for a coming upheaval
A row breaks out over the future of Japan's consumer finance
Banks in developing countries
The global housing market

Lexington- Paleocon Pat

Business Section; Mobile phones on planes / Pharmaceuticals / Drug patents / Viacom / Corporate corruption in Germany / Japan's basic industries / Mobile telecoms

Alan Mulally jumps from Boeing to rescue America's troubled carmaker

Good Inaugurals

The John Curtin Institute of Public Policy has just established the journal Public Policy.

Via Andrew Leigh

Good Magazine- your subscription money goes to a charity of your choosing. See Jeffrey Sachs article and their blog.

Via Pienso

The Road Less Traveled of Business Regulatory Reform

According to the World Bank's Doing Business 2007, the four steps to successful business regulatory reform;

• Start simple and consider administrative reforms that don’t need legislative changes.
• Cut unnecessary procedures, reducing the number of bureaucrats entrepreneurs interact with.
• Introduce standard application forms and publish as much regulatory information as possible.
• And remember: many of the frustrations for businesses come from how regulations are administered. The internet alleviates these frustrations without changing the spirit of the regulation

More on the report from the preface;

“Regulations affecting 10 areas of everyday business are measured: starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. The indicators are used to analyze economic outcomes and identify what reforms have worked, where and why.

The methodology has limitations. Other areas important to business—such as a country’s proximity to large markets, quality of infrastructure services (other than services related to trading across borders), the security of property from theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of institutions—are not studied directly by Doing Business. To make the data comparable across countries, the indicators refer to a specific type of business—generally a limited liability company operating in the largest business city.

The methodology for 4 of the Doing Business topics changed in this edition. For paying taxes, the total tax rate now includes all labor contributions paid by the employer and excludes consumption taxes. For enforcing contracts, the case study was revised to reflect a typical contractual dispute over the quality of goods rather than a simple debt default. For trading across borders, Doing Business now reports the cost associated with exporting and importing cargo in addition to the time and number of documents required. And for employing workers, nonwage labor costs are no longer included in the calculation of the ease of employing workers. For these reasons— as well as the addition of 20 new economies—last year’s rankings on the ease of doing business are recalculated using the new methodology and reported in the Overview.”

Singapore is the number one in the rankings- coincidently the World Bank-IMF annual meetings are also being held in Singapore this month. It is interesting that Singapore (not a democratic country according to Acemoglu) beat more deomcratic countries like Australia in the rankings.

As for a lot of the other poor countries, there is a sense in these countries that a lot of the wealth has been generated through either corruption or unfair competition. May be one need to take a hard look at some of the local partners of the Doing Business survey for their independence.

Quick Links;
The Doing Business Law Library
Create their own custom dataset of main indices
Local Partners
Economy Rankings
Explore Economies
Economy Characteristics

Related;
Blog coverage of the report- PSD Blog, New Economist, Greg Mankiw, Econlog, Pienso.

Doing Business and Poverty Reduction

Does Doing Business suck?

Business Regulation measure

Measuring Labor Market Flexibility

MI Indexes

Doing Business in 2006: Creating Jobs-online discussion

How Should States Encourage Entrepreneurship?
"At the heart of this public policy issue are two competing views of how to facilitate entrepreneurship. For some policymakers encouraging entrepreneurship involves improving the entrepreneurial climate through the lowering of tax and regulatory burdens. This view is consistent with a large body of academic literature showing that a good way to encourage entrepreneurship is to provide individuals with the freedom to pursue their dreams. Other policymakers focus on the financial constraints facing would-be entrepreneurs and how public policy can mitigate the financial hurdles to entrepreneurship. State financing of venture capital firms is consistent with this view."

Multimedia
Podcast of news from the World Bank on the Doing Business 2007
The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else; I would also highly recommed de Soto's book, 'The Other Path'
How to Reform the Business Environment ; highly recommended especially comments by Egyptian minister.
Doing Business in 2006: Creating Jobs- Book Event at Cato
Doing Business in India Today: McDonalds Experience Entering the Indian Market

Related Bank Publications
Doing business in 2006 - creating jobs
Doing Business in 2005
Doing business in 2004 : understanding regulation
Doing business in South Asia in 2005
Doing business in 2005: comparing the Cambodian business environment with the world
Doing business in 2005 : India regional profile
Ukraine - Cost of doing business survey, 2002
Latvia : self-assessment report on administrative barriers to doing business
Perceived obstacles to doing business: worldwide survey results
Doing better business through effective public consultation and disclosure : a good practice manual
Doing business in Brazil
Doing business in Mexico
Despite many reforms, doing business is still not easy in Vietnam
Institutional obstacles to doing business : region-by-region results from a worldwide survey of the private sector

*updated 8th September, 2006

Equality of opportunity among states

Robert H. Wad reviews Economic Justice in an Unfair World: Toward a Level Playing Field by Ethan B. Kapstein;

“Focusing on poverty is inadequate, Kapstein argues, because it does not put relations between states front and center. "It is governments," he writes, "that sign treaties and agreements, impose sanctions and boycotts, and make war and peace, and it is governments that -- for good or for bad -- are ultimately accountable for their actions at home and abroad." In other words, a theory of global distributive justice must emphasize relations between states and the kinds of economic arrangements states subscribe to. Individuals are not the only moral agents; states are also moral agents, with duties and responsibilities to one another as well as to their citizens.

Kapstein's goal is to present an alternative framework of global justice, one that centers on equality of opportunity among states. He refers to this framework as "liberal internationalism" and calls for an international economic system that is "inclusive, participatory, and welfare-enhancing for all." This order, Kapstein writes, "would give the smallest and poorest states greater voice in the system than they have at present," including in the governance of international organizations.

Building on the work of the political theorist Charles Beitz, Kapstein distinguishes two different social compacts: the domestic one between a state and its citizens, which expresses a society's basic principles of economic justice, and an international one among states, which determines the context in which countries pursue their domestic compacts. Some theorists of international relations hold that relative power, especially military power, shapes the international compact entirely. But Kapstein points out that powerful states do not always operate with a bit-better-than-the-law-of-the-jungle morality. In fact, they often forgo immediate relative gains in the interest of building a system of interactions that all participants view as reasonably fair. The resulting stability of expectations brings benefits for powerful states while increasing the common good. By way of evidence, Kapstein cites studies of the Tokyo and Uruguay Rounds of trade negotiations finding that the most powerful countries did not press their full advantages. Steered by the goal of promoting greater market access for all countries, they gave up more than they got.

The social arrangement that, in Kapstein's view, guarantees inclusiveness and participation and is "welfare-enhancing for all participants" is a global regime of free trade. In other words, free trade is the social arrangement that has the potential to best achieve justice in interstate relations and to fulfill each state's domestic social compact.

Kapstein believes that free trade can generate the highest attainable economic growth -- because it maximizes the scope of opportunity and equalizes opportunities for all potential participants -- and that high economic growth is good for the poor as well as the nonpoor. But he is also aware that despite the expansion of free trade, the growth rates of poor countries have not converged with those of rich countries, as free-trade advocates had predicted they would (the experiences of East Asia and, more recently, South Asia notwithstanding). Some of the continuing disparity -- owing to persistent low growth in a majority of poorer countries -- results from domestic politics and policies and from geography. But a good part, Kapstein argues, is due to the fact that rich countries have rigged the trade regime; far from being a level playing field, it is distinctly tilted against producers in poor countries…”

Via Peinso- a cool new development issues blog.

Watch or listen book event featuring Kasptein and Deepak Lal at Cato.

Related;

Excerpt from the Book, and Chapter 1 of the book

Daniel Dreszner’s short review of the book

Interesting papers by Ethan B. Kapstein;
The Economics of Young Democracies: Policies and Performance
Behavioral Foundations of Democracy and Development
The Political Economy of International Cooperation: A View From Fairness Economics
A Global Third Way Social Justice and the World Economy
Models of International Economic Justice

The Case for Open Industrial Policy- webcast of an event featuring Robert Wade

Morality and Capitalism

The Truth about Globalization and Inequality

Globalization is Working?

Podcast of the Day-Crisis of Abundance

Crisis of Abundance: Rethinking How We Pay for Health Care- Arnold Kling’s book presentation at Cato;

“If you follow the video or audio all the way through to the Q&A, you will hear a Congressional aide's rant against economic analysis of health care. I chose not to respond, and I think that was the right choice. The book explains why health care is an economic issue, and I would leave it at that. Frankly, I thought that the audience Q&A did not add much. Just as with comments on blog posts, the first one often sets the tone, so that it's important to get a good question first.”

Listen to the podcast. Here is a discussion of the book at Tech Central Station. Also a Cato interview Arnold Kling.

Related:
Podcasts; Cogan on Improving the Health Care System, The Economics of Medical Malpractice
Sylvia Allegretto, an economist at the Economic Policy Institute and author of "The State of Working America," talks with Bloomberg's Tom Keene from Washington about her analysis of the U.S. labor market. Listen to the podcast.

Dead Meat is a 25 minute short film which shows the reality of health care under Canada's socialized medical system
Economics of Obesity
In praise of US health care
Unhealthy America
Charlie Rose interview with New York City Commissioner for Health & Mental Hygiene, Thomas Frieden
Economics of Health Care posts at Econlog, Economist’s View, Café Hayek, Marginal Revolution
Healthcare Economist blog
Health Courts: Exploring the Concept
The Health Report- podcasts from Radio National.
Voluntary C-Sections Result in More Baby Deaths
Health Care Costs

Health Financing Revisited: A Practitioner's Guide
Health Insurance in Francophone Africa

GAO reports;
Hispanic Access to Health Care: Significant Gaps Exist
Preventive Health Care for Children: Experience From Selected Foreign Countries
Canadian Health Insurance: Lessons for the United States
Health Care Spending Control: The Experience of France, Germany, and Japan
Health Insurance: Bibliography of Studies on Health Benefits for the Uninsured

India - Five-year roadmap to fuller rupee convertibility

The Hindu reports;

“The Reserve Bank of India (RBI) Committee, headed by S. S. Tarapore, on Fuller Capital Account Convertibility has recommended that the scheme should be implemented in a five-year period in three phases and at the end of the five-year period ending in 2010-11, "there would be a comprehensive review to chalk out the future plan of action".

The committee, whose report was submitted to the RBI on July 31 and which was made public on Friday, recommended that the annual limit of remittance by individuals to open foreign currency accounts overseas be raised to $50,000 in phase one from the current level of $25,000 and further raised to $100,000 in phase two and $200,000 in phase three. Difficulties in operating this scheme should be reviewed, it observed. Since this facility straddles the current and capital accounts, the Committee recommended that "where current account transactions are restricted, that is, gifts, donations and travel, these should be raised to an overall ceiling of $25,000 without any sub-limit".

"All individual non-residents should be allowed to invest in the Indian stock market through SEBI registered entities including mutual funds and portfolio management Schemes who will be responsible for meeting Know-Your-Customer norms and the money should come through bank accounts in India". It recommended allowing non-resident corporates also to invest in Indian stock markets in the same manner the RBI allowed non-resident individuals...”

Related;
Fuller Capital Account Convertibility Report. See also the ‘Dissent’ piece by Surjit Bhalla in the report.
Ajay Shah's blog- has a roundup of the report
A Monetary Policymaker's Passage to India

India's RBI to Consult Government on Rupee Conversion
The rupee; fear of freedom
Are free capital movements a good idea?
India: Selected Issues- IMF February 2006
India Development Policy Review 2006
India: Country in Brief
Should India go for Capital Account Convertibility?
India-Research Publications from World Bank
How to solve the RBI problem
Subsidizing inefficiency
Doing Business India-Dealing with Licenses-The steps, time, and costs of complying with licensing and permit requirements for ongoing operations in India- It takes 20 steps and 270 days to complete the process, and costs 678.5% of income per capita.

Recent edition of Foreign Exchange TV show with focus on India- Arvind Panagariya interviewed in the show.
Time for India to reduce inequality
Economic and Political Weekly
Mukherji, Joydeep. "Economic Growth and India's Future."
New Economist posts on India

The Norwegian Model

Avoiding Dutch Disease and investing ethically- Norway shows the way;

“The central bank administers the country's pension fund, which is financed mainly by Norway's booming oil and natural gas industries. As the world's third-largest oil exporter, the fund has a king's ransom at its disposal. The last time the the books were balanced, the fund disposed of €196 billion ($250 billion) in assets. Analysts predict it will grow this year to become the second-largest pension fund in the world.

Roughly four percent of the fund's financial resources have gone into the state budget every year since 2001. The money is used to cover shortages and finance projects that benefit the well-being of country's citizens. Most of the remaining sums are invested for future generations -- for the time when Norway's oil and natural gas reserves will have been used up.

The fund is responsible for no less than 0.3 percent of all the stocks traded worldwide, it holds shares in more than 3,200 corporations and its portfolio reads like a "Who's Who" guide to the world of international investment. It includes Blue Chip corporations such as Accor, Adidas, BASF, Porsche, Siemens, Volvo and Zürich Financial. Norway has shown great acumen with its portfolio -- in 2005, it had a return on investment of 11.1 percent, or about €20 billion ($26 billion)….

In November 2004, the government established ethical guidelines for the investment policy of its pension fund. Since then, an Ethical Council has overseen the various investments and separated the good from the bad. Seven corporations -- among them BAE Systems, Boeing and Honeywell -- were recently removed from the portfolio. Norwegian stocks worth 3.3 million Norwegian krona or €420 million ($535 million) have been sold as part of the ethical clean-up effort.

The corporations were blacklisted because of their involvement in arms production -- for producing components that go into the production of nuclear weapons that clash with the "fundamental humanitarian principles" of the Norwegian codex. Overall, 17 arms corporations have been declared off limits by Norway's ethics guardians.
In order to avoid similar investments in the future, Norges Bank has armed itself with a strong condex and team of ethicists. "We want to combine economic and ethical interests," investment director Knut Kjaer says. "We are powerful and we can invest in ethical values."

Related;
A Policymakers' Guide to Dutch Disease
Dutch Disease: Too much wealth managed unwisely
Initiatives; EITI, Revenue Watch, Publish What You Pay

The devil's excrement-Is oil wealth a blessing or a curse?;Tricky as this problem is, oil economies such as Norway and Alaska have come up with a clever (though still imperfect) solution: they hive off much of the oil income into “stabilisation” funds, disbursing “dividends” to citizens slowly—directly in Alaska, via social spending in Norway—so that the economy does not overheat. Chile, one of the world's more successful developing countries, has a similar fund for its copper revenues

Fuelling poverty - Oil, war and corruption

Aid, Cost Inflation and 'Dutch Disease': Effects and Implications

Links on Oil, Environment and Human Rights

How to Invest $200 Billion ... Ethically

Norwegian Government Pension Fund Dumps Wal-Mart and Freeport on Ethical Exclusions

Ethical Guidelines; Norwegian Government Pension Fund - Global

Paradise re-arranged; The recent conference in Singapore — CSR in the Travel, Tourism and Hospitality Industries 25-26 July 2006, has sparked some debate about commitment to CSR between one of the speakers — Tricia Barnett, representing Tourism Concern (a UK based NGO that works with communities in destination countries to reduce social and environmental problems and with the out-going tourism industry in the UK) and Hilton International, specifically Hilton operations in the Maldives.

The morality of tourism?

Afghanistan- on the road to a narco-state?

"If this thing gets out of hand, you could move from a narco-economy to a narco-state," - Doug Wankel, director, US drugs control office

Things are going good for poppy cultivators in Afghanistan;

"Opium cultivation in Afghanistan rose 59 percent in 2006, largely due to a dramatic increase in the troubled southern provinces, the United Nations Office on Drugs and Crime (UNODC) said on Saturday…

The Afghan Government, the Parliament and partner nations have made it clear that legalizing cultivation or buying up the opium crop for medical purposes is not an option under current circumstances. The price differential between the legal market, where opium costs about $20-30 per kilo, and the illegal one, where the price is $100, would lead to even greater cultivation and the massive diversion of supplies to the black market..."

NYT also reports on the report;

“He said the increase in cultivation was significantly fueled by the resurgence of Taliban rebels in the south, the country’s prime opium growing region. As the insurgents have stepped up attacks, they have also encouraged and profited from the drug trade, promising protection to growers if they expanded their opium operations. “This year’s harvest will be around 6,100 metric tons of opium — a staggering 92 percent of total world supply. It exceeds global consumption by 30 percent,” Mr. Costa said at a news briefing…

He said the harvest increased by 49 percent from the year before, and it drastically outpaced the previous record of 4,600 metric tons, set in 1999 while the Taliban governed the country. The area cultivated increased by 59 percent, with more than 400,000 acres planted with poppies in 2006 compared with less than 260,000 in 2005….
Afghanistan is already the world’s largest producer of opium, and 35 percent of its gross domestic product is estimated to come from the narcotics trade..”

