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Austerity vs. Fiscal Stimulus: A False Dilemma?

Augusto Lopez-Claros's picture

The 2008-2009 global financial crisis led to a number of large–scale government interventions across the world. These included massive provisions of liquidity, the takeover of weak financial institutions, the extension of deposit insurance schemes, purchases by the government of troubled assets, bank recapitalization and, of course, packages of fiscal stimulus, sometimes of a scale not seen since World War II. Even the IMF, the world’s traditional guardian of sound public finance, came out strongly in favor of fiscal loosening, arguing through its managing director that “if there has ever been a time in modern economic history when fiscal policy and a fiscal stimulus should be used, it's now” and that it should take place “everywhere where it's possible. Everywhere where you have some room concerning debt sustainability. Everywhere where inflation is low enough not to risk having some kind of return of inflation, this effort has to be made".

The WTO Environmental Goods Agreement: Why Even A Small Step Forward Is a Good Step

Miles McKenna's picture

Will the WTO be the first global organization to take action on climate change? Source - VerticalarrayInternational trade has a critical role to play in environmental protection and the effort to mitigate climate change. While it certainly isn’t always framed this way, it is important to realize that increased trade and economic growth are not necessarily incompatible with a cleaner environment and a healthier climate.

If we are going to move away from dirty fossil fuels and inefficient energy processes at a rate necessary to limit the likely devastating results of a warmer planet, then we need enabling policies in place—especially when it comes to trade policy.

That’s why, this week, a group of 14 World Trade Organization (WTO) Members are meeting to begin the second round of negotiations on the Environmental Goods Agreement (EGA)—an effort aimed at liberalizing trade in products that help make our world cleaner and greener.

Have Humans Evolved to Manage Megacities?

Chandan Deuskar's picture
Ancient cities, like Mohenjodaro in modern-day Pakistan, emerged relatively recently in human history.
Ancient cities, like Mohenjodaro in modern-day Pakistan, emerged relatively recently in human history (photo courtesy of Saqib Qayyum used through a Creative Commons license.)​

The growth of large metropolitan areas around the world has been very recent and very rapid, particularly when measured against the duration of human beings’ existence as a species. For the first 95% of our time on earth, we built no settlements at all. Cities of a million people arose during only the last 1% of homo sapiens’ time on earth, and there are already 500 such cities in the world today.

If we have spent most of our existence as small wandering bands, does that mean we are ill-equipped to manage urban settlements of this vast size? The key to success in our current urban transformation may in fact be the same as the key to mankind’s earliest origins - our ability to cooperate.

Who will feed China in the 21st Century?

Will Martin's picture

A recent surge in China’s food imports has rekindled concerns about global food demand raised by Brown (1995) and about food self-sufficiency in China. According to UN Comtrade data, China’s trade in food was roughly balanced until 2008 but subsequently moved into deficit, with net imports rising to $38.7 billion in 2013. A key question is whether China will become a massive net food importer like Japan and the Republic of Korea, which rely on world markets for more than 70 percent of grain and soybean demand.
China’s rapid economic growth, at 8.5 percent average annual per capita in purchasing power parity terms since economic reform began in 1978, has dramatically changed Chinese diets. While China’s per capita calorie consumption appears likely to be approaching its peak, the composition of food demand seems likely to continue to change, as consumers shift away from basic staples and towards animal-based products. This shift to greater dietary diversity imposes greater burdens on agricultural resources since animal-based diets require much more agricultural resources than vegetable-based diets.

