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June 2012

Global Economy and Development Roundup

Swati Mishra's picture

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.

Farewell World Bank. You’re on the Right track. And you have a Big Job Ahead!

Andrew Steer's picture


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.”

Are our blog readers better predictors of impact results than seminar audiences? Evaluating programs to get young women to work

David McKenzie's picture

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.

Central America: learning how to create better jobs

Ana María Oviedo's picture

También disponible en español

Trabajo informal en Centroamerica

 

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.

 

A Murmuration of Starlings

Maya Brahmam's picture

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:

Drugging Development

Otaviano Canuto's picture

Photo: Scott WallaceDrug 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.

Euro in the Twilight Zone: Past Lessons, Implications and Policy Options (part 2)

Inci Otker-Robe's picture

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

 

Does Sanitation as a Human Right = Free Toilets?

Craig Kullmann's picture

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? 


Euro in the Twilight Zone: Past Lessons, Implications and Policy Options

Inci Otker-Robe's picture

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?Photo Credit: dasroofless, Flickr Creative Commons

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.

U.S. health reform – The cartoon version

Owen Smith's picture

Health Care Reform, by Jonathan GruberIn a landmark decision, the U.S. Supreme Court today upheld the main provisions of President Obama’s Affordable Care Act, including the individual mandate (i.e., everyone must buy health insurance). It represents a major step towards universal coverage for health care in the U.S., something that many countries around the world are striving to achieve.

For those interested in gaining a better understanding of this complex legislation, you can do no better than to start with a graphic novel about the law written by Jonathan Gruber, a professor at MIT and one of the main architects of the Affordable Care Act (and, for that matter, of the Massachusetts health reform that it closely resembles). It’s a great introduction to the policy issues surrounding market failure in health insurance, without having to wade through a dry textbook or World Bank report.

The wisdom of children...and prophets

Andrew Steer's picture

UN Photo/Maria Elisa Franco

We’re changing planes in Panama on our way to the Rio+20 Earth Summit.  As we taxi out to take off the pilot tells us that we’ll need to wait for 15 minutes while we burn off 300 pounds of fuel, since the plane may be too heavy to take off.

My 11 year-old daughter, who is sitting next to me, says “Isn’t this very silly? It’s wasteful and bad for the climate. Why do they do it?” 

We’ve brought Charlotte, together with her 10 year old brother, Ben, on this trip so they can see how country leaders struggle with the big issues, and also because they ask the right questions, and help keep us grounded. I explained to her that the fuel on international flights is totally untaxed by international agreement, and that subsidies on fossil fuels amount to over $400 billion each year, including over $70 billion in rich countries. And that governments spend more than 20 times more paying people to consume more fossil fuels than they spend on research to develop renewable energy.

“That’s stupid”, says Ben, who is not as polite as his sister. It’s like telling your kids not to smoke, and then paying them each time you see them smoking.

They’re right, of course. And one of the rare bright spots in Rio was the airtime given to fossil subsidies by civil society and the private sector. The B20 (the business shadow of the G20) Working Group on Green Growth, of which I am a member, urged G20 leaders to publish subsidy levels each year, and set a time-bound schedule for their elimination. Not so easy for political leaders to grasp this nettle, of course, having seen several countries, most recently Nigeria, find their efforts to raise energy prices hit with violent opposition. I discussed with Charlotte how smart politicians, such as in Indonesia and Iran, have found ways to use a share of the revenues saved to provide cash compensation to the poor. “Makes sense”, she said.

From one billion cars to one billion bicycles

Sintana Vergara's picture

Bike path in New York City

In 1993, when I was 10 years old, my family took a trip to Beijing, where the large boulevards provided us with an image that seemed reversed: bicycles everywhere, punctuated by the occasional car. The young and old rode nearly identical two-wheeled machines to get where they needed to, and the internal combustion engines were sidelined, weaving their way through an army of peddlers. At that time, writes Kristof in 1988, 76% of road space in China’s capital was taken up by bicycles – and one in every two people owned a bicycle (that’s 5.6 million bikes for 10 million people).

Fast forward 20 years: Beijing’s traffic patterns are impressive for a very different reason. Cars now clog the streets, slowing down rush hour traffic to 9 miles per hour, and bicycles have all but disappeared. Chinese consumers have overwhelmingly embraced the car - from 1990 to 2000, their number increased from 1.1 to 6 million (a 445% leap). The hunger for cars is growing; China is now home to over 78 million cars, of which 6.5 million are in Beijing alone.

Weekly Wire: The Global Forum

Kalliope Kokolis's picture

These are some of the views and reports relevant to our readers that caught our attention this week.

International IDEA
Do Accountability Mechanisms in Safety Nets Improve Access to Social Services? The case of Brazil’s Bolsa Família

"This paper was part of International IDEA’s work on “Democracy and Development” in 2011. It was selected as a contribution to stimulate debate on and increase knowledge about the impact of democratic accountability on services. A summary of the papers selected and an analysis on some general trends are provided in “Democratic Accountability in Service Delivery: A Synthesis of Case Studies”

The study analyses a semi-governmental mechanism for accountability called social control councils. Through this mechanism beneficiaries are supposed to provide feedback on health and education services. However as beneficiaries have been heavily underrepresented in these councils and membership tends to be skewed towards the local government, they have not been able to function as intended." READ MORE

Mashable
How the Arab World Uses Facebook and Twitter

“Social media has been often touted for the role it played in the popular uprisings that have spread across the Arab world since December 2010. Despite the buzz, you may be surprised that only 0.26% of the Egyptian population, 0.1% of the Tunisian population and 0.04% of the Syrian population are active on Twitter.

Of all the countries in North Africa and the Middle East, Twitter is most popular in Kuwait, where 8.6% of the population is active users, defined as those who tweet at least once per month. Facebook’s more popular throughout the region. In its most popular country, the U.A.E., some 36.18% of the population is on Facebook.” READ MORE

Realizing India’s Potential

Kalpana Kochhar's picture

Yesterday, I discussed India’s incredible economic transformation over the last two decades and some of the challenges that the country is currently facing. So, what can India do to reduce the impact of global uncertainty and improve growth performance and boost investor confidence?

India’s firepower to respond to a crisis with traditional monetary and fiscal stimulus is much weaker now than prior to the 2008 crisis. Fiscal space for additional spending is severely constrained in light of continued high deficits. Room for monetary policy easing is modest in light of continued high inflation, and still low real interest rates. Moreover, when investor confidence is at a low ebb as it is in India, easing monetary policy would be tantamount to “pushing on a string.”


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