Related;
Colombia's 'Drugs and Thugs'
Deconstructing Afghanistan
Afghanistan Reconstruction
Afghanistan's Uncertain Transition from Turmoil to Normalcy
South Asia Monitor: The Reconstruction of Afghanistan: A Fight for Survival
Afghanistan; Country in Brief – World Bank
Afghanistan's opium output: what problem?
Afghanistan’s Other War
Life in Afghanistan
Afghanistan-It's rough up north; "In Juma Bazaar, near Maimana, a commander called Rahmatullah Rais, loyal to General Dostum's Jumbesh party, rules the roost. Locals claim that, like most commanders, Mr Rais levies a produce tax, which he calls zakat, after the Muslim tithe to feed the poor, according to his whim. They also say he grabs their water, which after four droughts in five years is a precious resource, and accuse him of the murder of six men in the town earlier this year. Mr Rais denies involvement in the killings and says he hasn't levied zakat for a decade."
Afghanistan: a country on the move
World Drug Report 2006

Wal-Mart’s Communist Party Branch

“The world's leading retailer giant Wal-Mart has seen the establishment of the first branch of the Communist Party of China (CPC) and the first branch of the Communist Youth League of China (CYLC) in one of its outlets in the northeastern city of Shenyang, capital of Liaoning Province….

Wal-Mart has set up 59 outlets in 30 Chinese cities since it entered China in 1996. It has more than 23,000 employees in China, including over 700 in Shenyang”

Via Spontaneous Order

Related;
China Digital Times
Forget the World Bank, Try Wal-Mart; Between 1990 and 2002 more than 174 million people escaped poverty in China, about 1.2 million per month. With an estimated $23 billion in Chinese exports in 2005 (out of a total of $713 billion in manufacturing exports), Wal-Mart might well be single-handedly responsible for bringing about 38,000 people out of poverty in China each month, about 460,000 per year.
Fight poverty by shopping at Wal-Mart?
Managing Governments: Unilever in India and Turkey, 1950-1980

Worldmapper

Territory size shows the relative tourist profits made, in US dollars;

"The seven highest earning territories (per person) are islands: Bahamas, Palau, Barbados, Seychelles, Cyprus, Malta and Hong Kong. The highest net earnings are made in Spain where a profit of US$33 billion was made in 2003 which is more than twice the profit made by the second highest tourist earner: the United States."

From Worldmapper – a cool set of maps via Thoughts about K4D-they also have the data files in EXCEL.

Today’s Podcasts

Most of the podcasts are from Sydney Ideas Festival;

How to Spend $50 Billion to Make the World A Better Place: Bjorn Lomborg

Tim Flannery and the nuclear question

Paul Redding on Kant

Peter Anstey on Locke

What's happening to democracy? John Keane

Raewyn Connell on Globalisation

Concepts of liberty- Quentin Skinner

Duncan Ivison on Freedom

Why are we scared of ourselves? Frank Furedi

Robert Fisk lecture

Italy Now- Paul Ginsborg

Hurricane Katrina - one year on

Oil Depletion Protocol

Non-proliferation of Weapons of Mass Destruction- Hans Blix

See also recent additions on the TED Talks including the session of Jimmy Wales founder of Wikipedia.

Christopher Hitchens- Books That Shook the World - Thomas Paine's Rights of Man

In Search of Mozart

Communications Technology and Life

U.S. Trade Policy in the Wake of Doha

Buck Wild: How Republicans Broke the Bank and Became the Party of Big Government

Comprehensive Immigration Reform for a Growing Economy

Sandstorm: Policy Failure in the Middle East

U.S.-China Trade, Exchange Rates, and the U.S. Economy

Speech by Andrew Mitchell MP, Shadow Secretary of State for International Development, UK on the case for a Pan-African Trading Area

Jeffrey Sachs on the Millennium Development Goals

Andrew Lawson on Harmonization and Alignment

Ahead of His Time -Robert Mundell

The latest F&D magazine from the IMF is out. The focus is on demographics, it has also got a profile of Robert Mundell. Some excerpts below;

“He also stays strongly rooted in academia, much beloved by generations of students who have deeply valued how much he has been willing to give of himself to help them grow. He was a professor at the University of Chicago (where he was also Editor of the Journal of Political Economy) from 1966 to 1971—a time famous for its economic talents, including several other future Nobel Prize winners. "As a teacher, he was both stimulating and irritating," says Mussa, explaining that Mundell liked to tease his students with "intelligent questions that weren't entirely well structured and therefore didn't have clear answers." Since 1974, he has been a professor at Columbia University.

David Bloom, Harvard professor of economics and demography and a former Columbia colleague, recalls that the most interesting conversation he ever had with Mundell was about the effect of cross-country demographic imbalances (in age) on international capital flows—a topic that Mundell isn't normally associated with but finds enormously important for macroeconomic performance. In fact, Mundell developed a four-generation model that shows that if one country has a demographic shock, it creates a wave of interest rate changes that bring on, in an open economy, compensating capital movements. The model also highlights the role that the U.S. baby boom has played in U.S. balance of payments and budget deficits, as there was high demand for resources (some of which were internally generated and some of which flowed in from abroad) associated with investing in children.”

Related;
The Works of Robert Mundell
Mundell’s Home Page; some of books are being digitized like this one International Economics, Robert A. Mundell, New York: Macmillan

Dictators Watch- Burma

The military dictators of Myanmar (Burma) has got another asset to maintain their tyranny over the Burmese people and play around with neighboring giants- ten trillion cubic feet of natural gas;

“The Great Game of the 19th Century was played between empire builders Britain and Russia, using Afghanistan as their football in seeking control of central Asia. Today, there is a new great game under way between two very different competitors -- China and India. But this time the ball is Burma…

Burma is saturated in more than ten trillion cubic feet of natural gas, and possibly also oil, beneath its offshore waters, which stretch from the border of Bangladesh in the Bay of Bengal down to within sight of Thailand's azure blue coastline, dotted with tourist resorts. It is that rugged and undeveloped coastline of almost 1,000 miles that particularly interests the new great game players.

After much wrangling, and especially after a first-ever visit by an Indian head of state, President Abdul Kalam, to Burma last March, New Delhi thought it had secured exclusive purchase from Burma of 5.6 trillion cubic feet of natural gas. That was the quantity onfirmed by independent U.S. assessors Gaffney, Cline & Associates to be in just one undersea block, known as A-1, of the Shwe field near the port of Sittwe. But while India was sizing up the route of a 960-mile land pipeline bypassing Bangladesh, China swooped in and signed a memorandum of agreement to buy the A-1 gas.”

Related;
Burma: Orwellian state, with teashops
Burma's confusing capital move
Annan pays tribute to UN envoy in Myanmar upon his resignation
Junta Pressures Social Welfare Group;
“Rangoon’s only funeral service association, under pressure by authorities, is likely to be taken over by a military-backed civilian group, according to social workers in Rangoon”

The Truth about Globalization and Inequality

According to P. Sainath;

“India is a classic example of engineered inequality. On 20 October, The New York Times had a front page lead celebrating the birth of a class of people in India who spend their weekends at malls. It failed to mention that this year, India slipped three places in the human development ranking of the United Nations. We now stand at rank 127. This year’s UN Human Development Report had found that for the bulk of the Indian population, living standards are lower than those of Botswana – or even the occupied territories of Palestine. So while some of the richest people in the world live in India, so do the largest number of the world’s poor.

The euphoria over one good monsoon (actually, we’ve had several these past 15 years) seems to have erased any debate in the media on what’s happening in Indian agriculture. Small farms are dying. Investment in agriculture is down. Rural credit has collapsed and debt has exploded. Many are losing their lands as a few celebrate at the malls. In March this year, as Professor Utsa Patnaik points out, the per person availability of foodgrain was lower than it had been during the notorious Bengal Famine of 1942-43.

Thousands of farmers have committed suicide since the late 1990s. In a single district of Andhra Pradesh, Anantapur, more than 2400 farmers have taken their own lives since 1997. Elsewhere in India, like in Gujarat or Mumbai, the loss of countless jobs in industry is boosting religious fundamentalism. In the 2002 violence in Gujarat in which over 1500 lives were lost, many of the rioters were workers from shut-down textile mills.
The huge new inequalities are feeding into existing ones: For instance, in a society where they are already disadvantaged, hunger hits women much harder. Millions of families are making do with less food. In the Indian family women eat last. After they have fed their husbands and children. With smaller amounts of food being left over now, poor Indian women are eating even less that they did earlier. The strain on their bodies and health becomes greater. Yet, health care is ever more expensive.”

According to Phillipe Legrain;

"Wade points out that absolute income gaps are widening and argues that this is a matter for concern. Really? Consider again his example of economy A, where the average income is $10,000, and economy B, where it is $1,000. Their relative income is 10:1 and the absolute gap between them is $9,000. Suppose B grows at a racy 10 per cent a year. Its income will rise by $100 to $1,100. If the absolute gap between A and B is not to widen, A can add at most $100 to its income of $10,000, which means growth cannot exceed 1 per cent. In short, because A starts off so much richer than B, even if B booms the absolute gap between them will initially widen unless A stagnates—and if A stagnates, B is unlikely to boom, since A’s demand for its exports will also stagnate. Perhaps Wade wants the gap between rich and poor to shrink through economic stagnation in rich countries—if so, he should say so explicitly. But surely what is happening now is preferable: rich countries are growing steadily, but poor countries are growing faster, and thus catching up in relative terms. If this continues, they will eventually narrow the absolute gap too. For example, if B grows at 10 per cent a year for 30 years, its income will rise to $17,449; while if A grows at 2 per cent a year over the same period, its income will rise to $18,114.”

Related;
What to Read: Inequality and Development in a Globalizing World- A Syllabus
Inequality Does Cause Underdevelopment
Globalisation, Inequality and Poverty Relationships: A Cross Country Evidence
The global redistribution of income
New Economist blog's posts on Inequality.
Everybody Loves a Good Drought: Stories from India’s Poorest Districts- Book Review

Multimedia;
Why Inequality Matters in a Globalizing World- Nancy Birdsall
How Unequal Can America Get Before it Snaps- Robert Reich
Economic Growth, Inequality and Poverty: Findings from a New Dataset
Perspectives on Growth, Inequality and Poverty
Poverty, Inequality and Growth in the Era of Globalization
World Inequality in the Second Half of the 20th Century
Globalization, Growth, and Poverty: Building an Inclusive World Economy
Hans Rosling at TED
Gapminder
The Globalisation of Inequality – Sainath

A Tale of Two Small Countries

This August 13 marks the notorious Black Friday in the Maldives. There is still a long way to go till the country becomes a decent democracy.

In another small country, Seychelles, things seems to be going smoothly at least on the democratic front;

To the casual eye, Seychelles seems both fortunate and well-governed. The 115 islands, most of them uninhabited, cover a mere 445 square kilometres (175 square miles) of the Indian Ocean, north of Madagascar, and enjoy several advantages over most of the rest of Africa. The weather is never extreme. There is no malaria. The islanders have free education and health care. Their multiracial society is pretty harmonious. With GDP at around $8,000 a head, there is almost no discernible poverty.

But this standard of living has come at a cost: the IMF says its public debt is too high and may be unsustainable. Mr Michel's main opposition, the Seychelles National Party, which scored 46% in the elections, claims that Seychelles, per person, is the world's most indebted country; with some $590m of external debt for just 82,000 people, it is certainly one of them. A black market in foreign currency already exists as speculation persists that the government, unable to meet its obligations, may be forced to devalue. Basic consumer goods sometimes run out. If, as the IMF predicts, GDP falls by over 1% this year, Mr Michel may find his next five years in power more testing than he had hoped.

The country needs more ways of making money. In the cold war, it was easy. The Seychelles played each side off against the other, remaining a member of the Commonwealth as well as the Non-Aligned Movement and taking military aid from the Soviet Union while leasing a satellite tracking station to the Americans. Since those streams of revenue dried up, the main Seychellois streams of revenue have been from tourism—leasing land to foreign hoteliers—and from tuna: the government earns about $200m a year from selling tuna-fishing licences to Spain, France and South Korea.”

For Discussions; Does bigger neighbors have a role to play in promoting democracy in small countries?
* Figures above from WDI 2006.

Related;
Fisheries Sector in of Seychelles and Maldives
“We’ve Been Lied To For 30 Years”
The Impact of Globalisation - a Maldivian Perspective
Virtual Seychelles
Australia and the South Pacific: roles and responsibilities; lessons from pacific

Randomized Trials Do Work

An example of randomized control trial used for a program evaluation;

“Career Academies is an educational program that enrolls middle and high school student applicants in academic and technical courses in small learning communities with a career theme and partnership with local employers. Participants’ high school graduation rates are one of the outcome measures of interest. A well-designed RCT of over 1,700 students that randomly assigned student applicants into an Academy or into a non-Academy control group that continued regular schooling found that the intervention did not result in increased graduation rates at the eight year follow-up. By contrast, if the evaluation had used a comparison group design comprised of like students from similar schools, the evaluation would have concluded erroneously that Career Academies increased the graduation rate by a large and statistically significant 33 percent.”

-Source; What Constitutes Strong Evidence of a Program’s Effectiveness?

Related;

Why Do Impact Evaluations?

Instrument Variables and Randomized Experiments

Better than Trial and Error

Benefit Cost Analysis Guide

Decision-Making in Government: The Role of Program Evaluation

Influential Evaluations: Evaluations that Improved the Performance and Impacts of Development Programs

Lomberg with Fareed Zakaria

The latest Foreign Exchange show is up; discusses change in Saudi Arabia, interview with Lomberg, Mexican immigrants and a perspective on Dubai.

“While many rulers flush with oil profits are wasting their opportunity to build for their future, Dubai is going against the stream and it is not going unnoticed. Both Bahrain and Qatar are now trying to join Dubai as the world’s premier tourist destination. This summer you may be visiting Europe or Yosemite, but soon your flight plans may take you to the Middle East for rest and relaxation.”

The previous two shows are also worth a look.

Reinventing the IMF - Renewing the Commitment to Poor Countries

Some highlights from a major speech by IMF Managing Director at Center for Global Development today;

“Earlier this year, I set out a road map for implementing the International Monetary Fund's Medium-Term Strategy. This afternoon I want to talk about a particular aspect of the strategy: the Fund's relationship with low-income countries…

The Medium-Term Strategy is based on the premise that the Fund needs to adapt to help all of its members deal with the challenges of 21st century globalization. The strategy covers all areas of the Fund's activities, including the way we conduct surveillance of individual members' economies and of the global economy; our instruments for preventing and dealing with crises in emerging markets; and the Fund's own governance. The measures proposed in the strategy are important not only for systemically important countries and emerging markets, but also for low-income countries. Tackling global imbalances will reduce the risk of chaotic exchange rate movements, abrupt shifts in financial markets, and crippling protectionism. Avoiding crises in emerging markets will help keep down the cost of low-income countries' borrowing and maintain demand for their exports. And low-income countries as well as clearly underrepresented emerging markets have reason to be concerned about their voice and representation in the Fund.

Telling countries to avoid debt is likely to be most effective if we can offer them alternative sources of finance. As the Irish playwright George Bernard Shaw wrote, "I can't talk religion to a man with bodily hunger in his eyes." It is therefore important that the international community address the urgent needs of low-income countries by offering sufficient grants and highly concessional loans to enable them to finance development without relying on expensive debt. This leads me to the second part of the Gleneagles compact: a significant increase in aid.

The Fund has also been a consistent advocate of the effective use of aid. Better outcomes from increases in aid flows will depend not only on the amount of the support, but on its effective use. This depends partly on macroeconomic policies, and one of the Fund's responsibilities is to help countries manage their macroeconomic policies in ways that maximize their capacity to absorb aid and debt relief.

The Fund is also strongly committed to making sure that countries have the fiscal space they need to expand social programs, especially in health and education. I want to remove any misconceptions about our views on this. I have repeatedly heard concerns expressed, especially by NGOs, about budgetary ceilings limiting social sector outlays.

The first concerns trade. Most of the discussion of trade policy in recent months has focused on the WTO negotiations on the Doha Round. This is appropriate: increased trade, bolstered by multilateral agreements, has been a cornerstone of growth in the global economy for many years, and is fundamental to the prospects of low-income countries….