Education & Technology in an Age of Pandemics (revisited)

Michael Trucano's picture
consider this picture
MOOCs -- massively open online courses of the sort that can simultaneously enroll thousands, even tens of thousands, of learners simultaneously -- have been a hot topic of discussion for a few years now in both the worlds of education and 'international development' (and, for what it's worth, the subject of numerous related posts here on the World Bank's EduTech blog). Recent news that edX, one of the prominent MOOC platforms, is to start offering courses aimed at high school students suggests that the potential usefulness and impact of things like MOOCs may soon extend beyond the realm of higher education, out of which MOOCs originally emerged and where most related activity has occurred to date.
There is much (potentially) to be excited about here. Few would argue against having greater access to more learning opportunities, especially when those opportunities are offered for 'free', where there is latent unmet demand, and where the opportunities themselves are well constructed and offer real value for learners. As with MOOCs at the level of higher education, however, we perhaps shouldn't be too surprised if these new opportunities at the high school level are first seized upon *not* by some of the groups with the greatest learning needs -- for example, students in overcrowded, poorly resourced secondary schools in developing countries, or even students who would like a secondary education, but for a variety of reasons aren't able to receive one -- but rather by those best placed to take advantage of them. This has been largely been the case for initial adopters of MOOCs. (One of the first studies of this aspect of the 'MOOC Phenomenon', which looked at MOOCs from the University of Pennsylvania, found that students tended to be "young, well educated, and employed, with a majority from developed countries.")
As a practical matter, some of the first types of beneficiaries may, for example (and I am just speculating here), be homeschooling families in North America (while not necessarily comparatively 'rich' by local standards, such families need to be affluent enough to be able to afford to have one parent stay at home with the kids, and generally have pretty good Internet connectivity); international schools around the world (which can offer a broader range of courses to students interested in an 'American' education); and the families of 'foreign' students looking to apply to college in the United States (the edX course “COL101x: The Road to Selective College Admissions” looks, at least to my eyes, tailor made for certain segments of the population of learners in places like China, Korea, Hong Kong, etc.). In other words, at least in the near term, a Matthew Effect in Educational Technology may be apparent, where those who are best placed to benefit from the introduction of a new technology tool or innovation are the ones who indeed benefit from it the most.
Longer term, though, it is possible to view this news about movement of a major MOOC platform into the area of secondary education as one further indication that we are getting further along from the 'front end of the e-learning wave' (of which MOOCs are but one part) to something that will eventually have a greater mass impact beyond what is happening now in the 'rich' countries of North America and the OECD.
Learning with new technologies has of course been around for many decades but, broadly speaking, has not (yet) had the 'transformational' impact that has long been promised. "Gradually, then suddenly" is how one of Ernest Hemingway's characters famously describes how he went bankrupt. Might this be how the large scale adoption of educational technologies will eventually happen as well in much of the world?
black swan
black swan
f so, one credible potential tipping point may be a 'black swan' event that could push all of this stuff into the mainstream, especially in places where it to date has been largely peripheral: some sort of major health-related scare. (For those unfamiliar with the term, which was popularized by Nicholas Taleb, a 'black swan' is a rare event that people don't anticipate but which has profound consequences). One of the first ever posts on the EduTech blog, Education & Technology in an Age of Pandemics, looked at some of what had been learned about how teachers and learners use new technologies to adapt when schools were closed in response to outbreaks involving the H1N1 influenza virus: the 'swine flu' that afflicted many in Mexico about six years ago; and an earlier outbreak of 'bird flu' in China. I have recently been fielding many calls as a result of the current outbreak of the Ebola virus in West Africa asking essentially, 'Can we do anything with technology to help our students while our schools are closed?', and so I thought it might be useful to revisit, and update, that earlier post, in case doing so might be a useful contribution to a number of related discussions are occurring.

Beware the Middle Income Trap – Says Who?

Borko Handjiski's picture

Fishing in the Hai River Economic development theorists and practitioners are increasingly using the term “middle-income trap” to describe the situation where developing economies’ convergence to the development frontier comes to a halt once their income per capita reaches a middle-income level. The term is ambiguous: is it a halt in convergence or slowdown in growth, and what exactly is the definition of middle-income? Nevertheless, the concept has been successfully used to create a scare that developing countries are more likely to run out of breath or even give up the race in the middle of the track than to continue catching up with the leading economies. Eichengreen et al. and several IMF economists are among those who provide empirical evidence that the “middle-income trap” is real and that developing countries do get stuck at some low-level equilibrium.

