In the recently released Global Economic Prospects June 2012, World Bank experts warned of long period of volatility. Resurgence of the Euro Area tensions had eroded economic gains of first 4 months of 2012, said the report. And as the leaders of the 27 European Nations convened in Brussels yesterday to tackle the crisis, it was labeled as the “last chance” summit. The outcome: Up All Night, But Consensus Finally Reached, says a Time.com story. According to the story, published today, “Yet, despite what were described as tense and grinding negotiations, decisions announced early Friday morning appear to represent important steps towards the survival of the embattled euro zone—and in both the short- and long-term context of the crisis.” This much needed move comes at a crucial point and will hopefully have a positive impact on developing countries. However, a lot remains to be done. Following is a sampling of some interesting research and analysis by World Bank as well as others highlighting issues of current import to global economy and development.
Andrew Steer in Indonesia
Today is my final day at the World Bank.
When I first entered the doors of 1818 H Street three decades and seven Presidents ago, the big buzz in the cafeteria was Cost Benefit Analysis and Basic Needs. President McNamara had demanded that every project document identify in detail how many of the poorest 25% it would directly and indirectly benefit, and how. The secret to rapid career progress was expertise in shadow pricing (which was appropriate in light of the massive distortions in goods, labor, currency and capital markets in most of our client countries).
But those shadow prices certainly didn’t include the value of environmental externalities. The entire cadre of environmental specialists for the whole institution consisted of one person. (It wasn’t me.)
Last week at the Rio+20 Conference I met up with an old friend, Emil Salim, who for many years was the longest serving Environment Minister in the World, and is still, well into his eighties, chief environmental advisor to President Yudhoyono of Indonesia. We reminisced about a meeting he and I were at in 1982, when he asked the President of the World Bank for help in dealing with the acute environmental problems associated with Indonesia’s rapid growth. The polite reply he received was “The World Bank is a development agency, not an environment organization. We don’t do this kind of work.”
I’ve been working for the last couple of years with Tara Vishwanath, Nandini Krishnan and Matt Groh on a pilot program in Jordan which aims to get young women just graduating from community college into work. Today I want to describe what we did, and ask you to predict the results – which I will then share in a subsequent blog post.
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The global events of the last few years, beginning with the 2008 financial crisis, have revived the debate around job creation as a key element for economic recovery.
In Central America, the global financial crisis had a significant effect on production and employment, and even though the region has recovered, the debate regarding how to create better jobs is still going strong.
Reporting from TEDGlobal on Radical Openness. I was struck by Don Tapscott’s presentation on Tuesday, which compared the opening up of our knowledge and data as the next step in the evolution of human societies and called it an "Age of Networked Intelligence." Tapscott then went on to say that the societies of this age can be likened to a “murmuration of starlings,” a term that is used here for a flock. The murmuration moves in a complex interconnected way without a single leader and the flock works together and protects itself from predators (see picture).
What surprised me is that this flock of starlings was startlingly similar to the infographic displayed by the Vibrant Data Project during a presentation by Eric Berlow, a TED Fellow, which describes the network of connections in an “open” environment. Check it out here:
Drug trafficking is nothing new. But with the current levels of violence we are seeing, its effects on society and economic activity are staggering. From the suffering of victims, to increasing levels of corruption and the weakening of institutions, drug trafficking is not only a criminal problem—it is an urgent development issue which needs to be tackled.
The drug business is particularly insidious.
In a previous installment, we explored one particular past financial crisis which resembles the current tensions in the Euro Zone in key aspects—specifically, the 2001 collapse of Argentina’s currency board. Taking history as our guide, we discuss the lessons that can be learned from past crises and potential steps policymakers can take.
Implications for the euro zone
Until even as short as a month ago, the possibility of a breakdown of the European monetary union triggered by an exit of one or more of its members had been considered no more than a tail risk scenario. The odds of such an outcome are now seen to have grown, as market concerns continue to focus on economic and financial fundamentals of the peripheral Euro Area members that, similar to Argentina, failed to satisfy the preconditions of a sustainable membership in the currency union. Given the significant economic and financial interlinkages within the Euro Area, and the key role of Europe in the global economy (Figure 1), potential fallout from such a breakdown would be much more profound for the region as a whole and the rest of the world, compared to any crisis experienced in the past.
Figure 1. Exposure to Peripheral European Countries
Earlier this month, the World Bank’s Water and Sanitation Program (WSP), Nordic Human Rights Trust Fund, and the World Bank’s Sanitation Thematic Group hosted Catarina de Albuquerque, the first UN Special Rapporteur on the human right to sanitation and safe drinking water. She discussed the human right to sanitation with sector and human rights experts, and what it means in practice. One of the most notable questions she addressed was--- if something is a human right, does that mean it has to be free?
The very foundations of the European monetary union have been severely shaken by the ongoing financial crisis and doubts surrounding its future have intensified. In this two part series, we explore the following issues: What are the key vulnerabilities underlying a shared currency union? What can we learn from past experiences and what would the impact be if the crisis escalates? And what policy measures should be taken?
Fragility of “hard” exchange rate pegs
A monetary union can bring large benefits in terms of trade, low inflation, and lower borrowing costs, but it comes with tight strings attached. As an extreme form of a hard exchange rate peg, it is vulnerable to “sudden stops” (De Grauwe, 2009 ). History is full of illustrations of the demands placed on an economy by hard exchange rate pegs, such as dollarization and currency boards. To be sustainable, a hard peg must be accompanied by fiscal discipline and labor and product market flexibility, since monetary and exchange rate policies can no longer be used to respond to shocks and safeguard competitiveness. The lack of these preconditions not only undermines the sustainability of the regime, but also impedes the recovery from an ensuing crisis in the wake of its collapse.