Before concluding, I would like to also say a few words about a policy area where it is particularly important that the Fund cooperate with donors and low-income country governments. This is governance. Paul Wolfowitz made a speech focusing on this issue earlier today, and I very much agree with his comments. Governance was a key element of the Monterrey compact and it is an area where the Fund has a well-defined and important role to play. When governance issues are macroeconomically relevant and threaten the success of a program, we set conditions to address them. We also promote good governance through broader initiatives. For example, we promote transparency through the General Data Dissemination System, a framework to develop national statistical systems to which over 90 countries have subscribed. In some countries we are developing action plans to improve the transparency of Public Expenditure Management systems. We also support the Extractive Industries Transparency Initiative and give advice on transparent use of revenues from natural resources. Underlying this work is the belief that more public accountability and more transparency can raise the quality of public expenditure, cut corruption, and reduce poverty..”

Related;
IMF to Propose Greater Representation for Developing Countries- see the event online

Efficient Rent Seeking and Economic Development

I recently asked a South Korean professor about the reason for the economic success of Korea. He said efficient rent-seeking and suggested the following book;

Rents, Rent-Seeking and Economic Development: Theory and Evidence in Asia by Mushtaq H. Khan (Editor), Kwame Sundaram Jomo (Editor)

Related; Chapters 1 and 2 are online.

Globalization is Working?

Philippe Legrain debates Robert Wade;

“Wade claims that, “If the liberal argument holds, we would expect the global shift towards free markets in the past 25 years to have raised the rate of world economic growth. Instead, there has been a slowdown in developed and developing countries. Between the era of managed capitalism (roughly 1960-78) and the era of globalisation (roughly 1979-2000), the growth rate of world output fell by almost half, from 2.7 per cent to 1.5 per cent.”

Not so. According to the latest IMF figures, the world economy grew by 3.3 per cent a year from 1986-95 and by 3.9 per cent a year from 1996-2005. Better still, while in 1986-95 emerging economies grew only fractionally faster than advanced economies (3.7 per cent a year compared with 3 per cent), in 1996-2005 they grew over twice as fast (5.5 per cent a year compared with 2.7 per cent). Far from stagnating, the world economy is booming—and developing countries are outpacing developed ones.

But in any case, Wade’s methodology is shoddy. Even if global growth had slowed since 1979, one could not deduce from such aggregate figures that globalisation wasn’t working. Contrary to what he asserts, there has not been a global shift towards free markets, let alone one that can be dated to 1979. Countries have opened their markets to varying degrees and at different times; some have failed to liberalise at all or have even become more protectionist. What’s more, globalisation is not the only economic change of the past 40 years, and so cannot necessarily be considered responsible for any particular change in economic performance. The right way to judge whether globalisation is working is to look at individual economies’ performance before and after they liberalised, controlling for other changes that might affect the picture—and one finds a mountain of evidence that it is indeed delivering the goods.”

*The picture is from the cover of the latest edition of The Economist

Related;
Philippe Legrain’s Globalization posts
Thomas Palley’s Globalization posts

Recent UN Reports on Development Themes

It continues to puzzle me the number of reports that continue to be published on development themes by multilateral agencies; the following list is only from the UN.

There is lot of talk about harmonization of donor practices- shouldn’t multilateral agencies harmonize production of research and reports?

The World Economic and Social Survey (WESS) 2006;

“According to the World Economic and Social Survey 2006, in the industrialized world, the income level over the last five decades has grown steadily while it has failed to do so in many developing countries, thereby causing a rise in already high world inequality.

Greater income divergence is partly explained by a rising number of growth collapses. Countries with weak economic structures and institutions and low infrastructural and human development have less capacity to gain from global markets

The importance of strong institutions and good governance for economic growth is now widely recognized. But contrary to some prescriptions, immediate institution of large-scale reform is not a necessary condition for growth, or even sometimes beneficial in the short run. The experience of China and Vietnam indicates that incremental reforms, if credible and perceived as steps along the way to further change, can be highly effective in shepherding strong and sustained growth.”

Millennium Development Goals Report 2006

World Economic Situation and Prospects 2006

“The world economy is expected to continue to grow at a rate of 3 per cent during 2006. The United States economy remains the main engine of global economic growth, but the growth of China, India and a few other large developing economies is becoming increasingly important. On average, developing economies are expected to expand at a rate of 5.6 per cent and the economies in transition at 5.9 per cent, despite the fact that these economies may face larger challenges during 2006.

Driven by higher oil prices, inflation rates have edged up worldwide. Core inflation rates, which exclude the prices of energy and food, have been more stable, indicating that the pass-through of higher oil prices to overall inflation is limited.”

Building Inclusive Financial Sectors for Development (The Blue Book)

THE LEAST DEVELOPED COUNTRIES REPORT, 2006

"UNCTAD´s Least Developed Countries Report 2006 argues that the development of domestic productive capacities and concomitant expansion of productive employment opportunities is the key to sustained economic growth and poverty reduction in the least developed countries (LDCs).

The Report calls for a paradigm shift from a consumption- and exchange-oriented approach to poverty reduction towards a production- and employment-oriented approach. It analyzes three basic constraints on the development of productive capacities in the LDCs -- poor physical infrastructure; weaknesses of the domestic private sector and supporting financial systems and knowledge systems; and insufficient demand and thus underutilization of domestic resources and capabilities as well as weak incentives to invest and innovate -- and it identifies some key policy priorities to overcome these constraints, including the mobilization of underutilized domestic potentials and a re-balancing of the sectoral allocation of aid."

For the latest UN publications see the UN Pulse blog. This is one area where other international agencies may follow
UN's lead- institutions like the WorldBank don't have a blog covering their new publications in a systematic way.

Here you can look at the titles that are popular at World Bank and IMF. This guide is also very useful- RESOURCES FOR LIBRARIANS IN DEVELOPING COUNTRIES.

Facts about Poverty in South Africa

A recent article from UN highlights;

“According to the Basic Income Grant (BIG) lobby group, around half of South Africa's 47 million people are poor. But the government's welfare scheme - child grants, pensions, foster children support and disability payments - reach only 11 million people

Child support grants pay R190 (US$27) per child per month, roughly R6 (85 cents) a day - about the cost of a loaf-and-a-half of bread. Around seven million children receive the means-tested payments, and that money often supports an entire family

An unemployment rate estimated at around 40 percent…

It believes a total of 12 million children up to the age of 18 live in poverty.”

Related;
Interview with the author of recent survey on South Africa at The Economist

Value of foreign direct investment soars ; THE value of mergers and acquisitions in SA soared 63% last year, helping the country eclipse India for the first time in terms of foreign direct investment, according to Ernst & Young

No Phishing Attacks from IMF!

IMF released the following press release recently;

"The IMF has learned of various forms of identity fraud and financial fraud involving the unauthorized use of the IMF's name and emblem. This includes `phishing' attacks, in which the names of IMF officials have been misused to deceive recipients into disclosing personal financial information, and `spoofing' attempts, in which a false copy of the IMF website had been created with false contact information, to mislead potential users…”

Podcast of the Day- Anwar Ibrahim

Earlier I posted about a recent speech by Anwar Ibrahim. Now the podcast of the lecture is available.

It's not about the money

Easterly offers some advice to Bill Gates, Warren Buffet and other would be philanthropists;

“The misguided media reaction to the Gates-Buffett union was, quite predictably, all about numbers: Warren's $31 billion gift, which roughly doubles the size of Bill's foundation to about $60 billion. Welcome to foreign aid wonderland, where it's always about the spending, never about the impact. "Double" has a venerable history; whenever anyone starts worrying about the world's poor, they almost always call for exactly doubling foreign aid -- from John F. Kennedy to last year's Group of Eight (G-8) Summit agreeing to double aid to Africa.

Alas, aid flow reflects the cost of providing services for the poor, not the value of those services. Would Microsoft Corp. promote an executive who bragged about setting a record for costs? Would Berkshire Hathaway invest in a business that headlined its remarkably high spending on office supplies? Unfortunately, the foreign aid business has a sad history of bureaucrats under heavy pressure to spend money on foreign consultants and four-wheel-drive vehicles but with zero pressure to find out whether that spending translates into the forever elusive "technical assistance," "capacity building" and "civil service restructuring" that are supposed to help the poor. Your challenge -- much harder in foreign aid than in business -- is to find out if your final customers are satisfied.”

Related;

Conversation Bill and Melinda Gates and Warren Buffett had about philanthropy with Charlie Rose (via Official Google Blog)

‘World development report 1993 : investing in health’- which according to Bill Gates opened his eyes and gave his mission (see the above interview)

Being smart with Buffett’s billions

Indonesia has come a long way

Pablo links to a blog of Indonesia’s defense minister (which cannot be independently verified).

Even if this is a hoax, I think everyone would agree that Indonesia has come a long way since time of Suharto.

Earlier posts which talked about corruption in Indonesia; Excessive Anti-Corruption Drive Hurting the Economy?, Advice to Mr. Wolfowitz on Fighting Corruption

Fact Attack on World Development and Water

UN has published a World Water Development Report- some statistics;

1 billion people lack access to improved water supply

2.4 billion people lack access to improved sanitation

Access to piped water through household connections
- Latin America and the Caribbean: 66%
- Asia: 49%
- Africa: 24%

Access to sanitation linked to a sewage system:
- Latin America and the Caribbean: 66%
- Asia: 18%
- Africa: 13%

Over 1 million people die from malaria every year.

Every day, diarrhoeal diseases cause some 6,000 deaths, mostly among children under five.

777 million people in developing countries do not have access to sufficient and adequate food.

Approximately 70% of all available water is used for irrigation.

Some 300-500 million tons of heavy metals, solvents, toxic sludge, and other wastes accumulate each year from industry.

Water withdrawals for industry
- World: 22% of total water use.
- High-income countries: 59% of total water use.
- Low-income countries: 8% of total water use.

Some 2 billion people have no access to electricity at all.

Hydropower plays a major role in reducing greenhouse gas emissions: developing ½ of the world's economically feasible hydropower potential could reduce greenhouse gases emissions by about 13%.

Natural disasters cost a total of US$70 billion in 1999, compared to US$30 billion in 1990.

From 1992 to 2001, developing countries accounted for 20% of the total number of disasters, and over 50% of all disaster fatalities.

Approximately 13 times more people die per reported disaster in developing countries than in developed countries.

Approximately 66 million people suffered flood damage from 1973 to 1997.

Number of children of primary-school age who do not have access to education: 113 million

The average size of the world's 100 largest cities grew from around 0.2 million in 1800 to 0.7 million in 1900 to 6.2 million in 2000.

Sixteen cities became 'mega-cities' (10 or more million inhabitants) in 2000, comprising 4% of the population.

In the urban areas of low-income countries, 1 child in 6 dies before the age of five.
In areas poorly served with water and sanitation, the child mortality rate is multiplied by 10 or 20 compared to areas with adequate water and sanitation services.

Every day, 2 million tons of human waste are disposed of in water courses.

The chart above shows price of water in some developed countries.

Outsourcing Philanthropy

“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”
- Adam Smith, The Theory of Moral Sentiments

Bill Gates quoted the above sentence after giving a gift of the Adam Smith’s two books to Warren Buffet for his very generous donation of some $ 31 billion to the Gates Foundation (only $ 6 billion was given to his children’s charities - he once derided those made rich by inherited wealth as “members of the lucky-sperm club”).

I watched the event online (would recommend highly) and was very moved by both the passion of Melinda and Bill to really make a difference in the world and Mr. Buffet’s belief in them. According to the Economist, Mr Buffett made his gift conditional upon Mr Gates giving up his day job at Microsoft;

“Mr Gates was taught by his mother that he had a responsibility to “give back”. Mr Gates famously brought forward his plans to give away most of his wealth after a World Development Report convinced him that by doing so it would have a greater impact than waiting until he grew old.”

NYT reports that Mr. Gates credited Mr. Buffett for encouraging him, in the early 1990's, to read a copy of the World Development Report.

But did the Sage of Omaha made the right decision in giving the largest share of his money to the Gates Foundation? The agency that seems to have had the largest impact on world development is arguably the World Bank and it currently has a monopoly in generating and disseminating policy ideas with regard to low income countries. I think one of the best ways to help the world’s poor would be to bring in some competition in this field.

Related;

Across the blogs; Charity begins at home, American Philanthropy, A Global Health Colossus, Warren Buffett's Gift to the Gates Foundation

Prioritizing ‘inconvenient truths’

Q&A: Gates' Growing Public Health Brand

Honor Thy Mother

DATA campaign (Debt, Aids, Trade, Africa)

Drug Development for Neglected Diseases (podcast)

Earlier blog posts; Are Asian billionaires Stingy?, Bill Gates's Post-Microsoft future

US Government through Google

Google has a new feature- Google US Government Search;

I tried searching for following report from GAO about Treasury’s influence on advancing US interests in the IMF- I couldn’t find it through the Google search engine. Here’s the findings in brief;

“The Department of the Treasury has sustained a formal process for advancing U.S. policies at the IMF. A task force facilitates coordination between Treasury and the U.S. Executive Director and identifies early opportunities to influence decisions of IMF members. Since our September 2005 report, the task force has continued to meet on a regular basis to identify opportunities to advance legislative mandates at the IMF. Treasury continues to promote the task force as a tool for monitoring and promoting legislative mandates and other policy priorities by, for example, including discussion on crosscutting policy issues such as debt relief and focusing attention n on both present and prospective IMF programs.

We have identified 70 legislative mandates that prescribe U.S. policy goals at the IMF, which is similar to the numbers we reported in our previous reports. Since our last report, 9 mandates have either replaced older mandates or represented amendments to mandates, and 1 mandate, concerning direct support to the central government of Cambodia, has expired. Treasury continues to notify the U.S. Executive Director about new mandates through instruction letters.”

Stylized facts about regional disparities of growth in India

The latest IMF survey summarized the working paper ‘Mind the Gap - Is Economic Growth in India Leaving Some States Behind?’ in which the author examines how economic growth has varied across India's states. The following five are given as stylized facts about growth in India.

1. The gap between in income levels across states is widening.

2. Richer and faster-growing states are generally better at reducing poverty.

3. Poor and slower-growing states generated fewer private sector jobs.

4. Capital and labor flows do little to address imbalances in economic activity and
income across states.

5. Growth has been the most volatile in the poorest states.

Some more statistics;

-Between 2006 and 2051, about 60 percent of the projected 620 million increase in the Indian population is expected to occur in three of its poorest states (Bihar, Madhya Pradesh, and Uttar Pradesh)

- The ratio of average per capita income in India’s richest state, Punjab, to that in its poorest state, Bihar, rose to 4.5 percent in 2004, from 3.4 percent in 1970. The pace of growth in real per capita income in India’s fastest-growing states—just over 3 percent a year—has been more than twice as fast as that in the slower-growing poor states.

- On average, richer states have been about 50 percent more effective in reducing poverty, for each percentage point of growth, than poorer states. The pace of job creation in middle- and high-income states has far outstripped that in poorer states. India’s poorest and most populous states account for about 40 percent of the population but capture only one-fourth of jobs in the organized sector.

- About 55 percent of outstanding bank loans in India in FY2004/05 were to borrowers in the five richest states, whereas borrowers in the five poorest states accounted for a mere 15 percent. Moreover, over half of the foreign direct investment inflows into India in recent years have gone to five largely prosperous states.

- Only 6 percent of migration in rural areas and 20 percent of migration in urban areas in recent years has occurred across state borders.

- Take, for example, one of India’s richest and fastest-growing states, Maharashtra (which includes the financial capital of India, Mumbai). It was less successful in translating its growth into jobs and poverty reduction over the past three decades than Rajasthan, which grew much more slowly than the national average (see table).

- Using district-level data, Abhijit Banerjee and Lakshmi Iyer found that areas in which proprietary land rights were historically given to landlords had significantly lower agricultural investment and productivity after independence than areas in which these rights were given to cultivators.

For comment; Why is that female literary is not found to have a significant exogenous impact on states’ growth performance (coefficients are in fact negative)?

Related links;

Economic Growth in South Asia- a recent report from World Bank

Reports on India from Planning Commission

Indian States Database

Water in India; The cost of boom times in India is a surge in demand for everything - and top of the list is water. Industry, agriculture, households in middle class suburbs and global corporations all want as much as they can get. Is privatisation the answer when governments are struggling?