Carbon pricing – delivering economic & climate benefits

Thomas Kerr's picture


A dangerously warming planet is not just an environmental challenge – it is a fundamental threat to efforts to end poverty, and it threatens to put prosperity out of the reach of millions of people.  Read the recent Fifth Assessment Report from the Intergovernmental Panel on Climate Change if you need further evidence.

If we agree it is an economic problem, what do we do about it?  There is general agreement among economists that a robust price on carbon is a key part of effective strategies to avert dangerous climate change. A strong price signal directs finance away from fossil fuels and toward a suite of cleaner, more efficient alternatives.

This logic is not lost on governments and companies.  Momentum is building around the globe to put a price on carbon.  Consider these facts:

Encouraging News on Private Sector-Led Transparency and Collaboration in China

Kerina Wang's picture
Where was the lettuce in your salad grown? How was it cultivated, sourced, packaged and distributed? How many suppliers were involved and who are they? How much energy and water did it take from growing it in the farm to serving it on your table?

These questions might not be the typical things you would contemplate when eating a salad, but rapid urbanization and changes in climate, agricultural, and food production patterns are raising a host of alarming questions for many. How is the world going to sustainably feed more than 9 billion people by 2050, when farm lands are being converted into industrial and commercial use, and extreme weather events are jeopardizing our future resources?

This is a more daunting problem for China, where under-investment in the food industry and environmental pollution have aggravated the situation. A recent official Chinese government report issued by the Ministry of Environmental Protection and Ministry of Land and Resources shows that more than 16% of China’s soil and 19.4% of farm land is polluted, according to the state news agency Xinhua.

PISA data on financial literacy: Unanswered questions on developing financial skills for the broad student population

Margaret Miller's picture

A few weeks ago, the results of the OECD’s PISA (Programme for International Student Assessment) module on financial literacy were revealed, with Shanghai taking top honors in this category – just as it has in the last two rounds (in 2009 and 2012) on the traditional academic curriculum (reading, math and science).
This is no coincidence, as the OECD results and many other studies suggest a close relationship between education levels and academic performance in math and reading comprehension and scores on financial literacy tests.
In the PISA report, the correlation coefficients between financial literacy scores and performance in mathematics and reading were 0.83 and 0.79 respectively across 13 OECD countries in the survey sample. For high performers like Shanghai and New Zealand, these correlations were even stronger: 0.88 for mathematics, 0.86 for reading.

While waiting for general improvement in academic performance is one path to improved financial literacy, the urgency of addressing financial skills for today’s youth has led many educators and policymakers to look for more immediate steps that can be taken, including financial education interventions at school. The PISA results, however, don’t include an assessment of the value of possible financial literacy curricula, due to the “limited and uneven provision of financial education in schools.” That factor makes comparisons across countries difficult, as described in the report.

Africa's McTipping Point?

Borko Handjiski's picture
Three quarters of a century since the opening of the first McDonald’s, the fast food chain operates around 34,000 outfits in around 120 countries and territories across all continents. In Sub-Saharan Africa (SSA), however, – a region of 48 countries and almost a billion people - only South Africa and Mauritius have been able to attract this global food chain.

This peculiarity cannot be explained only by the fact that the region is poor. The company has found a market in about 30 countries with GDP per capita of less than US$ 3,000 (in constant 2005 US$) at the time of their first McDonald’s opening. Hamburgers, Cheeseburgers, and Big Macs are also on offer in a dozen of low-income countries as well. When the first McDonald’s opened in Shenzhen in 1990, China’s GDP per capita was less than US$ 500 per person. Of course, Shenzhen’s per capita income was several times higher, but the company has also found a market in Moldova since 1998 when the GDP per capita of the 3 million person country was less than US$ 600 per capita. There are many cities in SSA today that have higher income, population concentration, and tourists than what Chisinau had in 1998; yet they do not have a McDonald’s. As a matter of fact, 22 SSA countries today have higher income per capita than what Moldova or Pakistan had when the first McDonald’s opened there, and 15 of them have higher income per capita even than what Indonesia or Egypt had at their McDonald’s openings (see chart).