A Tale of Two Giants: India's and China's Experience with Reform and Growth. See also the panel discussion on the topic; China’s economy is three times larger than India’s and contributes significantly more to global economic growth.

Movie Recommendation from World Bank

“If you cannot imagine how a movie about electricity privatization can move you to tears …” - Jonathan Walters, World Bank

Pablo recommends the film ‘Power Trip’- a documentary about electricity privatization in the former Soviet republic of Georgia. Watching the trailer it gave me the feeling it was very one-sided as commented by one critic;

“Paul Devlin's documentary focuses on Piers Lewis, project director of AES-Telasi. A former classmate of Devlin's, their relationship slants the film in favor of AES managers, portraying them as a fun-loving group of world travelers on an altruistic crusade to save a picturesque country from a descent into a new dark age…

While his interviews with Lewis, AES general director Michael Scholey and CEO Dennis Bakke amply express management's point of view, the people of Tbilisi are either portrayed as thieves who vandalize company equipment, rigging dangerous and illegal connections to siphon off the electricity, or are shown in various stages of distress. Devlin takes his camera into the street to film impressions of the people, but he shoots them, not as individuals, but as a chaotic mob..”

Here is John Giraudo, VP and Chief Compliance Officer, AES Corp. talking about corruption;

“My company, The AES Corporation, is in the thick of improving economic development. We provide an essential good— electricity to many third world countries—27 countries in fact. We are part of the local infrastructure in Venezuela, Brazil, Argentina, Nigeria, China, India, Pakistan, Ukraine, Kazakhstan and many other developing countries. Through 15 distribution companies we deliver electricity to more than 10 million people---for example we keep the lights on for nearly everyone in the city of San Paolo Brazil, the entire country of Cameroon and many of the suburbs of Kiev. As a company, listed on the US stock exchange, we are one of the biggest channels of private sector money to poor countries. It is difficult to think of another private-sector company with such a large investment in third world infrastructure.

Because of our presence in all these places in the world we see lots of corruption—petty corruption and official corruption. Indeed, the biggest challenge our people face in doing business overseas is to resist the corruption around us…”

Now I think I would definitely see the film. I wonder what Georgians think of the movie.

More reviews; The Boston Globe, Village Voice

Iraqi Virtual Science Library

NYT reports that the number of children enrolled in schools in Iraq rose by 7.4 percent from 2002 to 2005, and in middle schools and high schools by 27 percent in that time- Iraq was once the most educated in the middle-east.

Here is a site that’s an interesting educational initiative- Iraqi Virtual Science Library which provides free, full-text access to thousands of scientific journals from major publishers as well as a large collection of on-line educational materials.

Interestingly contributors does not include multilateral agencies like UN or the World Bank. See also Fighting Poverty with the Espresso Book Machine

Related;

Solution: Break Up Iraq; Reality: It's Not So Easy- have a look at the multimedia on Iraqi cities.

The Zarqawi effect-Bush's Mideast policies have turned a brutal terrorist into an icon of resistance -- and made violent fundamentalism more popular. Juan Cole at Salon.

Iraq’s oil production improves; Iraq's oil minister Hussain al-Shahristani offered an optimistic forecast for the country's industry on Sunday, saying daily output has reached 2.5 million barrels and that Iraq hoped to rival top exporter Saudi Arabia within a decade.

Are Asian billionaires Stingy?

Sepia Mutiny raises an interesting question about lack of wealthy Asian especially Indian philanthropists;

“In general, I’m scratching my head trying to understand why rich desis have taken after their white counterparts spending habits in every way except this one: a penchant for big ticket charitable giving. Is it simply that they’ve got new money, and they’ll start to give in a few decades once their appetite for weddings, cars, houses and jewelry has been slaked? Are they simply numb to poverty having grown up with it? Is it something cultural that I’m missing? If so, what - all the desi religions emphasize charitable giving, so it’s not that.

Are rich brown people simply more selfish than rich white ones?”

Some Indian billionaires are known for their lavish lifestyles ( Mittal spend over $ 55 million for a wedding and $ 127 million for a London mansion) but their western counterparts like Bill Gates and Soros are well known for the opposite.

May be Mittal had never read a World Development Report - Bill Gates read a World Bank World Development Report and realised he could do something to improve public health in the world's poorest countries, so he started the Gates Foundation. Or just may be that Asian philanthropists’ work are not publicized enough.

Related;

Deepak Lal tells a tale about a wealthy Indian and how he decided on the inheritor to his wealth in this podcast book discussion.

Blogs discussing the latest World Wealth Report- New Economist and Andrew Leigh

A discussion with Matthew Bishop, American business editor of The Economist who ealry this year wrote a survey of philanthropy in the magazine; “It's very, very striking that the new philanthropists, the likes of Bill Gates or Pierre Omidyar, who founded eBay, or Thomas Hunter, the Scottish retailer, who are coming into the field, are all very concerned about how do we make sure that our money isn't wasted, that it actually does make a difference. And they're rethinking the way philanthropy is done"

US Foreign Aid Reform- Follow UK

A major study by Brookings on reforming the US foreign assistance had the following recommendation amongst many others;

“The establishment of the U.K. Department for International Development (DFID) in 1997 has proven a successful reform. DFID combines in a single cabinet agency the delivery of all overseas aid and has responsibility for analyzing the impact on developing countries of policies on trade, the environment, and conflict prevention.”

Here is report- Security by Other Means: Foreign Assistance, Global Poverty, and American Leadership

And a transcript of a conference discussing the report.

Related; How comprehensive is the new U.S. foreign assistance framework?

The Future of Aid

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” - Fredrick Hayek, 1988

The plenary session of the WIDER conference on Aid is available online. My recommendations are Easterly’s presentation and that of Peter Heller.

Easterly’s presentation is almost the same as his discussion at CGD recently.

Related;

The Future of Aid – presentation by Richard Manning, Head of DAC, OECD.

On Jeffrey Sachs by Mankiw

The End of Poverty- a profile of Jaffrey Sachs

The Man Without a Plan- a review of Easterly’s book by Amartya Sen

Foreign aid face-off; Can we end poverty with wads of cash?

Earlier blog posts; A Shocking Fact about Sub-Saharan Africa, Removing binding constraints to growth?

Saving the World through Socratic Method

Pablo links to an interesting NGO, ‘dropping knowledge’ which invites people to ask questions and later plan to host some ‘leading thinkers in the world’ to answer their questions.

See their blog- the drop, and their introductory video.

People seem to have a lot of free time and a lot of money for these types of things- could the money and effort be spent on more worthwhile cause? That’s my question.

Related;

How to save the world; Bolton v Gore

Copenhagen Consensus

Could bad weather be responsible for U.S. corruption?

Asks Peter T. Leeson and Russell S. Sobel in the following paper; Weathering Corruption

Abstract; Could bad weather be responsible for U.S. corruption? Natural disasters create resource windfalls in the states they strike by triggering federally-provided natural disaster relief. Like windfalls created by the .natural resource curse.and foreign aid, disaster relief windfalls may also increase corruption. We investigate this hypothesis by exploring the effect of FEMA-provided disaster relief on public corruption. The results support our hypothesis. Each additional $1 per capita in average annual FEMA relief increases corruption nearly 2.5 percent in the average state. Eliminating FEMA disaster relief would reduce corruption more than 20 percent in the average state. Our findings suggest that notoriously corrupt regions of the United States, such as the Gulf Coast, are notoriously corrupt because natural disasters frequently strike them. They attract more disaster relief making them more corrupt.

Related;

Disaster Relief: Type I & Type II Errors

May be report cards like this could help.

Martin Wolf on World Bank and Economic Reform in India

“The experience with national economic planning has important lessons. It helps us understand what a state can usefully do — and is obliged not do — if it is to see a rise in the living standards of the people for whom it has responsibility.

This undermined the professional integrity of the staff and encouraged borrowers to pile up debt, no matter what the likely returns. This could not last — and did not do so. As Montek Ahluwalia — former economic secretary and later finance secretary — once told me, the Bank was a growing business in a dying industry. It was certain to reach the limit to its growth.

I worked on India as senior divisional economist for three years. During that time, my chief function, so far as the Bank was concerned, was to justify the provision of significant quantities of aid — even though this money was helping the government of India avoid desperately needed policy changes.

As it turned out, those changes were made in the midst of a deep foreign exchange crisis in 1991 — almost two wasted decades later.

The changes were made under the direction of Manmohan Singh — then finance minister — with the assistance of Montek Ahluwalia.

This experience confirmed three lessons: Policy changes could make a huge difference to economic performance. Such changes could be put into effect by relatively small teams of intelligent, motivated and well-disciplined individuals. And most important of all, those changes could not be imposed from outside.

Unfortunately, lending too much was not the World Bank's only fault. It also had to lend to governments.”

Martin Wolf, “Why Globalization Works”

Related; Montek Ahluwalia, Some Lessons from Economic Reforms in India

Britain can be gateway to Islamic finance- Gordon Brown

Some highlights from Gordon Brown’s speech at Islamic Finance and Trade Conference, London;

“Already, Britain is the largest European trader with many Islamic countries - the largest European investor in Oman, the largest non-Arab investor in Egypt, and second largest global investor in Pakistan and Saudi Arabia;

Second, the foundation for making Britain the gateway to Islamic trade, is to make Britain the global centre for Islamic finance.

Today British banks are pioneering Islamic banking - London now has more banks supplying services under Islamic principles than any other Western financial centre.

And I want to thank also the Muslim Council of Britain and the many of you here who have worked with the Government through our tax and regulatory reform to support the development of Shari’a compliant finance:

- first, three years ago, for mortgages, enabling the expansion of the Islamic mortgage market to over half a billion pounds - growing by almost 50 per cent in the last year alone;
- then last year, for savings and borrowing and providing proper consumer protection for Ijara products;
- this year, for business finance, with last week Parliament approving measures in the Finance Bill for diminishing musharaka and wakala;
- and now, working with us, to look at international finance, Islamic securitisation and sukuk - and I am pleased that London was the financial centre chosen recently to advise on one of the largest sukuk deals ever done.

All of us are facing up to the challenges of globalisation, to the rise of Asia – one million manufacturing jobs lost from America, Europe and Japan, one quarter of a million jobs offshored, oil prices rising not least because Asia now takes up 30 per cent of demand.

To secure a world trade deal, heads of government should stand ready to use all the resources of leadership and statesmanship. The prize is a 50 per cent increase in world trade - and specifically the World Bank estimates a deal could bring $14 billion increased prosperity to the Middle East and North Africa and a further $2 billion to Indonesia alone.

I am aware of the importance Islam places on education, through the hadith such as: "Seek knowledge from the cradle to the grave" and "Verily the men of knowledge are the inheritors of the prophets."

I was shocked to learn that while Muslims constitute 22 per cent of the world's population, almost 40 per cent of the world's out-of-school children are Muslims. In Pakistan alone there are nearly 8 million children not in school, in Bangladesh nearly 4 million, and over one million in Mali, a total of more than 40 million Muslim children who do not go to school

So I know you will agree with me that it is one of the world's greatest scandals that in total 110 million children do not go to school.

And led by Hilary Benn, our Secretary of State for International Development, we will enter into 10 year agreements with countries to finance their 10 year plans, in total committing at least $15 billion over the next ten years - four times as much as the $3.5 billion of the previous ten years. In Singapore in September, I will press other G8 Finance Ministers to commit to their share..."

Related Links;

The Design of Instruments for Government Finance in an Islamic Economy

Islamic Finance Gears Up

Islamic Financial Systems

Islamic finance in the United States: A small but growing industry

Regulation and Supervision of Islamic Banking in the United States

Heard of Islamic micro-banking?

More links on the topic.

Development as Accountability

Here’s an interesting speech (though not by content) by Malaysia’s former finance minister Anwar Ibrahim;

“Ibrahim spoke on governance and accountability as drivers for social change, led by development organizations. He drew upon his experiences in Malaysia to illustrate this point, highlighting the positive results from anticorruption initiatives. Ibrahim also tied accountability to freedom, calling it the process of “civilizing power,” and he advocated cooperation with the World Bank to countries that are working toward good governance.”

The speech was high on quotations and referred to Ibn Khaldun, Thomas Jefferson, Isaiah Berlin, Amartya Sen, Mancur Olson, and Kafka amongst others. He also went on to suggest that World Bank should have an independent office of accountability with a broad mandate. His book Asian Renaissance, published in 1996 is decent enough book. I wonder how Mahathir would react to his speech.

Related video; Anwar Ibrahim clarifies his role at the World Bank

I haven’t come across a good economics blog on Malaysia. Let us know if you’ve come across one.

Anglobalisation and British Empire

A must listen podcast from the BBC;

“To mark the end of Radio 4's This Sceptred Isle: Empire series, some of this country's best-known historians will be examining how Britain and other countries around the world have been changed by their experience of empire. They'll be discussing whether Britain should apologise and make reparation for its imperial past or glory in it, and asking whether the twenty-first century will see the birth of new empires- Eric Hobsbawm, Niall Ferguson, Robert Beckford, Linda Colley and Priya Gopal.”

The debate gets very heated at times. I think one way to view the role of British Empire and its relation with the colonies like India is to look at it as India or any other colony giving a huge interest free loan to Britain- this point was highlighted by the late Mahbub ul Haq in one of his books.

Related podcast;

Francis Fukuyama- No longer neocon; The man who wrote The End of History? is now disenchanted with American foreign policy. Fukuyama remains a conservative, but has strong views on what has gone wrong. He sees a need to demilitarise the struggle against violent fundamentalism.

A Tipping Point for Infrastructure in Latin America

Some statistics on the state of infrastructure in Latin America from the latest edition of The Economist;

“In Mexico, public spending on infrastructure—electricity generation, roads, railways, water plants and the like—was a third lower in 2004 than a decade earlier, according to a report by Merrill Lynch, an investment bank. The World Bank describes two-fifths of the country's motorways as “pre-modern”. Nevertheless, the government has found the money to spend 0.7% of GDP on subsidising the electricity that is consumed—which does nothing for the poorest, who live in the dark in rural areas…Between 1990 and 2003, Latin America accounted for half of total private-sector participation in infrastructure in developing countries.

In recent years, total spending in the region on infrastructure has averaged less than 2% of GDP. It is not enough. According to the World Bank, 58m Latin Americans lack access to potable water and 137m lack sewerage. In Brazil and Peru, less than a quarter of the main highways are classified as good. In surveys by the bank, 55% of businessmen consulted in Latin America cite infrastructure as a serious problem compared with just 18% in East Asia. The bank says the region will have to double or triple its current spending to bring its infrastructure up to the level of that in East Asia's fast-growing economies.

Chile- the exception…Now the roads that whisk the traveller into Santiago, the capital, from the airport are privately run, as are most other motorways and the airport itself. Nearly all Chile's water is supplied by private companies. Long-term “infrastructure bonds”, denominated in inflation-adjusted pesos, have financed much of the $8 billion investment in roads, airports and the like. Chile is planning to issue contracts for private investors to build and maintain public hospitals.

Brazil,…Infrastructure will be “a point of strangulation”, holding the rate of economic growth to less than 4%, predicts Adriano Pires of the Centro Brasileiro de Infra Estrutura, a consultancy. The federal investment budget is just 0.5% of GDP. Add in lower levels of government and state companies, and public spending on infrastructure totals about 2%—probably not enough to maintain the stock of infrastructure….Since Brazil has little scope for raising taxes and debt and cannot easily re-allocate spending, it will have to rely on the private sector over the next few years, believes Paulo Correa, co-author of a forthcoming World Bank report on Brazilian infrastructure. ..In Brazil 36% of concession contracts have been renegotiated, usually at the instigation of the government—above the regional average of 30%. All but the most profitable investments have been deterred by the high—though now falling—cost of capital.”

Related:

ABCDE Tokyo 2006- Video

A Primer on Risk Management: Applications to Latin America and the Caribbean

Mexico - Infrastructure public expenditure review

Ranking economic policies ($ required)

Asian Highway network gathers speed

Thought of the Day- Building Walls

“We live in a new age of globalization where everything and everyone move everywhere, right? Well not exactly; governments around the world are putting up barriers these days to stop people. The United States Senate has approved a triple-layered set of fences, snaking along for 370 miles, plus an additional 500 miles of vehicle barriers--all to keep Mexicans out. Tiny Botswana has just built a wall to stop people from Zimbabwe from flooding in. Israel is famously separating itself from the lands where most Palestinians live--something that has produced a dramatic drop in terrorism. The Indian army, impressed by this success, has now built a similar fence along its line of control in the disputed region of Kashmir. Saudi Arabia is currently building a wall to stop poor Yemenites sneaking across the desert sands. So when you next hear that we live in a borderless era, remember that it may be true for goods and capital but it is not true for people.”

Fareed Zakaria, in the latest show of Foreign Exchange

Removing binding constraints to growth?

I learned via P&G blog that the World Bank has launched a new fund called Africa Catalytic Growth Fund. One of the Fund’s targets is removing binding constraints to growth;

“Binding constraints to growth are removed through the ACGF framework for systematically targeting high performing and transformation countries, as well as regional integration initiatives that demonstrate evidence of specific constraints. Increased targeted aid for these countries can enable them to solve immediate problems that present barriers to their development, to implement critical reforms and provide them with the technical and financial assistance to give them the opportunity to break existing barriers, leading to higher sustained rates of growth.”

For Comment: I would like to hear your response after reading the above ‘humble’ objective of the program.

Related Podcast; Two Views on Global Development; Revive the Invisible Hand or Strengthen a "Society of States"?

Better than Trial and Error

A recent article in the Forbes magazine on randomized trials of development projects (via PSD blog);

“The Indian antipoverty group Seva Mandir runs an educational program that teaches 4,000 kids ages 7 to 10 math and reading and writing in Hindi. Seva Mandir had a problem: The teachers, recruited from the villages, often with only a tenth-grade education, would show up at the school only 60% of the time. While a teacher could be fired for excessive absenteeism, the remote locations throughout the impoverished state of Rajasthan ruled out regular monitoring.

A classic way of dealing with this problem is to throw money at it--which is what officials at Seva Mandir proposed to do. They would hire an additional teacher for each classroom, doubling the cost. But in stepped a group of development economists from the Massachusetts Institute of Technology. For a few years now the group has been testing antipoverty programs using the same scientific technique pharmaceutical researchers use to evaluate new drugs: the comparison of a randomized test group with a control group.

The idea is to divide a targeted population into two groups, then give the aid--microcredit, computers, textbooks, teacher incentives, health care programs--to one group but not the other and compare the results. "We aren't really interested in the more-aid-less-aid debate. We're interested in seeing what works, and what doesn't," says Abhijit Banerjee, a development economist at MIT who (with Esther Duflo of MIT and Sendhil Mullainathan of Harvard) helped found MIT's Poverty Action Lab.”

Abhijit himself was an ‘activist’as a student in India. There course on Evaluating Social Programs is also conducted at Centre for Micro-Finance in Chennai as well.

Corruption in Infrastructure

“A very promising research area is the use of randomized field experiments. A recent paper by Olken (2005) reports the results of such an experiment in Indonesia which measures missing expenditures in over 600 village projects. To do so, the author relied on a comparison of the villages’ official expenditure reports with estimates of the prices and quality of all inputs used in road construction and maintenance, each made by independent engineers. This approach allows a separation of the sample into sub-samples designed to test the effectiveness of various types of policies in reducing corruption.

What do these studies show? Most of the evidence confirms the expectations. First, the basic data analysis from the Global Competitiveness report suggests that the frequency with which firms have had to make undocumented extra payments or bribes to get connected to public utilities or to gain public contracts is, on average, negatively correlated with the income of the countries. These responses suggest that the poorer a country is, the bigger the corruption problem in infrastructure. While useful these data are also far from being precise. They are based on executive surveys which are known to have their share of problems. More importantly, it tells us little about what the government or the residential infrastructure users think about corruption. Second, corruption can be tracked to greater constraints on utility capacity and lower competition among utilities. This is found by Clarke and Xu (2004) for 21 Eastern European countries. They also find that public ownership in that region is more correlated with corruption than private ownership of utilities. Third, corruption can be associated with higher than expected costs. The most detailed studies ( Flyvbjerg and various colleagues) show that excess costs can be attributed to procurement rules that give bidders an incentive to announce low costs to increase their chances of winning projects, then renegotiate….

What can we do to reduce corruption in infrastructure? There are basically four main directions in which theoretical researchers have been pushing for over 20 years: (i) privatization, (ii) regulation and related processes, (iii) increased decentralization, and, (iv) adoption of participatory process in the selection, implementation, and supervision of projects. Since many countries have tried these recommendations, we now have enough new facts to analyze. This analysis is still very young but already yielding interesting results.”

Infrastructure: A survey of recent and upcoming issues

The paper comes from the Annual Bank Conference on Development Economics - ABCDE Tokyo 2006.

Here’s a podcast overview and a video of the opening session.

A related conference in South Africa- see especially the paper 2010 World Cup- Infrastructure Challenges.

PSD Blog has more on corruption.

Ten Reforms to Make the World More Conducive to Development

1. A “development box” in the WTO that legitimizes the use of trade and industrial incentives (including export subsidies) for developmental purposes (with burden of proof on those that argue the intervention is not developmental.

2. A recognition by the US, in particular, that prudential restrictions on capital flows (“capital account management”) in the developing world is an integral part of a development agenda.

3. Preparation of a “developmental impact statement” as a necessary requirement for any international agreement (including the costing out of the financial implications for LDCs, and laying out the modalities of how these will be financed).

4. Adoption of the “odious debt” notion, whereby debt contracts signed by oppressive regimes are no longer enforceable in Northern courts.

5. A 0.10% financial transaction tax on foreign currency transactions, with proceeds spent on global public goods.

6. Willingness to share information with LDC governments on Northern bank accounts held by LDC residents.

7. A temporary work permit scheme that allows workers from developing nations to spend 3-5 years in the advanced countries. (Revolving pool of workers; low and high skill; return important)

8. A multilateral agreement that disciplines the subsidization of DFI. (The only significant form of industrial policy that (a) is not banned; and (b) clearly transfers resources from developing to developed countries.)

9. Ending the monopoly of the World Bank in generating and disseminating policy ideas, particularly in the lowest income countries, by breaking it up into a number of competing agencies.

10. Moving the IMF’s Policy Development and Review (PDR) Department (and its staff) to a developing country, and rotating it in, say, among different African capitals every five years.

Those are list from Dani Rodrik.

See the rest of papers from the conference- Equality and the New Global Order, especially the one by Branko Milanovic.

Summary of Milanovic’s presentation by Jon Mandle at Crooked Timber;

“Does concern with global inequality require a different approach to international aid?
This presentation was very heavily empirical and gave an interesting insight into the theoretical difficulties of measuring inequality. He began by talking about the significance of the Gini coefficient and the extent of global inequality in income. But, he observed, any such measurement involves aggregation. So, if members of a wealthy country contribute to a poor country, it might turn out that some poor members of the wealthy country are subsidizing wealthy members of the poor country who are better off than they are. (See Rodrik’s example, above.) For many pairs of countries, this would be very unlikely to happen – there are few people in the poor country that have higher incomes than anyone in the rich country. But sometimes it might. For example, the wealthiest 15% of Chinese have a higher income than the poorest 5% of Germans. If we want truly progressive redistribution, we should have a way of measuring this likelihood. So, we need to take the internal distribution of a country into account. A progressive redistribution between countries should minimize the likelihood of regressive transfers. Furthermore, such redistributions should not make the national distribution more unequal. For example, even if the poor in a rich society are better off than the rich in a poor society, transferring from the former to the latter, although progressive, would increase the inequality within each country. The bottom line is that not only the richer, but also the more unequal a country is, the more it should contribute to the relief of global poverty.”

Related: World Inequality in the Second Half of the 20th Century

A Shocking Fact about Sub-Saharan Africa

Mankiw declares the war on poverty is being won citing Xavier Sala-i-Martin. Harry Clarke earlier cited the same paper.

But we have a long way to go. I was shocked to see the accompanying chart about Sub-Saharan Africa ( in most recent Global Monitoring Report). The report quotes, ‘Africa has been at the forefront of innovation in water and sanitation for the last 20 years by replacing central planning approaches with community-based management of village water supplies and by implementing technologies like easy-to-maintain hand pumps and low-cost pit latrines” (p.40).

Over 30 percent having no access to any form of sanitation is quite shocking.

Related Multimedia;

Is Global Inequality Rising? – an economic forum at IMF

What Are the Major Advances in Growth Theory since Solow?

Perspectives on Growth, Inequality and Poverty

Understanding the Growth, Poverty, and Inequality Nexus

Easterly Urges Independent Evaluation of Foreign Aid

Robert Bates on Governance Systems and Political Effectiveness

A couple of blogs discussing similar themes; Africa Unchained, Poverty and Growth blog, The World Economic Forum blog- they have got a new 'white papeer' on Strengthening Healthcare Systems in Sub-Saharan Africa.

Redemption from Original Sin

The latest Global Development Finance report from the World Bank indicates net private capital flows to developing countries reached a record high of $491 billion in 2005.

One factor for the rapid growth might be the taming of the so called ‘Original Sin’;

"When a country is hit by a piece of bad news or a bout of political uncertainty - as Brazil was recently - investors sell off their assets and the currency plummets. If this were all that happened, the main effect would be more competitive exports and the crisis would solve itself. But since so much of emerging-market debt is denominated in foreign currency, this produces a massive increase in debt-servicing costs. Fears of payment difficulties create a vicious circle.

The core of this phenomenon is that countries cannot borrow abroad in their own currency: external debt is overwhelmingly denominated in foreign currency. In the period 1999-2001 developing countries accounted for 8 per cent of the debt but less than 1 per cent of the currency denomination.

Some would say this is so because the policies and institutions of many countries lack credibility. But this phenomenon is not peculiar to developing countries with weak policies and institutions. It affects virtually all countries except the issuers of the five main currencies. It affects countries with low inflation, balanced budgets and a reliable rule of law. Since it is not clear what countries have done to bring this problem upon themselves, it is referred to as "original sin".

More on the report by Pablo and a podcast discussing the report.

See also the virtual book tour with Ricardo Hausmann on Other People's Money: Debt Denomination and Financial Instability in Emerging Market Economies

Intellectual Trespassing and Socratic Humility

Pablo points out that David Ellerman has published a new book; Helping People Help Themselves; From the World Bank to an Alternative Philosophy of Development Assistance.

In the forward Albert Hirschman writes;

“It is important to note the difference between help and perverse, dependency-creating alternatives to self-help. The task is to find forms of help that enable self-reliance and autonomy to come forward. It is time for deep organization experimentation in the ways of development assistance. This can be done by reflecting on the ideas and proposals of the following people:

• Saul Alinsky, with regard to the community organization and the community;
• Paulo Freire, with regard to the relation of the educator and the peasant (or urban poor) community;
• John Dewey, with regard to the relation between teachers and learners;
• Douglas McGregor, with regard to the relation between managers and workers;
• Carl Rogers, with regard to the relation between therapists and clients;
• Søren Kierkegaard, with regard to the relation between teachers and learners;
• E. F. Schumacher, with regard to the relation between the development agency and the country; and
• my own work with regard to the relation between the development advisor and the government.”

In the following piece Ellerman gives advice to the World Bank; Mixing Truth and Power; Implications for a Knowledge Organization ( discusses the issue of World Bank and its dealings with internal critics including the Easterly saga);

“On observing these exits, outside critics might compare the Bank more to the Catholic Church at the time of the Spanish Inquisition than to an open learning organization dedicated to the promotion of learning about development. Sophisticated insiders, however, point to the positive contrast with the IMF, where none of the above apostates would have gotten a foot in the door in the first place. Compared to the IMF, the Bank is a raucous debating society, and, in their view, the exits were unnecessary—particularly if the transgressors had shown a little more decorum and restraint….

Finally, on the complex questions of development where intelligent and knowledgeable people differ, alternative approaches should be allowed to compete and to be implemented within the confines of the same open learning organization. There is no royal road to learning, no road that bypasses real competition and local experimentation—even within the organization itself. One of today’s preeminent thinkers on development, Albert Hirschman of the Institute for Advanced Study, has often ridiculed the “rage to conclude” that tends “to cut short that ‘long confrontation between man and a situation’ (Camus) so fruitful for the achievement of genuine progress in problem-solving.”

Those in power in the organization should harken to the admission and admonition of John Maynard Keynes (the principal founder of the World Bank): “But we all hate criticism. Nothing but rooted principle will cause us willingly to expose ourselves to it.” Instead of aspiring to Official Truths, the organization should aspire to a self-critical falliblism or Socratic humility of knowing that one does not know, and then on the basis of “rooted principle” to promote the knowledge processes shown to be “so fruitful for the achievement of genuine progress in problem-solving.”

Related;

Helping people help themselves - toward a theory of autonomy-compatible help- a working paper by Ellerman

David Warsh discusses the book

The Rhetoric of Reform

-The cartoon is by this well known Kenyan Cartoonist

A Lot of Noise from an Ex World Banker

"Is it time for a financial sector assessment? And, if so, will she be able to keep Basel out of her hair? "

Per Kurowski, a former Executive Director at the World Bank was kind enough to post a lot of interesting comments on a couple of our posts. I haven’t seen his book referred to by any World Bank bloggers- I wonder what might be the reason. I’ve collected some of them below;

World Bank and Dictators

“For a start it is not and cannot ever be the role of World Bank to take upon its shoulder the responsibility for fighting dictatorships, whenever and wherever they are. That responsibility has to be shared by many more, preferably all. There are thousands of way you can get rid of a dictator, including extravagant one as offering 5 million visas to all people in Turkmenistan so that they are all able to go and live elsewhere and the dictator dies of loneliness but, to serve a useful purpose, they should all first be able to answer the question of what to do after the dictator is gone? Build a nation? Outsource the government? Send them all to universities, so that they can be taxi drivers in New York?

It is a very delicate matter to get involved in trying to change other peoples or other countries life, and pure good intentions are not enough. That said and reading the description of the Father of the Turkmen People he sounds like a very insecure person with a tremendous inferiority complex and in need of asserting his importance anyway, anywhere, anytime, something that is frequently quite useful for profiling dictators in general. If this is right, one way to do it, a peaceful alternative, would be to rob from him all his mantles of respectability, laughing and scorning him out of power. Careful though, don’t confuse the target, you do not want to scorn the belief and the blind faith in their leader that many locals might already have developed. If this is the chosen strategy, it would then be clearly contra productive to have a technician from the World Bank go and have a serious talk with him…among technicians. By the way since so many governments keep themselves elevated only by means of the lot of hot air they inflate themselves with, we should not underestimate the risk of a catastrophic domino effect.
But, do not think for a moment that my comments are in jest. No, it is way too important for the world to find a mechanism to get rid of the rogues, in the name of that overriding sovereign right we have as citizens of a very small and interrelated planet. We cannot and should not allow for too many too infectious diseases to poison our planets future."

Fighting Poverty with the Espresso Book Machine

"This machine is best for that odd or old special book that it would be to expensive to have in the inventory. As you would have to ship the machine, the paper, the inks and what have you plus arrange for the university in Mozambique to duly pay the royalties to the author I seriously doubt it would work for our friend of Mozambique. But you know the saddest part of it all? That is that in his desperate plea for a book in microeconomics, he might actually get a really bad one. A book that got printed just because the author was the friend of someone, or in cahoots with someone. "

Don’t Worry, Everybody will get a chance to be rich

“Don’t Worry, Everybody will get a chance to be rich” YES!... And perhaps even the rich will get their chance of being a little bit poorer. Whatever, it is clear that we do not have the tools for measuring where we really want and should be heading.

For instance, the GNP figures, currently just the result of adding, could perhaps explain more if we also did some subtractions; like of the cost for consuming more than your world equitable share of energy; the cost of developing an energy addiction; and perhaps even the cost of the time wasted daily answering automated phone calls from computers that want to get more intimate with your family’s finances."

Budget Support – Another Passing Fad in the Development Community?

"I find absolutely nothing rhetoric about the need of country ownership but indeed much abusive and self-serving interpretations of what it really means and, foremost, on how its existence is evidenced. In a country where there exists a generalized commitment for taking the next step up the ladder of development, almost any help in any way will do some good. Where this national sense of responsibility and a real we want, we can, and we will do it attitude does not exist, almost any help, in any way, would do little good and could even be harmful. Now these are the facts, and their recognition is a must, even though of course that does not make the life of a developing institution any easier… but, then again why should their life be easy?"

Advice to Mr. Wolfowitz on Fighting Corruption

"In relation to the World Bank’s fight against corruption I have no doubts whatsoever that the most important first step it needs to take is to make perfectly clear what it cannot be expected to do. For the World Bank to help create the impression that certain risks of corruption are effectively taken cared off, would be collaborating and camouflaging for corruption.

For this I would recommend that all projects include in their documentation, a very simple one page Public Notice that lays out the most important risks of corruption in the operation, making clear what the World Bank is doing to diminish them but, much more importantly, what is not in their hands to do. That page should then surf transparently the web in order to enlist the civil civilians in the fight.

As an institution the World Bank is always well served by a good dose of humility and should always fight the corruptive arrogance of believing it can do it all on its own. The world needs, more than ever, a World Bank that needs the world."

Mr. Metaphor and the First Law of Petropolitics

Now go and read his book, Voice and Noise.

Budget Support -Does US use it to buy votes at UN?

Recently there has been much talk about the UN reform, but how do you restructure UN so that powerful nations are not able to bribe poorer countries to vote? A paper at Kiel Institute alleges that US aid buys voting compliance in the UN;

“This paper empirically investigated whether US aid has had an influence on voting patterns in the UN General Assembly over the period 1973-2002. Compared to other bilateral donors, notably the Netherlands and Scandinavian countries, the United States is widely believed to be less altruistic in allocating aid for humanitarian and developmental reasons. Apart from pursuing economic self-interests, US aid is supposed to be used to buy political support from recipient countries. The hypothesis that aid is applied as an instrument to induce recipients voting in line with the United States in the UN General Assembly is based on two observations: (i) various UN members are susceptible to bilateral pressure, and (ii) UN voting is considered relevant by the United States in defining bilateral relationships and foreign policy. As the main innovation of this paper, we used disaggregated aid data in order to assess whether aid was “effective” in inducing recipients to vote in line with the United States in the UN General Assembly. Different forms of aid may differ in their ability to induce political support by recipients. In particular, program aid (notably in the form of general budget support), grants, and untied aid are most likely to shape UN voting behavior. These links have been ignored in the previous literature.

Accounting for the potential endogeneity of aid, our results provide strong evidence that US aid has indeed bought voting compliance. More specifically, the results suggest that general budget support and untied grants are the major aid categories with which recipients have been induced to vote in line with the United States. When replicating the results for the other G7 countries, however, we did not find a similar pattern.”

Related;

UN Fact File – at Telegraph UK

The Oil-for-Food Scam: What Did Kofi Annan Know, and When Did He Know It?

An earlier post about Budget Support

Budget Support – Another Passing Fad in the Development Community?

OECD has made an ‘independent’ evaluation of development aid delivered in the form of ‘budget support’ (currently some $5 billion or 5 % of all aid)- as opposed to project aid;

“The evaluation points out that when a developing country’s government has the political will to reduce poverty, budget support can be an effective way for donors to deliver aid. Overall, it has helped to strengthen the relationship between donors and developing country governments, and encouraged better coordination between different donors. It has helped to strengthen planning and budget systems, making them more transparent and therefore accountable. It has also helped to prioritise areas of expenditure that target the poor like health and education.

The team of evaluators found no clear evidence that budget support funds were, in practice, more affected by corruption than other forms of aid.

They noted however, that donors should be prepared to better analyse political risks and gauge support for poverty reduction by a government. In some cases, the evaluation found that political risks had been under-estimated by donors.

While there were increases in expenditure in areas such as health and education, any increase in the incomes of the very poor is not yet evident.”

My Take; Every now and then development practitioners need compelled to reinvent themselves and delivering aid through ‘budget support’ may be fashionable way to fight poverty with the rhetoric of country ownership and predictability of aid. My worry is that this might be pushed too far without realizing that budget support is not a panacea to the deep rooted problems of the developing world. People in international institutions will find justification for anything their bosses tell them with fancy equations and econometric jargon. Look at this publication- Budget Support As More Effective Aid?. This book reminded me of Steven Pinker’s book Words and Rules- where he looks at irregular verbs from every imaginable angle of scholarship. The publication looks at budget support from every imaginable angle available to an economist. Then there is also the issue of fungibility which will always remain in the closet.

Related Links;

- Owen has a related post at CGD

- Managing Volatility and Crises: A Practitioner's Guide

- Are donors to Mozambique promoting corruption?

- Earlier related posts; World Bank and Dictators, Fighting Poverty with the Espresso Book Machine, From the Coffee House to the World Bank - Institutions and Development, ‘Fearful Pig’ is resigning as the President

Incredible India

India has got a lot more challenges that we thought as a recent World Bank report on malnutrition highlights (I can’t guarantee the World Bank link will work, they don’t seem to be able to get their website to work properly);

“The prevalence of underweight among children in India is amongst the highest in the world, and nearly double that of Sub-Saharan Africa. In 1998/99, 47 percent of children under three were underweight or severely underweight, and a further 26 percent were mildly underweight such that, in total, underweight afflicted almost three-quarters of Indian children. Levels of malnutrition have declined modestly, with the prevalence of underweight among children under three falling by 11 percent between 1992/93 and 1998/99. However, this lags far behind that achieved by countries with similar economic growth rates.

Undernutrition, both protein-energy malnutrition and micronutrient deficiencies, directly affects many aspects of children’s development. In particular, it retards their physical and cognitive growth and increases susceptibility to infection, further increasing the probability of malnutrition. Child malnutrition is responsible for 22 percent of India’s burden of disease. Undernutrition also undermines educational attainment, and productivity, with adverse implications for income and economic growth.

Disaggregation of underweight statistics by socioeconomic and demographic characteristics reveals which groups are most at risk of malnutrition. Most growth retardation occurs by the age of two, and is largely irreversible. Underweight prevalence is higher in rural areas (50 percent) than in urban areas (38 percent); higher among girls (48.9 percent) than among boys (45.5 percent); higher among scheduled castes (53.2 percent) and scheduled tribes (56.2 percent) than among other castes (44.1 percent); and, althoughunderweight is pervasive throughout the wealth distribution, the prevalence of underweight reaches as high as 60 percent in the lowest wealth quintile. Moreover, during the 1990s, urban-rural, inter-caste, male-female and inter-quintile inequalities in nutritional status widened….

Micronutrient deficiencies are also widespread in India. More than 75 percent of preschool children suffer from iron deficiency anemia (IDA) and 57 percent of preschool children have sub-clinical Vitamin A deficiency (VAD). Iodine deficiency is endemic in 85 percent of districts. Progress in reducing the prevalence of micronutrient deficiencies in India has been slow. As with underweight, the prevalence of different micronutrient deficiencies varies widely across states.”

A related post at Spontaneous Order.

Politician Proof Policy

Given the nonsense that you often hear in the development circles, the following paper by James Robinson is a breath of fresh air.

“In this paper I discuss the nature of the political constraints that the World Bank faces in delivering basic services to the poor. The main problem arises because the Bank has to work through domestic governments which have political aims different from helping the poor. The conceptual approach attractive to economists and central to the WDR 2004 is the notion of politician proofing. Given that political incentives derail good policies, how can those policies be politician-proofed? I argue that evidence and theory suggests that such an approach is ultimately futile, basically because we simply do not understand the relevant political incentives. I discuss alternative policy strategies and conclude that what is required is a much more fundamental assessment of what type of political equilibria deliver services to the poor. As I illustrate with the case of Botswana, once the political equilibrium is right, everything goes right and politician proofing is redundant.”

As Robinson says;

"It's basically all a matter of politics, which is something that most economists can't see. There's a tradition in economics of thinking of politics as a kind of irritation, which is fundamentally misleading as a vision of society. You can't have a politics-free economics. Of course, political scientists would like to have an economics-free political science, which is not very interesting either."

Robinson has co-authored a book with Daron Acemoglu, ‘ECONOMIC ORIGINS OF DICTATORSHIP AND DEMOCRACY: Economic and Political Origins’ in which they argue;

“..democracies often collapse in highly polarized societies in which a pronounced gap exists between rich and poor. When the wealthy control the government, they enact policies that perpetuate their own dominance, but when the poor gain power they tend to put extremely radical programs in place such as land reform or income redistribution, arousing violent resistance on the part of opposition groups.

The United States avoided this problem because there was egalitarian access to land and economic opportunity, and thus less incentive for one group to try to monopolize political power. But in Robinson's view, the stability of the American government was achieved as the result of a trade-off, rather than through any superior moral qualities….The United States solved some of the problems that Latin America faced by disenfranchising African Americans, who had almost no political power in the South until the Voting Rights Act of 1965,"

Unlike in Botswana, look at what’s happening to the neighbor Zimbabwe where an ageing dictator is bringing the country down the drain; inflation is now close to 1000 percent and 80 % unemployment. Imagine politician proofing policy in Zimbabwe.

Related; Acemoglu talk discussing institutions and development.

Thank You for Smoking

This month WHO will be celebrating the World No Tobacco Day, declaring;

“Tobacco addiction is a global epidemic that is increasingly ravaging countries and regions that can least afford its toll of disability, disease, lost productivity and death. The tobacco industry continues to put profits before life; its own expansion before the health of future generations; its own economic gain ahead of the sustainable development of struggling countries.

…The purpose of World No Tobacco Day 2006 is to encourage countries and governments to work towards strict regulation of tobacco products. We will do this by raising awareness about the existence of the wide variety of deadly tobacco products. Regulation should also help people get accurate information, remove the disguise and unveil the truth behind tobacco products – traditional, new, and future.”

My suggestion on how to celebrate the day; watch the movie, Thank You for Smoking (hat tip: Tom Palmer)

One reviewer comments;

“Although the movie doesn't stake out much new ground in the tobacco debate, Reitman delivers an explicit message of personal responsibility and individual choice that rarely comes from Hollywood and is almost never associated with smoking in polite company. Whereas the novel's version of Nick Naylor views personal responsibility as a convenient diversion from the unfortunate lethal side-effects of smoking, Reitman's Naylor comes to see that it's the other way around: The emotional nature of the health appeals obscures the importance of individuals taking responsibility for their own choices—and parents taking responsibility for teaching their kids to make informed decisions.”

Related Links:

- The film director’s blog

- Tradable smoking pollution permits (via Idea Shop)

- The Marlboro Man – (this is one of my favorite Art blogs)

- Economics of Tobacco Control Toolkit – development community are crazy about Toolkits

- The Millennium Development Goals and Tobacco Control

- The tobacco atlas

- 5 Year Anniversary of the Tobacco Settlement; Since 1998, an arbitration panel has awarded more than $13 billion in fees to lawyers who represented states in litigation against Big Tobacco.

- An earlier post about personal choice and responsibility

Fact Attack on Globalization

Scientific American has overview article on ‘Does Globalization Help or Hurt the World's Poor’ by Pranab Bardhan. Some statistics from the article are summarized below.

- Between 1980 and 2000, trade in goods and services expanded from 23 to 46 percent of gross domestic product (GDP) in China and from 19 to 30 percent in India.

- Between 1981 and 2001 the percentage of rural people living on less than $1 a day decreased from 79 to 27 percent in China, 63 to 42 percent in India, and 55 to 11 percent in Indonesia.

- Of the more than 400 million Chinese lifted above the international poverty line between 1981 and 2001, three fourths got there by 1987.

- Between 1981 and 2001 the fraction of Africans living below the international poverty line increased from 42 to 47 percent.

- A recent study by Gordon H. Hanson of the University of California, San Diego, which took into account only people born in a particular region (thus leaving out migrants), found that during the 1990s average incomes in the Mexican states most affected by globalization increased 10 percent more than those least affected.

- In 2001 Naila Kabeer of the University of Sussex in England and Simeen Mahmud of the Bangladesh Institute of Development Studies did a survey of 1,322 women workers in Dhaka. They discovered that the average monthly income of workers in garment-export factories was 86 percent above that of other wage workers living in the same slum neighborhoods.

- In 1993, anticipating a U.S. ban on imports of products made using child labor, the garment industry in Bangladesh dismissed an estimated 50,000 children. Wages and conditions in garment factories are poor by world standards but better than those in alternative occupations such as domestic service or street prostitution.

- South Korea and the Philippines had similar per capita incomes in the early 1960s, but the Philippines languished in terms of political and economic institutions (especially because power and wealth were concentrated in a few hands), so it remains a developing country, while South Korea has joined the ranks of the developed.

- The international coffee market, for example, is dominated by four companies. In the early 1990s the coffee earnings of exporting countries were about $12 billion, and retail sales were $30 billion. By 2002 retail sales had more than doubled, yet coffee-producing countries received about half their earnings of a decade earlier.

- The Asian financial crisis of 1997 –following speculators' run on the Thai currency, the baht, the poverty rate in rural Thailand jumped 50 percent in just one year. In Indonesia, a mass withdrawal of short-term capital caused real wages in manufacturing to drop 44 percent.

- The annual loss to developing countries as a group from agricultural tariffs and subsidies in rich countries is estimated to be $45 billion; their annual loss from trade barriers on textile and clothing is estimated to be $24 billion. The toll exceeds rich countries' foreign aid to poor countries.

- Globalization does not explain the differing fates of Botswana and Angola, both diamond exporters, one democratic, the other ravaged by civil war.

Infrastructure has become Cool

Ken Rogoff has a new column up, advising policy makers to focus on infrastructure;

“But the risks are two-sided, and sound economic policy is just as much about capitalizing on good times as avoiding bad ones. Economic gurus at places like the World Bank have developed a ridiculously long list of steps that countries should take to raise their growth rates (the so-called “extended Washington Consensus”). Like maintaining good health, it is not enough to concentrate on a single component. But if there is one area where obvious opportunities exist, and where policy can really make a difference, it would have to be infrastructure investment…..

But there are ways to waste less. Transparency in procurement works wonders. So, too, does private sector involvement. The Nobel laureate economist William Vickrey argued tirelessly in favor of privately financed toll roads. Private oversight can often produce better and more efficient construction, and, in theory, toll roads help alleviate traffic congestion. (Ironically, Vickery died while sitting in a traffic jam.) Even China, which has added more than 50,000 kilometers of roads and dozens of airports over the past five years, makes use of private financing….”

As Rogoff is rumored to be a candidate to replace Anne Krueger, Deputy Managing Director at IMF, it is well worth listening to him.

Related Links:

-Open Letter to Stiglitz – which has become something of a classic. See the actual debate between Stiglitz and Rogoff. See also his interview.

- Rogoff's publications while he was at the Fund and his recent columns.

- Infrastructure Lessons – World Bank publication

- Pablo has got lot of interesting posts on infrastructure

Don’t Worry, Everybody will get a chance to be rich

World Bank blogger Ignacio comments on a speech of Edward Prescott, 2004 Noble laureate in economics.

“…economic integration would be the main driver for growth and development.

For example, according to Prescott, the original European Community countries were able to catch-up with the US in the second half of the 20th century because they became a free trade club, as the US had done before. The reason why Latin America is not catching up would be that it has not adopted this US/EU type free trade club.

In his optimistic conclusion, Prescott forecasts that in the long term the whole world will catch up with rich countries, which will continue to double their living standards every generation. This forecast is conditional on all countries becoming economically integrated, and on all of them maintaining economic sovereignty. He sees the European Union expanding (including Turkey), and a functioning NAFTA, with India and China being big enough to constituting a trading club in themselves and the rest of Asia maybe becoming a trading club.”

Prescott has been talking of about wealth of nations for some time; see the paper Changes in the Wealth of Nations. In an interview, Prescott says;

“I think the question, "Why isn't the whole world rich?" is the most important question facing economists. I think we've learned that just accumulating more capital—that is more machines, factories, and roads—is not sufficient to become rich. Accumulating more human capital, as well, is not sufficient either. Both are important and essential but, given the economy wide productivity parameter, these factors of production will be accumulated. As I see it, what we need is a theory of this parameter, and I expect that the rules of the game a country sets up will account for the big difference in this number across countries.”

Related Links

- Time Inconsistency

- A Nobel for Real Business Cycles

- The Transformation of Macroeconomic Policy and Research-Nobel Lecture

- A Brief on the 2004 Nobel Prize Winners from the Economist

Q&A on World Bank and Corruption

Council of Foreign Relations has got an interesting briefing on the World Bank’s new strategy relating to corruption;

“In April Wolfowitz called corruption a chief threat to development in poor countries, saying it distorts markets, lowers investment, and "encourages people to apply their skills and energies in nonproductive ways." He has made anticorruption a major theme of his first year as president and vowed to set in motion a country-by-country process to attack the problem. The moves come at a time of increasing scrutiny of the bank's own role in corruption. A recent study by U.S. News & World Report quotes analysts as saying more than 20 percent of the funds disbursed by the bank each year may be wasted through corrupt practices. A Northwestern University professor, Jeffrey Winters, says his research found nearly 100 billion dollars of World Bank funds have been squandered by corruption over the years. The bank rejects these claims and says it is difficult to calculate how much of its funds have been distorted by corruption.

But experts say there is a clear correlation between corruption and stagnant growth on the world's poorest continent: Africa. The African Union has said corruption costs the continent $148 billion per year. The Heritage Foundation says two World Bank entities provided nearly $70 billion [in 1995 dollars] in development assistance to 48 countries in sub-Saharan Africa between 1980 and 2002. But at least twenty-three of those countries experienced negative growth in gross domestic product (GDP) in that period. Bruce Rich, an expert on multilateral banks for the organization Environmental Defense, says the World Bank's problems stem from a failure to ban corrupt contractors and companies from its programs and investigating fraud by government officials. "I think you have to start somewhere and the bank can start by ensuring that its own loans are clean, which it didn't do in the past.”

The most recent Global Monitoring Report promises to be part of this effort quantify the fight against corruption and improve governance in poor countries.

“Governance and corruption often are used synonymously. But they are quite different concepts—and conflating them can be very damaging. Public sector governance refers to the way the state acquires and exercises the authority to provide and manage public goods and services—including both public capacities and public accountabilities. Corruption is an outcome. It is a consequence of the failure of any of a number of accountability relationships that characterize a national governance system—from a failure of the citizen-politician relationship (which can lead to state capture) to a failure of bureaucratic and checks and balances institutions (which can lead to administrative corruption). Fighting corruption requires strengthening governance system across its core dimensions.”

A French journalist in the press conference on the Report asked the following question;
“You highlight how important it was to fight corruption and how important was good governance. I'm wondering why the World Bank gave this decision point to Congo while there was plenty of evidence that the country was stealing oil and steel monies through sham companies in the Bahamas and the British Virgin Islands.”

Watch the conference to find out the World Bank response.

Related Links:

- World Bank Stalks Corruption

- Interview with John Githongo and George Ayittey

- Podcast discussion with the lead author of Global Monitoring Report.

- Other posts related to corruption

The Psychology of Terrorism

British Muslim convert Abdul-Hakim Murad, narrates the following story of a leader of radical Islamic group in Egypt;

“I used to know, quite well, a leader of the radical 'Islamic' group, the Jama'at Islamiya, at the Egyptian university of Assiut. His name was Hamdi. He grew a luxuriant beard, was constantly scrubbing his teeth with his miswak, and spent his time preaching hatred of the Coptic Christians, a number of whom were actually attacked and beaten up as a result of his khutbas. He had hundreds of followers; in fact, Assiut today remains a citadel of hardline, Wahhabi-style activism.

The moral of the story is that some five years after this acquaintance, providence again brought me face to face with Shaikh Hamdi. This time, chancing to see him on a Cairo street, I almost failed to recognise him. The beard was gone. He was in trousers and a sweater. More astonishing still was that he was walking with a young Western girl who turned out to be an Australian, whom, as he sheepishly explained to me, he was intending to marry. I talked to him, and it became clear that he was no longer even a minimally observant Muslim, no longer prayed, and that his ambition in life was to leave Egypt, live in Australia, and make money. What was extraordinary was that his experiences in Islamic activism had made no impression on him - he was once again the same distracted, ordinary Egyptian youth he had been before his conversion to 'radical Islam'.

This phenomenon, which we might label 'salafi burnout', is a recognised feature of many modern Muslim cultures. An initial enthusiasm, gained usually in one's early twenties, loses steam some seven to ten years later. Prison and torture - the frequent lot of the Islamic radical - may serve to prolong commitment, but ultimately, a majority of these neo-Muslims relapse, seemingly no better or worse for their experience in the cult-like universe of the salafi mindset.”

What’s best way to deal with this ‘salafi burnout’. Psychologist Jerrold Post explains;

“You don't have terrorism where you have a prosperous society where a bright, educated kid can succeed. And we have for the terrorists all too often a feeling of shame and humiliation, which the act of terrorism gives them a sense of power. Power as opposed to powerlessness, pride as opposed to shame. So it is necessary to create pathways where within society they can succeed rather than being blocked, as is currently the case. And this argues for much more funding to help these societies open up, to reform educational systems. Also the role of parents is critical here. In many Muslim societies the parents are supposed to be proud of 'my son the martyr', so to speak. Yet no one wants to lose a child. Nasra Hassan, a Pakistani Muslim woman who works for the UN, has interviewed what she called 250 human bombs and their families. And one of the mothers who lost her first son to a martyrdom operation and her second son was on the way said, 'If I could, I would take this scalpel, cut open my heart and sew my son inside to protect him'. How can we mobilise families to not encourage or to inhibit their children from moving in this pathway?

The main thing I would like to leave with your audience is that when hatred has been bred in the bone, I have a picture of a three-year-old girl holding a hand grenade, of an eleven-month-old infant with a toy suicide bomb belt, when you're starting at this age, it's very hard to do this. Everything we know about culture change and attitude change says it takes a long time. So I don't see any quick solutions here.”

The road ahead is not an easy one.

Related Links:

- The Psychology of Terrorism; Radio National podcast discussing the historical roots of terrorism with two experts in the field, Anne Speckhard and Jerrold Post. Here is the transcript.

- Martyrdom and murder

- The rational response to terrorism

- Genocide and Terrorism: Probing the Mind of the Perpetrator, article by Juan Cole.

- The Global Ideology of Fear

- Earlier related blog posts; Bin Laden Studied Economics and Amartya Sen and the War on Terrorism

- Blogs covering terrorism; Terrorism Unveiled and Counterterrorism Blog

World Bank and Dictators

Ex-World Banker Dennis de Tray offers some advice for EU in its dealings with Turkmanistan’s dictator;

“I was until recently World Bank director for the five Central Asia “stans” (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan). The World Bank had no program in Turkmenistan because we could find no way to do anything remotely positive for its people. Natural gas is important to Europe. But it is the money Mr. Niyazov receives from natural gas sales that keeps him in power. While I am a strong advocate of engagement, in this case the European Parliament should reject Turkmenistan’s “most favored nation” status. If it does not, the EU must accept responsibility for supporting the ongoing destruction of a country and a people.”

Turkmenistan, a country of 5m people in Central Asia, …

“used to be a Soviet vassal state, ruled by a Moscow stooge called Saparmurat Niyazov. When the Soviet Union collapsed, Mr Niyazov deftly reinvented himself as a Turkmen patriot, the “Turkmenbashi” or father of all Turkmen. He banned all opposition, declared himself president-for-life and erected golden statues of himself everywhere, including one in Ashgabat, the capital, which revolves with the sun.

A collection of his thoughts on philosophy, ethics and Turkmen culture, the “Rukhnama” (“Book of the Soul”), forms the basis of the school curriculum. Even to pass a driving test, his subjects must show their knowledge of this “sacred” text. The children who have passed through the country's schools most recently are now nearly as brainwashed as North Koreans.”

On the state of education in the country;

“Basic education has been reduced to nine years, and university from four years to two. From September to November, students are usually sent to cotton fields for the harvest. The number of students in higher education has dropped from 40,000 at independence to 7,000 or so today. Those who can afford it go to study in Moscow or other former communist capitals, perpetuating a tradition from Soviet times. Over 12,000 teachers were fired a few years ago, and those who have kept their jobs are paid badly, if at all. Classes are overcrowded, and grades as well as admission are often for sale.

The curriculum has been increasingly geared towards vocational skills—subjects deemed useless such as physical education and arts were eliminated—and political indoctrination. A substantial part of school time is now dedicated to learning passages from the “Rukhnama” (Book of the Soul), in which President Saparmurat Niyazov rambles on about practically everything, from proper social behaviour and morals to the motherland and its glorious leader. The book and its author have acquired quasi-religious status….As a result, the education level has collapsed. With over 45% of the population under 19 years old, general knowledge and critical thinking—let alone vaguely accurate views of the outside world—are vanishing rapidly.”

The situation appears to be grim in the country, as one human rights campaigner from the country comments;

“It's the law of the land in Turkmenistan that attempting to "sow doubt about the foreign and domestic policies of the one and eternal President of Turkmenistan, the Great Saparmurat Niazov, Father of the Turkmen People," is treason, and is punishable by up to life imprisonment.

I was in prison with people doing time for this "crime." ….

There's a joke that there are three types of people in my country - those who were in prison, those now in prison, and those about to get thrown into prison.

For people in Turkmenistan the only hope is in international organizations such as the United Nations, the European Union and the Organization for Security and Cooperation in Europe. They believe that international pressure on the Turkmen dictatorship will somehow lighten their burden.

I owe my freedom to the international community. I urge the EU to be consistent in standing up for human rights, to demand real reform of the Niazov regime before it gives his government a trade agreement. Please don't rob people in Turkmenistan of their hope for real change.”

For Comment: Is disengagement the best way to deal with wealthy despots and dictators?

Related Links:

- The most recent economic reports from the World Bank and IMF on Turkmanistan.

- Relations with Iran and China and other current news from Turkmanistan Project of Open Society Institute

- A Survey of the Economic Relations Between Iran and the Republic of Turkmenistan

- Background Brief on the country from Institute for War & Peace Reporting.

- ICT at a Glance –Turkmanistan

- Blogs covering Turkmanistan issues; Registan, Neweurasia, Global Voices Online, Publus Pundit, and Brian’s Study Breaks.

Aid Olympics

Other Free Reads from the latest Economist;
- A guide to womenomics
- Top Exporters
- Quality of Living
- Profile of Alan Lafley, Head of Procter & Gamble
- Islam in Europe
- Race and Medicine
- The language business in China
- The last conquest of Jerusalem
- The perils of literary realism in the United States
- The return of populism in Latin America

Fighting Poverty with the Espresso Book Machine

The World Bank has started the first Print On Demand (POD) device - the Espresso Book Machine (EBM);

"The new low cost and fully automatic book machine, developed by On Demand Books LLC (ODB) with initial funding from the Alfred P. Sloan Foundation, will revolutionize book sales by printing and binding a single copy of a book at the point of demand. EBM can produce 15 - 20 library quality paperback books per hour, in any language, in quantities of one, without any human intervention. On a global scale, this would eliminate the costs of shipping and warehousing, returning and pulping unsold books, while allowing simultaneous global availability of new books. Print jobs can be initiated from the machine itself or from any locally connected computer using nothing more than a web browser.

Young ambassadors from DC high schools and universities will be present to officially print the first book by a retail customer at the World Bank InfoShop, the first site to offer this service. Buying a book will eventually be like getting cash from an ATM. You choose a title, insert a credit card to pay for the book and walk away with the finished book a few minutes later."

Is this a good way to fight poverty? I don’t know. If you were to ask Easterly he would have plenty of things to say. My challenge is for development institutions to be able to provide every student in the developing world the material he/she needs to develop their minds to the fullest like the following student from Mozambique.

Hi! my name is Guido Da Silva, and I am a student of economic course at Eduardo Mondlane University - Mozambique.
would you send me a book of Microeconomic, I need it very much.
My post address is
Guido Da Silva
Av. Josina Machel,200
3º Andar Flat 10
Maputo
Mozambique

(I found it in the comments section of a post at New Economist blog)

Related Link:

- Google’s Plan to Digitise the World’s Libraries and its implications.

A Carnival of Podcasts for the Weekend

The Beautiful Mind…some recent fascinating insights into the causes and risk factors for schizophrenia. And young woman tells of her lonely battle to tame her fragmented mind.

Seafood and the Mind…some remarkable findings from a British study looking at the effect of giving fish oil supplements to children with ADHD and learning difficulties. And the figures showing significantly lower depression rates in countries which eat lots of seafood may give you an idea for tonight’s dinner!

A Mother's Nightmare…A baby is dead. A mother is in jail. She maintains her innocence. A seven-year-old may be to blame.

God: An Itinerary

House Design and Violence … Architect Claire Bennett says the way we design our modern houses is encouraging violent behaviour.

How design drives capitalism…Professor Robert Reich in his book The Future of Success outlines how our unfulfilled desires drive capitalism.

Microsoft and the Australian tribe… Anne Kirah is an anthropologist, her skill honed by fieldwork in immigration centres. Now she works for Microsoft as chief anthropologist.

The changing role of government… Shadow Finance Minister Lindsay Tanner of Australia

China: innovation and productivity

Literary animals- ending the debate of nature versus nurture

Trust and charities… Don D'Cruz has been casting a critical eye on the aid industry for some years, at first when he worked with the Institute of Public Affairs, and now as an independent commentator.

Governing by Network … Back in the 1980s there was a wave of changes to governments – increasing privatisation and outsourcing, a new recognition that governments didn't actually have to deliver all the services for which they accepted responsibility. Bill Egger's book Governing by Network seeks to take this process much further and has gradually been gathering a reputation as something of a signpost to the future

The art of demotivation …Recent data says that people are increasingly unhappy with their jobs. The root of the problem says Dr EL Kirsten is the 'noble employee myth', the idea that if people are unhappy at work, there must be some problem with the organisation. But could it be that we all just expect too much from our work and the organisations we work with.

Private education in developing countries

Genetics of nicotine dependence

Don’t worry if you’re obsese …Research from the US suggests that the risk factors from being overweight or obese may not be as big as has been suggested

Tim Flannery, whose book The Weather Makers, has made a considerable impact around the world, explains why he is not put off by those who are unconvinced by warnings about climate change.

David Ellyard has produced a book Who Discovered What When, about the superstars of science from the past 500 years. The list is both reassuring and surprising. Who is missing? Who snuck in? Where are the Australians?

Big Ideas Are Better…The opening night debate from the 2006 Ideas Festival in Brisbane. In front of a crowd of 1600 people, six guest speakers debate the assertion that big ideas are better (than small ones).

Climate change…Meet the law professor who's off to the North Pole to focus atttention on global warming.

Criminals and privacy… Last week, in New Zealand, a convicted paedophile was awarded $20,000 for 'breach of privacy' after police distributed a leaflet bearing his photo, his address and his criminal record. Legitimate community policing or vigilantism?

Date rape…Similar fact evidence: six girls make sexual assault allegations against one boy – so should there be one trial, or six different trials? If a jury hears six different stories is that prejudicial to the accused, or is it legitimate, probative evidence?

The Life and Grimes of Rudolf Diesel- the creator of diesel engine

Fruits of War…war what’s it good for

Triangulation…Most of us know about the square on the hypotenuse, but Pythagoras’s theorem is not simply a way of computing hypotenuses. It is an emblem of the very process of proof itself.

Knowing what you didn’t know you knew … How can we acquire knowledge about anything? If you’ve already got it, you don’t need it and, if you haven’t got it, you don’t know you need it. This is one of the questions that Plato asked in his dialogue Meno …

Does science tell the truth?

Niall Ferguson on Islam and demographics

Latest Science Show from Radio National … disappearing tea spoons/ fish oil and brain development

Sceptical and Spooked … Inveterate sceptic, Will Storr, takes on poltergeists and Electronic Voice Phenomena to test his philosophical atheism.

The Nazi Hunters … Prosecuting fugitive Nazis has not been easy, says Ephraim Zuroff, director of the Simon Wiesenthal Centre, but the pursuit of justice is paramount, even when it’s too little too late

Globalisation Institute podcast interview with with Dan Ikenson, a Trade Policy Analyst at the Cato Institute in Washington DC. ..discusses the rising anti-Chinese feeling in the US Senate, the proposed 27.5% tariff on Chinese goods, and the issue of whether Americans should be worried about the rising US trade deficit – and whether this is sustainable.

A brand new series of podcasts from the World Bank; Urban Development and Globalization , Trade and International Development, Energy, Malnutrition and Hunger, The Rise and Fall of Nations, Business Unusual

An ex-World Banker – Bill Easterly critiques the development community and urges for independent evaluation of aid. Great speech delivered with a remarkable sense of humour and irony. (webcast)

Markets, Networks and Governments : Issues in the Debate on Global Governance
Kemal Dervis, Administrator at the UN Development Program and former Finance Minister of Turkey

Latest Bloomberg podcasts; interview with Tim O'Neill, principal at O'Neill Strategic Economics and Joseph LaVorgna , chief U.S. fixed-income economist at Deutsche Bank Securities about U.S. economic growth, global trade, China's currency and trade policies, bond yields and Federal Reserve monetary policy.

Ben Franklin: Conservative, Libertarian, or Radical Democrat ….Featuring the author, Mark Skousen, compiler and editor of The Compleated Autobiography of Benjamin Franklin.

Electing to Fight: Why Emerging Democracies Go to War

Corruption in Kenya- A Whistleblower’s Account

The Carolinian Renaissance … In 800 AD on Christmas Day in Rome, Pope Leo III proclaimed Charlemagne Emperor. According to the Frankish historian Einhard, Charlemagne would never have set foot in St Peter's that day if he had known that the Pope intended to crown him. But Charlemagne accepted his coronation with magnanimity. Regarded as the first of the Holy Roman Emperors, Charlemagne became a touchstone for legitimacy until the institution was brought to an end by Napoleon in 1806…How did Charlemagne become the most powerful man in Western Europe and how did he finance his conquest? Why was he able to draw Europe's most impressive scholars to his court? How successful was he in his quest to reform his church and educate the clergy? And can the Carolingian period really be called a Renaissance?

The Today Lecture from BBC – featuring a new series of lectures organized with the Chatham House. The inaugural lecture is by Jack Straw and Condoleezza Rice..the usual stuff defending the war with Iraq but Rice wears a little bit of her academic hat as well and sometimes very moving. Highly recommended.

The lastest program from Foreign Exchange TV – a flage ship program hosted by Fareed Zakaria. The focus is on role of NGOs, global equity markets and higher education. How have Australia managed to capture 10 percent of the world market for students seeking an English-language education? Features discussion by the likes of Sebastian Malleaby and Ruchir Sharma at Morgan Stanley.

-Please note that a lot of above podcasts are time sensitive and won't be available if you don't download now.

Latin American Economies- Destiny or Choice

“How many numerical indicators would have to be created in order to let us realize that we are getting closer to solve the poverty problem?”- question put to a World Bank economist discussing a report on Latin American poverty (Poverty Reduction and Growth: Virtuous and Vicious Circles).

The report points out that ‘Latin America needs to cut poverty to boost growth’;

Two of their main conclusions are a breakthrough for the bank: that private-sector growth is not a panacea for the poor and that inequality must be targeted directly. A third conclusion is almost heretical for the bank: that the state needs to take on more responsibility rather than less. "Converting the state into an agent that promotes equality of opportunities and practices efficient redistribution is, perhaps, the most critical challenge Latin America faces in implementing better policies that simultaneously stimulate growth and reduce inequality and poverty," the report says.

Some statistics from the report;

- On average, for every one percent of economic growth, poverty declines by 1.25 percent in Latin America.

- About 25 percent of Latin Americans live on less than $2 a day. While China experienced annual per capita growth rates of about 8.5 percent between 1981 and 2000, reducing poverty by 42 percentage points, Latin America's per capita GDP declined by 0.7 percent during the 1980s and increased by about 1.5 percent per year in the 1990s, with no significant changes in poverty levels.

- On average, a 10 percent increase in poverty reduces annual growth by 1 percentage point . A 10 percent increase in poverty is likely to be associated with a decline in investment of about 6-8 percentage points

- Latin America and the Caribbean is the most unequal region with the exception of Sub-Saharan Africa. If Latin America had the level of inequality of the developed world, its income poverty levels would be closer to 5 percent than to the actual rate of 25 percent

- In 2000, income per capita in the poorest municipality in Brazil was barely 10 percent of that in the richest; in Mexico, per capita income in Chiapas was only 18 percent of that in the capital

- Having a mother with only primary education increases the risk of school dropout by as much as 1.6 times in Chile and 60 percent in El Salvador compared to having a college-educated mother. A low educated father additionally increases school failure risks by up to 1.4 times in Chile and 40 percent in the Dominican Republic

Related Links:

- IMF F&D edition with a focus on Latin American economies

- Interview with Dr. John Edwards (Radioeconomics podcast- download now, available for only limited time)

- Latin America goes South (podcast from Hoover)

- The Future of Reforms in Latin America (webcast from World Bank)

- Podcasts from BBC on Brazil and Argentina

- Political and Economic Future of Latin America (podcast from Institute for Policy Studies)

- Latin America and the Caribbean: What Lies Ahead? The Search for Life After Debt- a webcast (real video, 300k) of a discussion at Princeton by David de Ferrenti

- Cato events; The Roots of Poverty in Latin America, A Modern Vision for Latin America, Dollarization for Latin America?, Liberty for Latin America: How to Undo Five Hundred Years of State Oppression

- The Latinobarómetro poll- Democracy’s ten year rut

- Chilie and the World

-After the Washington Consensus: Restarting Growth and Reform in Latin America

Darwin’s Nightmare

Evolutionary biology works in mysterious ways in affecting economic outcomes. Look at the following paper on the effect of orphanhood in a poor region of Tanzania ;

“This paper provides unique evidence on the long-term impact of orphanhood in a region of Tanzania, near Lake Victoria in an area ravaged by HIVAIDS….

We find significant permanent effects. Children who become maternal orphans before the age of 15 are 2 cm shorter in adulthood than similar children whose mother did not die during this age interval, representing 22 percent of one standard deviation of height in the sample. We also find that maternal and paternal orphanhood results in substantially lower educational attainment, each lowering years of education by adulthood by about a quarter of one standard deviation of educational attainment in the sample…”

In another study Estho Duflo finds peculiar evidence related to health outcomes of children living with grandmothers;

“In the early 1990's, the benefits and coverage of the South African social pension program were expanded for the black population. In 1993, the benefits were about twice the median income per capita in rural areas. Over a quarter of black South African children under age five live with a pension recipient. My estimates suggest that pensions received by women had a large impact on the anthropometric status of girls (it improved their weight given height by 1.19 standard deviations, and their height given age by 1.16 standard deviations), but little effect on that of boys. In contrast, I found no similar effect for pensions received by men. This suggests that the household does not function as a unitary entity, and that they efficiency of public transfer programs may depend on the gender of the recipient.”

In Europe the Dutch are considered the giants, men being on average 6 feet tall; they used to be only about 5 foot 4 in the mid 19th century.

So what does this all mean for economics; biology and neuroscience needs to be seriously studied by economists. As Hayek had once said, ‘an economist who is only an economist cannot be a good economist.’

Related Links:

- Foreign Exchange TV, hosted by Fareed Zaakaria, reviews the recent documentary Darwin’s Nightmare. All the programs are available on the web and are highly recommended focusing mainly on current affairs and development.

- The latest Science Show from Radio National discusses economics and brain science and the relations between spoons and human nature. The podcast is available for a few weeks, so download now.

- Can studying the human brain revolutionise economics?

- Two related blogs posts that I wrote earlier; Phantoms in the Mind and Why Do Magicians Hate Children.

Carnival of Podcasts and Webcasts- Economics and Globalisation

This is the second series of the carnival of podcasts. In this edition we focus on economics and globalisation.

- Martin Feldstein on the performance of the US dollar and tax policy.

- IMF’s chief economist Raghuram Rajan on the outlook for global economic growth.

- Ben Benarke at Princeton –talking about the benefits of price stability.

- Bernanke in 2003 talking about the challenges of monetary policy (webcast).

- Robert Schiller- economics roundtable (webcast)

- Professor B.B. Bhattacharya, Vice-Chancellor of Jawaharlal Nehru University, New Delhi talking about India’s economic potential and constraints

- Selling China: The Wal-Mart Effect

- The World Is Flat: A Brief History of the Twenty-first Century, Thomas Friedman (webcast)

- More Thomas Friedman

- Globalisation and the World’s Poor - Jagdish Bhagwati ("In Defense of Globalization"), Allan Meltzer (Carnegie Mellon U.), William Easterly (formerly of the World Bank) and John Ambler (Oxfam America).

- The Cost of Corruption

- A series of short podcasts from The Economist; include Amartya Sen, Wolfowtiz, Daniel Yergin and more.

- Why Inequality Matters in a Globalizing World, Nancy Birdsall (webcast)

- Rethinking Growth Strategies, Dani Rodrik (webcast)

- A Fairer Globalisation- A discussion of the ILO report on the issue (webcast)

- Globalisation and the Rise of Religion

- Ernesto Zedillo and Stiglitz on Globalisation

- Innovative Ways for Financing Global Public Goods, Stiglitz

- Recent speech of Al Gore at TED conference

- Interview with the Economic Hit Man

- A three part series on globalization from BBC; Working together, the illicit side and the new rules

- Hernando de Soto interview (webcast)

- The Market Approach to Understanding Religion

- Daren Acemoglu and Jared Diamond

- Debate between Stiglitz and Rogoff

- The Roots of Poverty in Latin America

Good Economic News for Bin Laden

The latest Finance & Development, a quarterly magazine from the IMF is out. The latest issue focuses on Growth. My favorite regulars are People in Economics, Back to Basics, Picture This and Country Focus sections. It struck me that Arab countries have the highest unemployment rates in the world;

Although unemployment fell markedly in developed economies in 2005 to an average of 6.7 percent from 7.1 percent a year earlier, it continued to rise in the former Soviet bloc countries. The Middle East and North Africa have the highest regional rate (13.2 percent), while East Asia has the lowest (3.8 percent).

Let us hear from a well known Arab economist;

"The greatest challenges in the Arab world today are the rate of population growth and the need for increasing financial resources, both for capital investment and social development, to meet the current needs and rising expectations. At an average rate of 2.5 percent a year, population growth is hindering progress in most Arab countries. The demographic challenge is not only about numbers, but more critical is the shortfall in certain required skills and capabilities in all countries. The failure to reform the educational system and adjust to the needs of the marketplace is a real obstacle to the modernization that is necessary for global competition. Growth is hampered, and unemployment and poverty are rising. This is the situation today in most countries, including such oil-rich Gulf countries as Kuwait and Saudi Arabia, where the unemployment rate is rising rapidly….The region must create some 50 million new jobs in order to keep unemployment at its present level, and close to 70 million jobs to reach full employment in the next 20 years. ..the Arab Human Development Report 2002 highlighted three deficits that are slowing development in the region: deficits in freedom, in knowledge, and in women’s empowerment. All Arabs would agree that they need to make up these deficits and to overcome other major difficulties that are hampering their development."

Even in areas like internet use they lag far behind; the 22 Arab League members had only 11.7 million Internet users out of a total population of 316 million in 2004. Unless the Arab ruling autocrats can get their act together angry young Arabs will remain fertile ground to gain converts for the cause of fanatics like Bin Laden. With lavish oil money around we cannot know for sure whether another would be Bin Laden is buying up a failed state. May be Arabs need to think hard about the following saying of Prophet Mohammed’s nephew Ali, ‘If God were to humiliate a human being, He would deny him knowledge’.

Iraqi Date Merchant and Mobile Phones

“I buy and sell dates and my whole business is now dependent on the mobile phone. Trading in dates (like any other commodity) is a risky business characterized by significant price fluctuations, especially during the harvest season. Prior to having access to a mobile phone, I faced great difficulty in obtaining timely information about price variations. This delay in obtaining up-to-date prices sometimes resulted in significant losses, whereby I would sell a lot of dates at a low price. Since I bought my mobile phone, I am in continuous contact with the date trade exchange center which helps me strike deals at the right price”.

That’s an Iraqi date merchant taking about the importance of mobile phone in his business. Other highlights from a report on the socio-economic role of mobile phones in the Arab middle-east;

- Mobile revenues accounted for 5% of the increase in GDP in Bahrain between 2002-04
- In Jordan, the number of employees in the mobile sector increased by 42% over the 4yr period of liberalization
- Many mobile operators represent more than 30% percent of a total stock market – such as Egypt’s Cairo and Alexandria Stock Exchange
- 95% of Iraqis use their phone to ensure the safety of their loved ones, 83% of Iraqis see it as a necessity in life, and 77% said it made life easier

According to some estimates a developing country with an extra 10 phones per 100 people between 1996 and 2003 would have had GDP growth 0.59% higher than an otherwise identical country ( often these studies are financed by telephone companies);

To illustrate these findings, Mr Waverman considers Indonesia (nine mobile phones per 100 people) and the Philippines (27 phones per 100 people). Long-run growth in the Philippines, he suggests, could be a percentage point higher than in Indonesia if this gap is maintained. But if Indonesia closed the gap, its growth rate would match that of the Philippines. Mr Waverman also notes, however, that there is a large education gap between the two countries. His model predicts that bridging this divide would boost Indonesia's growth rate even more than closing the mobile gap. “Mobile phones are important, but so is education and health care,” he says. “A lot of things are required for growth.” He concludes by calling for regulatory policies that favour competition and encourage the speediest possible spread of mobile telephony. For policymakers interested in closing the “digital divide” to boost growth, the message is clear: mobile phones are the most effective means of doing so.

And liberalization and new technology helps. Look at India.

According to the stats available for January, the telecom sector in India added 5 million new subscribers, of which 4.75 were mobile connections. That's about 167,000 new subscribers (of which 158,000 are mobile users) being added *every day*. By comparison, in the pre-reform period (I am using 1974-1989 data here, though it's even lower pre-1974), India added about 175,000 new connections *every year*.

Now the World Bank has released a brand new report Information and Communications for Development 2006: Global Trends and Policies which takes stock of the progress that has been achieved worldwide in rolling out access to affordable ICT and provides evidence on what makes for success in adopting ICT to meet development challenges. The report also highlights some stark differences as well;

While the developing world has seen huge progress in rollout of basic ICT infrastructure, the picture is more mixed for advanced use of ICT. Worldwide, Internet use more than quadrupled between 2000 and 2005, but differences in the number of secure Internet servers, a proxy for the availability of e-commerce, remain stark. While developed nations have more than 300 such servers per 1 million people, developing nations have fewer than 2.

Are there any people who hate mobile phones? Once a taxi driver (in Male’, Maldives) complained to me that since mobile phones have become so popular, people have reduced taxi trips- Maldives used to have the highest mobile tariffs in the South Asia. In terms of mobile phone subscribers there were over 113,000 subscribers (out of a total population of 280,000). In the US mobile subscribers stood at 615 per 1000 at end 2004. In very small countries like Maldives foreign parties like the Wataniya are interested mostly because they can use the place as a test bed for new technologies.

Related Links:

- Impact of Mobile Phones in Africa, Vodafone
- Socio-Economic Impact of Mobile Phones in Arab World
- Financing ICT Investment in the Developing World
- Telephone is a weapon against poverty
- At A Glace Tables from the World Bank Report; 30 ICT Indicators for 144 Countries; it’s best such of indicators I have seen.

The Right Way and the Wolfowitz’s Way to Deal with Corruption

In a previous post I commented about Wolfowitz finding his top priority at the World Bank; battling graft. Finally the Economist magazine has catch up with the story and talks about it in the latest edition.

“CORRUPTION” was once a word that the World Bank did not use. Its staff spoke instead of “implicit taxes” or “rent-seeking behaviour” lest they be accused of meddling in politics. A decade ago James Wolfensohn, then the Bank's president, broke the taboo with a speech about the “cancer of corruption” and began a campaign to improve poor countries' governance…

To lead the anti-corruption drive, Mr Wolfowitz has beefed up the Bank's Department of Institutional Integrity, an internal watchdog set up by his predecessor. The unit now has 22 investigators and will get 12 more. Staff have been told to get involved in the preparation of projects rather than simply react to concerns about graft….

Mr Wolfowitz's management style has added to the concern. He relies heavily on a small group of advisers he brought with him, none of whom are development experts. Bank insiders complain that the newcomers have no idea how to run the organisation and that their corruption drive is aimed more at impressing America's Congress than at helping the world's poor. Several top veterans have left….

Dennis de Tray who recently left the Bank to join Centre for Global Development argues, “more practical advice and less rhetoric would be a good way to increase our effectiveness in the fight against corruption,” and “Dealing with corruption and poor governance is tantamount to dealing with development. This is a long-term agenda, not a go or no-go variable except in extreme cases,”…. “If we are not careful in the way we deal with corruption, we will set up even sincere and committed leaders for failure and could end up creating just the failed states we are trying to prevent.”

He may have a point; recently the Bank held up more than $800 of money for Indian health care and a recent Bank report suggests that India has levels of child under-nutrition double those of Sub-Saharan Africa and the country has almost 40 percent of the world’s malnourished children. It is alleged by the Economist that concerns about debt relief to Congo was raised in the last minute after revelations of a newspaper report that the country’s president spend over $ 81,000 on hotel bills in a trip to New York. Without a clear criteria, there will always be charges of arbitrariness; there are plenty of leaders of poor countries who doesn’t worry much about their spending habits.

The Economist has got good advice for Mr. Wolfowitz;

- Bank's experts need to create more objective and nuanced gauges of graft.
- needs to lay out guidelines governing the Bank's lending. Just how much graft is tolerable in a country before the Bank pulls the plug?
- to concentrate on the vulnerable parts of the economy. The Bank already seeks transpar